So why has the price of model kits gone up?

[tbill]

I suppose maybe I did mis-read the OP intended thought. I just got back into this stuff last September, so prices I have seen have remained the same in that short period of time. although at the same time, some of the kit prices I saw upon re-entering the hobby did shock me to some degree.

[Sport Suburban]

Now I'm all bummed out. I think I'll go back in the hobby room and build a model. That always cheers me up.

[clovis]

Why does everyone blame the Chinese anyway?

It's not their fault they offer cheap manufacturing etc... If you want to blame someone/something, then blame ALL the companies taking their business to China. They're the ones who have sold us all out. They'll continue to do it too because we continue to buy their products, whatever they are. We feed the demand... The companies supply that demand.

Next time you're looking for a scapegoat, stop & think about who really is to blame...

You are right...Corporate America did sell us down the river.

Let's not forget though, that the Chinese have been artificially pegging the the value of the yuan to the US Dollar for years and years. When a nation manipulates it's own currency to attract that business, and all of the manufacturing that came with it, the playing field is no longer fair.

If and when the Chinese actually 'float' the yuan on the open market, like most countries of the world do, the cost of doing business in China could skyrocket.

Let's just say that the Chinese did float their currency on the open market, and it doubled. What is that going to do to the cost of goods? What about a model kit?

Americans are going to be in a world of hurt, shock, and disbelief if that ever happens.

[martinfan5]

You are right...Corporate America did sell us down the river.

Let's not forget though, that the Chinese have been artificially pegging the the value of the yuan to the US Dollar for years and years. When a nation manipulates it's own currency to attract that business, and all of the manufacturing that came with it, the playing field is no longer fair.

If and when the Chinese actually 'float' the yuan on the open market, like most countries of the world do, the cost of doing business in China could skyrocket.

Let's just say that the Chinese did float their currency on the open market, and it doubled. What is that going to do to the cost of goods? What about a model kit?

Americans are going to be in a world of hurt, shock, and disbelief if that ever happens.

Again, how is it the Chinese fault?

Tell me, did the Chinese hold a gun to the heads all of the CEO's of American business and make them out source to their country? you need to put the blame were it belongs, on the American business that chose to out source to other countrys.

[clovis]

Again, how is it the Chinese fault?

Tell me, did the Chinese hold a gun to the heads all of the CEO's of American business and make them out source to their country? you need to put the blame were it belongs, on the American business that chose to out source to other countrys.

Wow.

I'm not looking for a fight.

Just stating the facts. The Chinese have been manipulating their currency for years, making manufacturing cheap in their country. If the Chinese would have floated that currency on the open currencies markets, it wouldn't be as cheap. The Chinese made the playing field unfair.

Before anyone tries to box me into a corner, and declare something that I didn't say, you probably won't find a bigger supporter of "Made in the USA" anywhere on the planet. I've been screaming "buy the Made in USA label" whenever possible for many years.

So here is your answer: No one in China, at least to my knowledge, held a gun to any US CEO, and made them move. It was a matter of economics, going cheap, and lining their own profits...and they could have cared less about anyone or anything, no matter if it hurt workers or the nation as a whole.

Do a little research about how the Chinese continue to manipulate the yuan. If and when they float it, we are going to be screwed.

[keyser]

The prices have outpaced inflation by a good bit. If the price of a $2 kit from 1968 (pretty much the price for most domestic kits back then–I remember because my weekly allowance was $2!) had merely kept up with inflation, the average kit today would sell for $14, not $25-30 or more.

$14 straight kit price + 15-20% for increased wage/insurance (health and liability if some kid chokes on kit pieces) + 10-15% for shipping/overhead/tooling/etc. + licensing (% who knows, didn't exist before) - manufacturer underwriting/assistance with tooling/design (expect 5-10% perhaps? on annual)

So, conservatively, costs to do business 40% higher than in '68 at least. $14 kit becomes $19.60 or more if we had actual idea of new costs/licensing/etc. Looking at net jobber prices, as WM, HL, HTUSA, etc all negotiate based on Net, and when many on board refuse to buy at MSRP, instead using 40% off coupons, you can bet Hobby Lobby is NOT losing money on those kits, just making less. Figure net is 45-50% MSRP.

MSRP of $25-30 kit implies $12.50-$15.00 net. Since 68-69 kits moved to $2.25, margin less since kits far more widely distributed, so $1.80 net about right. Using same calculator above in reverse puts a $12.50 net kit NOW at a $1.80 net in 68-69. We all have old kits from Woolworths, Kresge, K-Mart that were $1.76 or so from even early 70's, so net cost may even be less. I think kits are about same, but much less profit per unit, and greater costs.

[Art Anderson]

$14 straight kit price + 15-20% for increased wage/insurance (health and liability if some kid chokes on kit pieces) + 10-15% for shipping/overhead/tooling/etc. + licensing (% who knows, didn't exist before) - manufacturer underwriting/assistance with tooling/design (expect 5-10% perhaps? on annual)

So, conservatively, costs to do business 40% higher than in '68 at least. $14 kit becomes $19.60 or more if we had actual idea of new costs/licensing/etc. Looking at net jobber prices, as WM, HL, HTUSA, etc all negotiate based on Net, and when many on board refuse to buy at MSRP, instead using 40% off coupons, you can bet Hobby Lobby is NOT losing money on those kits, just making less. Figure net is 45-50% MSRP.

MSRP of $25-30 kit implies $12.50-$15.00 net. Since 68-69 kits moved to $2.25, margin less since kits far more widely distributed, so $1.80 net about right. Using same calculator above in reverse puts a $12.50 net kit NOW at a $1.80 net in 68-69. We all have old kits from Woolworths, Kresge, K-Mart that were $1.76 or so from even early 70's, so net cost may even be less. I think kits are about same, but much less profit per unit, and greater costs.

The cost of manufacturing any model car kit includes the following: Research & Development in all its facets, design and engineering of the tooling, the machining of that steel tooling (and in these two areas, there is little if any 1:1 manufacturer -- ie. Ford, GM, Chrysler, etc. financial assistance whatsoever, and if they supply reference information, which can range from a few manufacturer generated photo's or simple line drawings to complete CAD files where those exist), licensing (a necessary evil, and one that has been in place since the 1950's, believe it or not!. In addition, there are fixed costs (those that do not relate directly to any one product or project) such as whatever buildings and associated equipment are required, wages and salaries of employees not directly associated with any product, but very necessary--those secretaries, bookkeepers, the company accountant(s), managers, all of that gets included in the cost of all products that go out the door.

As for "negotiating" the retailer net cost, Walmart has never negotiated that whatsoever! (I was exposed to Wally's practices when I was in product development at Playing Mantis' Johnny Lightning Division back 10-12 years ago--Walmart DICTATED the price they would pay for any model kit or diecast miniature, on a "take it or leave it proposition". Hobbytown USA doesn't negotiate prices, as HTUSA isn't a wholesaler, but rather a franchisor of a business operating system and nationally known (or so they hope) name. HTUSA franchisee's buy from whichever hobby wholesalers they choose to, as well as manufacturer direct IF they are big enough to meet manufacturers' "minimum buys" (some are, most are not large enough to do that). The various wholesalers who act as middlemen between your LHS and the manufacturer (wholesalers essentially perform a warehousing function for your LHS, a quick access "reservoir" if you will, not unlike the float bowl of an old fashioned carburetor), and as such buy direct from the manufacturer at a discount only slightly larger than that they grant their hobby shop clients (this covers their costs, and hopefully they can make a bit of a profit in the bargain--based mainly on large volume sales of any item they carry and that in a fairly short time.

Where Walmart and even Hobby Lobby or Michael's gain a bit of an edge is that they perform their own warehousing and distribution functions, something which both companies do have down to a science, as far as efficiency is concerned. These companies, just as with any mass retailer (you know, those Big Box stores) depend on very fast "sell throughs" of everything they stock (sell through is described as "how fast a given product --SKU or Stock Keeping Unit" goes through the checkout lanes, generally on a 30-day basis. Fast sell-through means more reorders of the same SKU, slow sell-through means get rid of it anyway you can, and quickly--not to be reordered! In fact, Walmart is well known in the consumer products industry for dictating that hundreds, if not thousands of items they carry are subject to "guarranteed sale" within a certain time frame, and what isn't sold in the specified "window" can be shipped BACK to the manufacturer for credit. Such is the price paid by any manufacturer dealing with Walmart, (and such as KMart, Sears, and any other stores of that size).

But in the bottom line here, it's all the costs associated, not only with an individual model car kit (including its design and tooling), but such as insurance, licensing, even taxes that determine the price of that kit FOB (which means "Free On Board" the truck, ocean container, however it is being shipped on its way to the retail store) that determines the net price any LHS --and to a great extent, even the Big Box stores too--must pay in order to have a particular kit on their shelves. Add to that the necessary "markup" that the retailer needs in order to pay the rent (most smaller retailers lease their space), pay the lights, electricity, heat, telephone and internet access bills, insurance (both property/casualty AND liability--both general and product liability), personal and/or business property taxes along with business licenses, any security expenses they may have, plus wages or salaries for their employees, plus a salary for the owner (who in most cases is on-staff in his or her own store--AND a return on the investment they have (their money which is the capital by which the store operates) at least equal (hopefully) what they could be making by simply investing that money in any one of the financial markets rather than tying it up in retail inventory which they hope to sell. That all adds up, trust me. And in the bottom line, there's always that adage staring the retailer in the face every morning: "If your outgo exceeds your income, your upkeep is your downfall", which of course plays not only on the retailer's earpiece, but also that of the wholesalers he deals with , AND every manufacturer of every product he stocks in his store. Oh, and you are more than a bit off in your assessment of the dealer's cost of the items he stocks--it's more like 55-60% on such as model kits, paint and glue, but often dramatically shorter than that on many higher end items (trust me, I've been there, done that, for a good number of years, in fact the majority of my working life to this point).

As for your inflation calculator--aren't you using the Commerce Department's CPI, or Consumer Price Index? If so, that is a very inaccurate determinant, as not all product categories have seen the same rate of inflation since 1968--some have been far higher, a few have been way below the official rate of inflation--in short, the reported inflation rate from the US Government is an AVERAGE, not an indicator of any specific item or category of product.

Art

[kingiguana]

My LHS, Boardman Hobby keeps kits very reasonable and below MSRP. Yes, the AMT Round 2 kits are higher than the Revell products. Some of the older AMT/ERTL kits are lower. But, like its been said already,...EVERYTHING has gone up.

[om617]

I do most shopping for kits on Ebay and most new kit`s seem reasonable. One thing that have skyrocket is the price on shipping

Example,some charge close to $50 for priority,it`s insaine.

[ranma]

It al comes down to one word GREED! enough said.

[mikevillena]

Greed.....is not necessarily a bad thing. The pursuit of profit is the cornerstone of the economy. All of our jobs rely on companies and corporations engaged in the pursuit of profit. It is what allows us to put food on the table, clothe and house ourselves and our families. It even allows us to pursue hobbies like building plastic kits It is in essence neither a "good" or "bad" thing. What does distinguish each profit seeking venture is it's intended goal and underlying social conscience. For example, Robert Bosch Gmbh is actually a non for profit corporation. Bosch's corporate constitution dictates that their profits be given to charity. Their strong social conscience was incorporated into the company's DNA from the beginning (1886). On the opposite end of the scale is Wal-Mart

Edited June 22, 2014 by mikevillena

[gtx6970]

Again, how is it the Chinese fault?

Tell me, did the Chinese hold a gun to the heads all of the CEO's of American business and make them out source to their country? you need to put the blame were it belongs, on the American business that chose to out source to other countrys.

The american buying public did. The average buying John Q public could care less with how long it's going to last.

The problem today is the average buying public wants it now and at the cheapest costs possibile. As opposed to our parents generation. Back then we wanted to know how good was it and long it was going to last . NOT how cheap is it and how fast can we get it .

There for to compete the average manufacturer has to look at ways to compete with overseas manufacturing costs. To do so on the world stage business's have to monitor overhead to remain competitive. In some cases ( not all by any means ) that requires they look at off shore manufacturing.

[bill_rules]

96% of Bosch profits are re-invested into the company with only 2% being donated to charity and the other 2% going to shareholders.

.

[Joe Handley]

It al comes down to one word GREED! enough said.

Not really, I can see that when it comes to the commodities used to produce the kits (oil, paper, etc) as well as some of the licensing costs, but some of the money that goes into the purchase price at the consumer end also pays people like my self and my co-workers at said store, provides funds that restocks our shelves so you have things to buy when you come into the store (believe me, not having that and trying to run a nearly special order only business will kill it!), pays the bills (ie, keeps a roof over the inventory and the lights turned on so we can see it), etc. Then you have the same things at the manufacturing plants, no matter where in the world they are, then you have to ship the stuff from the factory, to who ever warehouses then ships the products out to stores like I work at.

Edited June 22, 2014 by Joe Handley

[mikevillena]

96% of Bosch profits are re-invested into the company with only 2% being donated to charity and the other 2% going to shareholders.

.

Here you go:

http://www.bosch.com/media/com/bosch_group/bosch_in_figures/publications/archive/GB_2012_EN.pdf

Guess who owns 92% of Robert Bosch Gmbh stock?

http://www.bosch-stiftung.de/content/language2/html/389.asp

BTW, "Stiftung" - FOUNDATION (NONPROFIT), i.e. CHARITABLE FOUNDATION

Edited June 22, 2014 by mikevillena

[Harry P.]

Not really, I can see that when it comes to the commodities used to produce the kits (oil, paper, etc) as well as some of the licensing costs, but some of the money that goes into the purchase price at the consumer end also pays people like my self and my co-workers at said store, provides funds that restocks our shelves so you have things to buy when you come into the store (believe me, not having that and trying to run a nearly special order only business will kill it!), pays the bills (ie, keeps a roof over the inventory and the lights turned on so we can see it), etc. Then you have the same things at the manufacturing plants, no matter where in the world they are, then you have to ship the stuff from the factory, to who ever warehouses then ships the products out to stores like I work at.

That applies to all consumer goods (except maybe the licensing part). So why have model kit prices risen so fast? Way faster than inflation... my theory is that the kitmakers are jacking up prices to make up for falling sales volume.

[Chillyb1]

my theory is that the kitmakers are jacking up prices to make up for falling sales volume.

My theory is that the Bilderberg faction is trying to drive what remains of the Illuminati out of the modeling conspiracy so that the Freemasons can continue their sub rosa activities unhindered by the need to continually be expending energy moderating scale automobile related web forums.

[bobthehobbyguy]

That applies to all consumer goods (except maybe the licensing part). So why have model kit prices risen so fast? Way faster than inflation... my theory is that the kitmakers are jacking up prices to make up for falling sales volume.

If the volumes are lower that will impact the cost, the larger volume you manufacture the better your costs. For example the boxes, a lower volume means that you are printing fewer which means it will cost more because you may not get as good a price for the quanity being printed. Setup costs will be higher every time you change the injections machines there are going to be labor costs involved.

Just a few things that lower volumes will impact.

[Harry P.]

If the volumes are lower that will impact the cost, the larger volume you manufacture the better your costs. For example the boxes, a lower volume means that you are printing fewer which means it will cost more because you may not get as good a price for the quanity being printed. Setup costs will be higher every time you change the injections machines there are going to be labor costs involved.

Just a few things that lower volumes will impact.

Right. Like I said, they're raising prices to make up for lost volume and all that goes with it.

[cobraman]

Where would we draw the line when it comes to pricing ? Is there a price where we would give up the hobby ? Maybe we would just cut back on what we buy ??? Never forget if you have a Hobby Lobby near you that there is a 40 % discount available but selection is somewhat limited.

[Art Anderson]

Right. Like I said, they're raising prices to make up for lost volume and all that goes with it.

Well, certainly the lower expected sales of any model car kit means that the investment in tooling has to be spread over fewer units produced and sold--that's basic business economics. Ditto for a pretty good chunk of overhead expenses (those that aren't variable).

[Art Anderson]

Your numbers are based on what?

From what I found, a model that sold for $2 in 1968 (which they did), adjusted for inflation would sell for about $14 today. Seems to me that a $25-30 kit is way more than just keeping up with inflation...

http://www.dollartimes.com/inflation/inflation.php?amount=2&year=1968

http://www.usinflationcalculator.com/

http://www.bls.gov/data/inflation_calculator.htm

Harry,

Please read up on how the so-called "inflation rate" gets calculated--it's nothing more than an average of the increases in price of a wide range of goods, services and even commodities. These items do not all go up in price at the same rate, never have, and probably never will. Some things included in the Consumer Price Index have been known to actually go down in price for periods of time, mostly commodities that are necessary in our lives, while of course, manufactured goods keep going up, as the costs of manufacturing keep going up--and that's just as true nowadays in China as it is right here at home (yeah, the People's Republic of China has been experiencing pretty noticeable inflation as their labor and manufacturing costs keep rising). It seems that folks in China have discovered they like being able to buy cars, have nice modern apartments--even their own houses, with furniture, TV's, computers, and pretty much lifestyles we've taken for granted here in the US all of our adult lives.

Actually, the biggest cost with a model car kit is the expense of developing and tooling that kit, and as pretty much a general rule with model kit makers, those new tools have to be funded from within the company--almost no lines of credit at the bank for tooling there. So, in a very real way, today's kit sales pay for tomorrow's new kit introductions. Along this same line, I've seen it estimated that to tool up and then produce, model car kits here in the US currently would mean kit prices practically double what we now pay for them being made overseas. Probably that won't be the case forever, even though it sure seems like it. And, I should think that you and everyone else following this topic would want the likes of Revell, Round2 or Moebius to be profitable, given that it's the income (profit) generated this year which pays for next year's new kits.

Remember the old Formica tabletops and decor that Wendy's restaurants used to have, that were reprints of old, 19th Century newspaper advertisements? Those were a mix of ads from newspapers in the US, as well as from London, England--can you guess which of those ads from the mid-late 1800's spoke constantly about quality and not price? Hint: They sure weren't ads from New York, Chicago or Boston! In short, our economy here in the US has been as much about price as anything else (I can get --fill in whatever blank you want to here please-- for you cheaper! (That is, until such a seller finds that his outgo is exceeding his income, making his upkeep his downfall).

[slusher]

That applies to all consumer goods (except maybe the licensing part). So why have model kit prices risen so fast? Way faster than inflation... my theory is that the kitmakers are jacking up prices to make up for falling sales volume.

Harry, you may be right but why is revell coming out with new tooled kits? I would think so many of us older builders would be keeping the model market strong....

[lordairgtar]

My theory is that the Bilderberg faction is trying to drive what remains of the Illuminati out of the modeling conspiracy so that the Freemasons can continue their sub rosa activities unhindered by the need to continually be expending energy moderating scale automobile related web forums.

I see what you did there.

[Tom Geiger]

A few thoughts to add to, not disagree with anything that's being said. Re Walmart, they are the most savy retailer in the world. Where Art spoke of their throughput of merchandise being no more than 30 days, their accounts payable is net 90. That means that they put the merchandise on the shelves, sell it within 30 days, then earn interest on that money for another 60 until they pay their vendor. They can open new Walmarts without putting out a dime for merchandise. They also have no purchasing function. Everything is computerized, recording sales and quantities of merchandise still on the shelves. Their vendors are to watch those numbers and automatically replenish their stock themselves.

About model kits and China... as said, who knows what kits would cost today if we continued to produce kits in the USA. True that Ertl was pressing kits in low cost Indiana Iowa, but still higher than the costs of third world countries, which have costs low enough not only to pay for the product, but the shipping cost from the other side of the Earth and still be cheaper. Note that when the kits started coming from China, the quality went up. Things were all bagged individually and I even got a few convertibles where the windshield frames were wrapped in cardboard and hand taped to the body to protect them. Much improved over slamming parts into the corner of the box that we got from USA.

And the lowest cost providers all have their day... as Art mentioned, the standard of living is rising in China so costs are going up as everyone wants consumer goods. One good part of the China equasion is that they LOVE American things. Marlboro, McDonalds, Kentucky Fried Chicken and Buicks... they love US cars so this should be a boom for our tired manufacturers, even if the cars are assembled there. Ford has literally doubled their business this year.

So eventually China will cost too much. I notice that Revell of Germany kits are produced in Poland, so there has to be a cost advantage there. Manufacturing will go to the lowest bidder so economies like Viet Nam and Laos have been bidding for business. Mercedes has a plant in Viet Nam now.

Note that the game of low cost pass around has gone on for years. First Japan was it, then their economy flourished, so then it was Korea. Now even Hyundai and Kia produce cars here. And as we all sit and cringe waiting for low cost cars to come from China and India, guess who snuck in the back door? All those Ford Transit Connects are built in Turkey. And it will get interesting from here...

Edited June 24, 2014 by Tom Geiger