S.T.: You have summed that up very concisely; we really are concentrating on these two price ranges with this year's new products. Firstly, because cheap products are good impulse products that sell well in local specialist shops in particular. The end user often does not hesitate for long over a price below €20 to €30, but will buy a model on impulse because he likes it. We are using this active product policy in an attempt to strengthen traditional, specialist businesses.
Conversely, there are also great ideas and products that result from them, which are a bit larger and more expensive. The unit sales of these products are then somewhat less, but the customer has a much greater choice of models than a few years ago. The trend in this area is towards more individual model building. However, as the fixed costs then result in smaller quantities, and because the models are, in part, technically very complex, this (unfortunately) automatically results in higher prices.
NOCH pioneered laser-cut models. Has the schism in the accessories industry been resolved because you can no longer do otherwise for economic reasons?
S.T.: I think that the fear that so many model railway enthusiasts had with regard to laser-cut models has now subsided. We had to recognize that "mass models" such as small detached houses can be made much more cheaply using the plastic moulding process and that they offer very attractive quantities. These models are thus not suitable for the laser-cut process.
With larger, special models that tend to sell in small quantities because they are, for example, typical of a particular region, the laser-cut process, however, makes more sense. Here, no expensive investment in tools is required. That is why, in future, we will also see on the market a peaceful, parallel co-existence of the two technologies with different model ranges.
One thing that remains a critical point is your most important marketing agents: the specialist shops. What we hear from them again and again is that everything costing more than €30 is sold online. Is it not true that such a development affects in particular an accessory supplier, who, after all, also makes a living from the additional sales he makes in his shop?
S.T.: Yes and no. What is clear is that when the retail trade enjoys less revenue, this affects us all sooner or later – accessories manufacturers like us as well as manufacturers of rolling stock. However, in the last few years, we have seen a trend towards model makers making more things and thus a shift in the retailers' portfolios towards more space for accessories.
Margins in the accessories sector are, according to retailers, bigger, the turnover higher and the capital lockup logically lower. Traditional specialist shops are, therefore, understandably focusing on having accessories available locally and ordering expensive model locomotives when customers want them. The pricing in the impulse product range of our product portfolio – which is usually less than €30 – is again very helpful to us with regard to this.
Even specialist dealers are playing along online. The decisive thing there is the price, not service or advice. Does that not fuel the structural change in the industry even more?
S.T.: The structural change brought about by the Internet has shaken up not only business but our entire lives. The last such fundamental changes in society, work and culture can probably be attributed to the Industrial Revolution in the 19th century. That the world – and along with it business –will change because of that is something that we first have to recognize without judgement. What we make of this realisation, however, is up to us.
I think the Internet is a well-functioning addition to the specialist retail trade, for example to provide people with information online or in e-mailed newsletters so they can enjoy an "offline customer visit". Such information includes details about things like opening hours, parking, the availability of different products, brands that the shops stock, the latest new products and a whole lot more.
I could immediately come up with 100 more bits of information that would be of interest to me as a potential offline customer at a real shop before getting into a car to drive there. Thus a specialist shop can provide real added value online, something which was impossible before the invention of the World Wide Web.
And what form could this added value take?
S.T.: In my view, traditional specialist shops have three aces up their sleeves that they can use to counter the best online price. At present, they are too hesitant to make use of them. The three aces are service, service, service! It is precisely here that online vendors cannot hold their own in many respects – despite good prices and fast delivery. Personal contact, a feel-good time in the shop and sound advice are, in my view, the key to successful offline retailers.
And retailers should simply turn the tables: just as online vendors have, in recent years, lured customers from the specialist retail shop onto the Internet, retailers can use the Internet to advertise their traditional shops and without doubt win back one or the other customer from the Internet again.
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