The future of model railways is intricate and digital. A detailed replica of the original remains the measure of all things, while digitization aims to offer maximum fun combined with realistic use. The real challenge, however, lies in encouraging young kids - and supporting the "points of contact" with the customer.
Märklin & Co. have been pressing ahead with digitization for over three decades in order to offer extra features that make model railways more fun for everyone. Since the introduction of the Z21 for smartphones and tablets, Modelleisenbahn München GmbH, with its brands Roco and Fleischmann, has seen itself as an "international leader in innovations and technology". In 2018, the Group presented a completely re-engineered Z21 app with additional features. Without digital control panels nothing would move at all on the board, but hardware is still controllable - look at the E-Lok Re 4/4, for example.
The accessory specialist Viessmann has also started thinking in binary terms. In 2017, the company presented the Commander 2 digital command station. PIKO is another example. The company's first trials with "Digi-Fern" date back more than 10 years. But the theme is really picking up speed now. In 2015 the SmartControl System was launched on the market. In 2018 it will be supplemented by SmartControl light. "The new digital command centre with its wired handset control is a low-cost alternative and ideal for beginners“, said PIKO sales manager Jens Beyer, "which is why we have included SmartControl light with our starter kits in particular."
A passion for that special product
The digital upgrade is more than just art for art's sake. High-tech is a sales argument for model railway enthusiasts who need good reasons to buy a model a second time round. Additional purchase incentives are also offered by "functional models" such as a track vehicles or measuring wagons which measure a system so precisely that model railway enthusiasts see their layouts from a completely new angle. But whatever you think about digital decoders and smoke generators - even the most loyal collectors and hobbyists have trouble getting their heads round the number of new products and new designs every year. Märklin alone announced 371 novelties for 2018. The trend towards themed collections and replica models is therefore only logical.
The industry is fighting on two fronts. It needs the next generation, but must not lose sight of the hardcore railway fans with their love of the intricate and digital.
The market is too small to be able to concentrate on just one target group. So we have to master the balancing act between inexpensive entry-level and high-end products for showcase collectors and technology freaks. At PIKO, we are trying to cater for the wide diversity of target groups with our various product lines.
Jens Beyer, Sales Manager, PIKO
And the industry seems to be successful here. "The market is stable" commented Jens Beyer. "PIKO is aiming for significant growth in the future." And that is probably only possible through market shares. According to Beyer, a key to this is a good price-performance ratio and stable product availability. Jörg Vallen, owner of the accessory specialists Busch GmbH & Co. KG, thinks the market has bottomed out (see interview).
For some years now, Märklin has been focussing more and more on children and returnees with "my world" and "Startup". Managing director Florian Sieber believes that technical gimmicks are an absolute must even if the industry is often criticised for this. "Over recent years Märklin has attracted a lot of attention with its refinements such as moving windscreen wipers or water-based steam atomizers. Technical gimmicks will continue to play an important role in the future because they give customers good reasons to buy, for example people that already own the cult class 103 locomotive."
Back to the future
With play sets such as Jim Button, Lukas and Emma, the market leader scores high marks with kids - as well as their grandparents who join them on the journey to Morrowland. The sets were sold out in a trice and seem to have the potential to bring generations together. Michael Ende and the Augsburg Puppet Theatre may be well known to baby boomers in Germany; but today's primary school kids have never heard of them.
Nevertheless, Lukas the engine driver and Hogwarts Express show that licences can give the industry a boost if they are closely linked to railways. "Märklin has had relatively little experience with licenses in the past," said Florian Sieber, "but all the Jim Button products we launched in 2018 were a great success. We think that the Jim Button theme and railways are attractive even without the film."
Products specifically for children are a central problem in the industry according to David Haarhaus, managing director of Bachmann Europe Plc. His company wants to respond to this. "We have developed a new strategy that will enable us to tackle this task", said David Haarhaus. "And we are starting in the UK." Another difficult task is to create points of contact with the customer. Haarhaus thinks the British market is suffering from exactly the same problems as the German one. Model railways are disappearing from people's minds, which is why the industry must help to protect the "physical presence of the hobby out in the real world".
Accessories particularly hard hit
Long gone are the days when customers didn't know exactly what they wanted, but wafted out of the shop with a feeling of contentment because they not only found what they might actually have been looking for, but, as a result of cross selling, so many other things as well that seemed to be tailored-made for them and nothing seemed too expensive. The point-of-sale was the central hub for customer relationships and extra purchases in this pre-digital shopping world. Retailers scored highly on the shelves with functional competence and emotional strength.
Today, algorithms are increasingly taking over the task of controlling the customer. Or, thanks to the Internet, manufacturers contact consumers directly themselves. In the meantime, the Internet has also become a "must" for retailers as well - a fact that doesn't exactly please them, but at least gives them a presence. Customers are increasingly making their purchasing decisions in advance on the basis of information from the Internet.
We all know the result. Whereas once, the Christmas season was traditionally parcel time, that’s only true today to a limited degree. The victory march of e-commerce as well as the different ways of communicating or interacting with customers are also being felt by model railway retail specialists. But nevertheless, it is the personal contact that gives them their original competitive advantage. Retailers are therefore struggling with a paradox: They must be present on the Internet, but their real strength lies in taking care of the customer personally.
The market is stable
Three questions for Jörg Vallen, Busch GmbH & Co. KG
Mr Vallen, people say that the market for model railways is stable, but stagnating. What's the problem?
Jörg Vallen: Can you name any sector that is still booming? Even the manufacturers of smartphones are now struggling with the sales figures of the mobile multitalents. It cannot be denied that model railways have faced a lot of competition in the last four decades and have had to struggle with declining sales for a few years. Each euro can only be spent once, especially since an ever smaller proportion of private income ends up in the traditional retail trade.
But fortunately it's also true that the market is stable. In the first nine months of 2018, Busch had an encouragingly good year despite the hot summer. Despite all our attempts to reach young people - and the question here is always whether they will remain loyal over time - we believe that the 50plus generation will remain our core target group. They have the time and money to fulfil all their childhood wishes. That does limit the market, of course.
Are accessory manufacturers suffering particularly from the fact that the business with rolling stock is migrating to the Internet, making it more difficult for the high street specialists to generate additional sales?
J. V.: This is without a doubt a huge threat because anyone who buys an expensive engine on the Internet isn't likely to buy any lupin or sunflower fields from Busch. As a result, accessory manufacturers are confronted with two problems. First, despite the shrinking number of dealers, they still want customers to come to their shops. Secondly, we must present our products so attractively online that hobby modelmakers and model railway enthusiasts can buy the accessories online if they wish, but still really prefer to go to a proper shop. In Germany, the "Micronations" club, for example, contributes to this by informing the target group continuously about new products, events and other interesting news. It forms a bridge to the end customer and makes up for the things that retailers cannot offer in their shops.
What else can Busch do to bring back personal customer relationships and prevent everything migrating to the Internet?
J. V.: It is clear that we cannot advertise on the six-second spot before the main evening news. The only possibility left, therefore, is to keep supplying customers with information and communicating with them so that they are encouraged to come to the shop. This can be done through newsletters, social media such as Facebook, vouchers and events in shopping centres.
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