The conversation of price, greed and models comes up on Facebook and a couple message boards I participate in about every three month. Just 30 days or so ago it happened again on Facebook. A person expressed outrage at the high cost of DCP trucks, a brand known for great detail that hobbiests enjoy buying. It did not take long for others to chime in with the same passion blaming greedy dealers, China and a variety of other culprits for the prices.
While I too look at prices and squirm from time to time I understand well why items cost what they do and the motivation to charge…well….what the market will bear. I will use DCP trucks in this example but the idea applies to a variety of models. As I write, a cab, just the semi tractor, can be bought about anywhere on the web for $50+/-. That is $50 for just a 1/64 scale cab, no trailer. Complete semis can average in the $70 – $80 range pretty easy. This causes outrage for some buyers. But on closer examination there is much more to it.
For example, a dealer buys a case of six trucks at $300.00 or $50.00 each. The manufacturer suggests a markup of 38% or a retail price of $69.00. So, the dealer will get a $19.00 profit, not too bad. But! We have not accounted for, shipping, sales tax, self employment tax, social security and a variety of other taxes that goes with owning a business.
Then, then there are the expenses of going to toy shows that includes fuel to get there, hotel expenses, table rent, save the date cards and advertising. If digital, there is the cost of an internet connection, website maintenance, host expenses, packing peanuts, bubble wrap, Ebay fees (if used), Paypal, and or credit card fees. With all the services and fees the $19.00 profit can shrink to $14 or less in seconds. In order to make enough to live on a dealer must sell a lot of models.
I am not here to garner sympathy for dealers. Business is business. What I do think is appropriate is to point out that there is more to the cost story. Add to that, if a dealer is going to give me great service, I expect to pay more. I normally work with 5 different dealers (I am not a dealer at this time, I usually pay whatever the market price is. I do get breaks from time to time). If I need a specific item I start on my call/email/text list until I find a dealer that has what I want. They are all competitive within a few dollars on price and are exceptional with shipping and timeliness. That is worth its weight in gold as I keep no inventory.
To add a variation to this conversation, there are several people, and I used to be one of them, that try/tried hard to buy bargains, then, flip those bargains hoping to make a profit. So what I did was buy a case lot of some model from a dealer or a close out item. I would usually get a 10 to 15% break for buying a case. If I bought a case of six trucks and get a 15% discount on a truck that retails for $65 I basically pay $55 per truck before shipping. If want to flip them and make money, I have to ask a premium to not lose money (remember all the fees?). This puts me at the top end of the market and I make $0 on my time. Plus, some bargains were bargains for a reason, no one wanted to buy them.
What now? The models I used in this example and other types of models will probably not get any cheaper. Sure patient buyers will sniff out bargains but overall I expect the prices to remain as they are and inch up over time. Does this mean that any average collector or enthusiast will be out of the market? I don’t think so, there will be some folks that are not price sensitive and buy what they want. But it will cause some enthusiasts to be selective and patient, which is not a bad thing.
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Thanks so much, Eric