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Advanced Pricing on Imported Items

EDM Models

Product Pricing Update

November 2008

Unless you have been living in a hole in the ground you will have some idea that the worlds economy is completely screwed.

 “So what!” you think…….

 Well have a look at what its done to the exchange rates

Exchange Rate History

The graph to the right shows the dire situation over the last 120 days. Prior to this period the rate was up around the 1.9 level for the last 3 or 4 years.

What does this mean: -

  • We used to be able to predict reasonably accurately the price in GBP of future US imports and set a UK price even when the item wasn’t coming to the UK until months [or years] in the future.
  • We can’t do that anymore. Old forecasts are wildly out and its not possible to make new predictions with any certainty.
A practical Example

The recent delivery of Stoney Creek’s 2008 Limited Edition Kits is a good example as we made a loss just because of the exchange rate plummet.

  • The cost to me was $4400 which at rate of 1.9 would be £2315 and based on a usual mark-up of 30% would have made EDM a profit of £695.

What actually happened

  • Firstly we honoured the prices I had quoted….

  • Then we paid the bill and $4400 dollars transferred to the USA cost me £3030, an increase of £715 and a loss of twenty quid to the business.

Warning, the figures are quite rounded to illustrate a point

Making a loss on each project is clearly not something we can sustain

So What About the Future??

An example = AMS Box & Tank Cars???

Well, it’s almost inevitable that the price we are going to have to charge for these is going to have to go up although at this stage neither we nor the UK importer can say by how much. When the rate had started to fall and was at about 1.7 we had both resolved to absorb the rise, at least for advance orders but 1.46 is a different matter all together.

I can see that these might end up being £90 a box instead of £66 by the time they are delivered. Please consider this

  • At £22.50 a car these still remain a good price per car for a scale sized car [The equivalent San Juan Cars were £46 each]

  • I will keep the price as competitive as I can but need to remain solvent! It will depend on the exchange rate at the time of delivery.

  • If you’re going to cancel please do so know whilst I can still get out of my commitment to take the cars from AMS

 

Other Thoughts to Consider

If you’re doing a price comparison, remember all the other prices like Bachmann are forecast to go up by 20%. Rumour has it the “technical problem” excuse Bachmann are using for the delayed delivery of the Railbus and Trailer to the UK [it’s been out in the US since August] is actually because they can’t afford to honour their dealer pricing.

[the Bachmann gossip is unsubstantiated rumour from a usually reliable source]

The Future

It has always been our policy to call all the prices of future delivery items and “estimated price”. This is the first time we have been in the position of having to raise prices [we have dropped the price several times] and we are not comfortable with having to do it but there is no other option. We plan to do the following: -

  • We are going increase the emphasis on the “estimated price” tag on our website to ensure there can be no doubt what this means.

  • We may well increase all our estimated prices so that we’re back to being able to reduce prices on delivery rather than having to ask for more.

  • When a price has been revised as described above we will mark it as such

  • We will continue to price our items as competitively as we can. If you want it mathematically the formulae below shows it. As you can see its dependant on the exchange rate even if nothing else changes

[[US cost + Shipping] x Exchange Rate] + Shipper Handling Fee = UK Cost Price

[UK Cost Price + Profit + VAT] = UK retail Price

 

We are sorry to have to bring you this sort of bad news. Its not something we like doing but we hope you will understand that there isn’t anything else we could do in the circumstances.

 

Paul Martin

EDM models