Sometimes the manufacturer gets stuck. I've been on the other side of this.
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For a year, I operated a partnership with two friends called Keyser Car Shops to produce custom lettered B&O freight equipment, possibly much later to grow into tooled B&O car designs. We had about 12 major product ideas, and envisioned cranking out two or three a year. We never got past the first project, a Red Caboose B&O M-26b in "Time-Saver" slogan bright red paint.
We took no pre-orders and only announced when the boxcars arrived. For all the other faults in our business plan (small marketing footprint, no paid advertising, web-based only sales, risking market saturation from the same freight car product in other B&O lettering) and unforseen obstacles (high retail price, mainly due to Chinese inflation and dishonesty), the insurmountable problem was fundamental lack of demand. Previous yahoo list clamor for a particular car appearance means about twenty sales, not 400. We sold 200 and remaindered 200 for a net loss. It was not going to get any better than this. When in a hole, stop digging. We disbanded.
As a consumer, I detest the preorders-only business model, where a new product is gone in two weeks before I can even look at one.
On the other hand, a garage full of unsold slow-selling boxcars is a killer. Bills are paid with seed corn, not sales proceeds. Never mind funding the next project. I cannot imagine a larger company making payroll risking this inventory condition.
The main challenge of capitalism is sizing the business. Like kids staffing a neighborhood lemonade stand, they lose their little shirts if it rains (much unsold paid-for lemonade on hand), or leave money on the table (thirsty potential customers walking away unslaked) if they are underprepared when the sun shines.
While we tire-kickers are fed up with sold-out preordered releases, the economic realities for the producers are stark.
--- In STMFC@..., SUVCWORR@... wrote:
The problem is, it is the dealer who gets stuck. The manufacturer has been paid. The distributor has been paid. Neither will take the product back. The customer who pre-ordered declines to take it. The person with the least available cash is stuck -- the dealer. This might not be so much of an issue with a freight car. But how many $500 locomotives can the dealer he left holding that he will likely need to sell at a loss (no one pays retail and most are not even satisfied with 25% off list any more) and stay in business? Thus the need for a pre-order deposit in selected cases -- when burned once. The non-refundable deposit allows the dealer to sell the amount of the deposit below cost and at least break even. Otherwise, he is out of business.
From: Anthony Thompson <thompson@...>
To: STMFC <STMFC@...>
Sent: Wed, Mar 21, 2012 1:17 pm
Subject: Re: [STMFC] Re: Pre-orders, pro or con.
Rich Orr wrote:
As a small vendor (not a LHS), I buy directly from two
manufacturers . . . I do selectively require deposits on orders. I
have been stuck with large numbers of items from individuals who pre-
ordered and then declined to accept the items. Usually
locomotives. Anything they order now requires a non-refundable
But notice the problem here. The locomotive comes in, it's panned
by somebody somewhere (rightly or wrongly), and the prospective buyer,
who of course had no way to know what would be delivered, declines to
accept. I don't think this is unreasonable behavior. If those who are
"selective" (not saying "picky") find themselves having to pre-pay for
reservations, some will simply drop out, as some posters have
observed. That's a loss of customer, because they don't decline EVERY
That said, I have no sympathy for the reservation holder who, on
arrival says, "sorry, I changed my mind." That's unreasonable, even
though I realize the dealer has no way to distinguish it from the
buyer who finds the product unacceptable.
Tony Thompson Editor, Signature Press, Berkeley, CA
2906 Forest Ave., Berkeley, CA 94705 www.signaturepress.com
(510) 540-6538; fax, (510) 540-1937; e-mail, thompson@...
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