It’s time to start thinking inside the box Okay, let me begin by apologising for the headline pun, but it was difficult to resist. In fact, the thrust of this article is that the diecast manufacturers need to start thinking, in the parlance of business strategists, outside the box. We are, at times, in awe of what the diecast companies manufacture. Their 1:18
models, in particular, are often incredibly impressive, with more detail and separate components than you’ll find in a thousand pound chronograph watch. One might suggest that the manufacturers have done a terrific job in keeping, for many years at least, the prices of their models down to an affordable level. But the times they are a-changin’ and the stability in
prices and supply that we saw in the nineties and the early years of the new decade are behind us. And frankly those years won’t be seen again. We are now, we would suggest, at what is sometimes termed by physicists and social observers alike, at a ‘tipping’ point. Not to put too fine a point on it, the diecast business as we know it is dying. It’s not going to disappear £89.99
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As measured by the price of a 1:18 F1 car, the cost of diecast has gone up by some 125% over the last six years. By contrast, inflation over that period has risen by 20%, meaning that our models have gone up by more than six times the rate of infl ation! This might just have some bearing on falling sales. 16 STARTTHINKINGINSIDETHEBOX
This is Beijing today; there’s barely a rickshaw in sight. No longer can China be looked upon as an underdeveloped economy desperate for any work that the west is prepared to throw its way. The east/west dynamic has changed forever and so it shouldn’t surprise us that our model cars have become so expensive.
overnight, but making high quality, technically advanced and detailed replicas at affordable prices, is simply unsustainable in the medium to long term. The reasons are well known to those who follow the model world. Basically, almost every manufacturer has its replicas made in China, a country that has been the workshop of the world for many decades. When China was largely a peasant economy, its costs were low. But these days China is a modern, industrial powerhouse. The country is not without its economic problems but, over the last 10 years, its growth has been phenomenal. I think I read somewhere that China now has more millionaires than the rest of the world combined. And central Beijing is like a 21st
century updating of the glitzy parts of London, Paris and New York. Chinese workers now rightly demand proper wages. They won’t work 25 to a room in the basement of a sweatshop. They want weekends off, annual holidays and all the
China is no longer purely an agricultural economy. Chinese workers now expect to enjoy the working conditions and rights that the west has enjoyed for many decades.
advantages and perks we have become used to in the west. This clearly affects the cost of manufacturing all kinds of products including, of course, our beloved model cars, especially in the larger scales, where the hundreds of separate actions and processes all have to be completed by hand. To this one can add the impact of rising commodity prices, the increased cost of shipping and Chinese inflation that is, right now, rampant. All of this helps to explain why our models are getting more expensive; indeed too expensive for many collectors. But there’s another, more structural problem. By finding employment elsewhere, the workers in China can now earn more than they do in the factories that make our replicas. STARTTHINKINGINSIDETHEBOX 17
This is amply demonstrated every year at Chinese New Year. Historically, the factories used by the manufacturers are in the south of the country. At New Year, which falls sometime after our New Year, workers have returned home for a few weeks to visit their families, returning to their jobs after the holidays are over. But increasingly, they are not coming back. One well-known factory that makes diecast replicas for a number of manufacturers lost over 1000 workers this year! That leaves an enormous hole in even the largest of operations.
The problem is that you can’t replace these workers with people taken off the street. It takes months to replace the missing staff and then several more months to train them to be able to assemble our complex and detailed replicas. By the time the factories are back up to speed with a fully conversant and technically capable labour pool, the next New Year is just around the corner! This means that, in any year, the factories are only at full capacity for six months at best. And it is this that partly accounts for the appallingly
The models we buy these days are incredibly detailed. They can only be put together and finished by highly skilled workers. Finding the kind of people who can do this work is not easy. Nor is it cheap. 18 STARTTHINKINGINSIDETHEBOX
The output of the diecast industry has slowed down incredibly in the last six to nine months. We see far fewer releases in a week than we used to.
low level of new releases we have seen in recent months. In past years, we have been used to seeing between 30 and 50 new replicas arrive on our shelves just about every week of the year. In the first half of 2011, there have been weeks where the number has been close to single figures. This industry, as we know it, can’t survive with such low levels of production. Manufacturers will disappear. Distributors will go out of business and retailers will close their doors for good. We’re not harbingers of doom here. And we’re not suggesting that all this heralds the end of civilisation as we
know it, but we probably need to accept that nothing lasts forever and that the diecast world will never be the same again. Once upon a time, collectors acquired lead soldiers and created battle field scenes in their living rooms. Tin plate cars and aeroplanes came and went. White metal gave automobile enthusiasts access to hitherto unseen levels of detail and accuracy. And, in turn, white metal died when diecast came along. So now, we have to ask ourselves, is it time for diecast to be replaced by the next affordable technology? Of course, we don’t know. But we do know that, in the years ahead, the shape of this business is going to have to be very different to the picture we see today.
The diecast companies are going to have to evolve if they want to survive. If they don’t change they’ll end up as dead as the legendary Dodo.
The question that poses itself is what can the manufacturer do to survive? It’s a serious question because it is clear that some won’t. And as we have suggested in previous issues
of Diecast Monthly, those who appear strong today won’t necessarily be so in the future, whilst some of today’s niche players may well become the giants of tomorrow. Meanwhile those who put their heads into the sand and go about their business the way they always have done, because that brought them success in the past, will risk becoming the modern day equivalents of the dinosaurs and dodos we see displayed in the Natural History Museum. So what can the manufacturer do? The first and most basic imperative is to understand what customers want. Diecast manufacturing can no longer be the preserve of amateur enthusiasts, pursuing their own particular fascinations.
Nothing in life stays the same. Lead soldiers came and went. As did clockwork toys, tin-plate cars, boats and aeroplanes. Is time up for diecast? CONTINUED ON PAGE 62 › 19
CONTINUED FROM PAGE 19
We’ve got nothing against Bentleys. They must be great cars or all those second division footballers and ageing rock stars wouldn’t buy them. But frankly, the Mulsanne is not the kind of car that many model collectors would want to acquire.
If you produce models that collectors don’t want to buy, you might as well pack it all in today, buy a villa by the sea and retire. And we’ve already warned the manufacturers against relying too much on the Audis, BMWs and Mercedes of this world. It’s tempting to do business with these multi-nationals. They commit to large quantities and pay their bills on time, but when it no longer suits them, the automotive manufacturers will bring the gravy train to a sudden halt without a second thought. Ask the owners of any small brand that has done business with one of the supermarket chains. It’s great whilst it lasts, but when the tap is turned off the shock can bring even the most successful medium sized business to its knees. 62 STARTTHINKINGINSIDETHEBOX
And for some manufacturers we suspect that the day of reckoning is not that far off. The big car companies like to have models in the cabinets of their steel and glass showrooms; replicas of the real cars that sit on their polished marble floors, but once the price of an average 1:18 replica breaks through £100, or a 1:43 through £50, the writing is on the wall. The diecast manufacturers are also going to have to be less parochial than they have been. In the future, a Japanese maker will have to make more than just Japanese cars, German makers will need to look beyond an
Audi, BMW and Mercedes, and French companies won’t get away with just making Citroens, Peugeots and Renaults. And that’s because no single country will allow a manufacturer to hit the minimum order quantities that are being demanded by the factories. We live in a global village and, to flourish, a manufacturer will need to look at the entire world market in order to work out what to manufacture. Obviously, this demands a certain level of sophistication in marketing terms and, as we’ve suggested in the past, that’s not the strong suit of most diecast companies. But the diecast companies are going to have to do more than just choose better subjects; they are going to have to radically review and, in our view change, the nature of the product they make. And that’s because they need to bring prices down,
Diecast companies are going to have to look beyond their national borders in order to survive. A French company making French models won’t, in the future, stand a chance of hitting the minimum order quantities required by their factories.
No longer is resin the poor cousin of diecast. 10 years ago it was, but these days a 1:43 resin F1 car is probably better quality and more detailed than an equivalent metal one. The Spark car is on the right.
or at the very least stop them from continually rising. They need to make their models simpler to manufacture so that less skilled labour is required to put them together. And they need to be able to get them into the market faster because, quite honestly, nobody wants a 2011 racing car in 2014. They want it in 2011. But anybody, you might say, can be a critic. It’s easy to complain and find fault in others and in other businesses. So do we have any ideas? Well, yes we do. They’re not necessarily new ideas. In the past they might have been brushed aside, but that kind of attitude will take some companies to the wall, so it might be time to pin the old ears back and listen!
There is one company out there that seems to be bucking the trend and which has avoided the malaise that is generally afflicting the industry. And that company is Spark. When Spark first came along it was laughed at by many. Resin was seen as a fringe product, and their models were written off as little more than built-up kits. Diecast companies looked down their noses at resin. In those days, prices were higher
than those for the equivalent metal model and the quality was seen as inferior. Well that was then and this is now. These days, resin is seen as, if anything, more desirable and collectible than diecast. The prices are on a par with diecast and our Leigh, the most fanatical and knowledgeable diecast collector this planet has ever seen, thinks that Spark’s 1:43s are now better quality and more detailed than their traditional diecast cousins.
Resin, we think, represents the future of motorsport models and that’s because resin is so much faster to get into the market, and most collectors want a 2011 replica this season, not next year, or the year after that! STARTTHINKINGINSIDETHEBOX 63
And as I write this, on a plane flight in mid April, Spark has just announced that it will be releasing its first 2011 F1 cars by the middle of the year. Quite honestly, diecast manufacturers simply can’t compete with this. We’ll be bold and make a claim. The future of F1, and indeed motorsport subjects in general, is in resin. Diecast cannot match resin on speed to market, and that’s the all important factor in this sector. The other drum we’ve been banging on for a number of years is the benefit of closed bodyshells on 1:18 replicas. We’ve often raised this with diecast manufacturers and have been scoffed at but, funnily enough, it’s another principle that has been embraced by Spark, and nobody scoffs at their 1:18s. So, let’s go back in time and look at how we got to where we are today.
Since the 1960s, and models like Corgi’s James Bond car, the race has been on to cram ever more detail into our collectibles. Is it now out of control we ask?
I’m no anorak-wearing diecast historian, but I remember early Dinky cars and the like which had no opening doors, boots and bonnets. They had no engines, no steering and no suspension. And then people like Corgi came along (I don’t know if they were the first) and suddenly every model had opening parts. Heck, if it was a James Bond car, you had firing rockets, revolving number plates, an ejector seat, and a pop up bullet proof shield.
In the early days we were happy with simple models that did little more than replicate the body shapes of the cars we coveted. Perhaps it’s time for the manufacturers to simplify the models they off er. 64 STARTTHINKINGINSIDETHEBOX
The race was on, and ever since it has been a fight to see who can provide the highest levels of intricacy and detail. Today we talk about hand-laced spoked wheels, photo-etched mesh grilles, real leather seats, working seat belts, opening glove boxes, luggage in the boot and so on. It’s all horribly impressive stuff, but did anyone ever ask collectors if this is what they wanted? More pertinently, did they ever ask collectors if they were happy to pay the prices that are required to deliver these levels of detail? I think not. Instead, what we find is that manufacturers have gone down this road because technology has allowed them to. They have become involved in an expensive game of one-upmanship that we, as collectors, are paying for.
The problem is that, increasingly, collectors don’t want to pay for these refinements that, in truth, they never demanded. What we have witnessed, and are witnessing, is a game of egos. Who can make the most detailed models and whose brand can get away with charging the most for it? Well, respectfully, the answer to the first part of that question is that anybody these days can make a great quality model: Minichamps, AUTOart, Mattel, TrueScale, CMC, Kyosho and so on. Well done boys, you’re all winners. But it is the second part of the question that is more important and more telling. What we’re seeing is that collectors are increasingly refusing to pay £100 for a standard 1:18 replica, £150 for a premium grade model, or £200 for a super premium grade number. In fact, we think that the manufacturers don’t realise just how poorly some of their models are selling. And that’s because heavy discounting on the internet is disguising the problem. But you can’t sustain a business model when it is based on part-time vendors and school kids selling replicas from their bedrooms at no margin in order to make beer money.
What we’re seeing is that collectors simply won’t pay the prices that are being demanded for models these days. Which explains why so many model shops are disappearing from our streets.
My point is this; the models we sell are too ornate, too intricate, too detailed and too complex, and therefore too expensive, for the audience that wants to collect them. Yes, I accept that there will always be people who want more and who are prepared to pay ridiculous prices to get the best. But the problem is that there aren’t enough of these people and that’s
why collectors are deserting this hobby, and that’s why so many manufacturers, distributors and retailers are suffering right now. So, back to my main point. Keep things simple, I suggest, and give us models without opening doors and other unnecessary fripperies.
The models produced by the leading diecast companies are simply superb; veritable works of art, but are they too detailed and are there enough people prepared to pay for such exquisite engineering? STARTTHINKINGINSIDETHEBOX 65
Manufacturers who go down the route of ever greater detailing are just showing off; it’s not big and it’s not clever. And increasingly it’s not making good business sense. The fact is that most collectors don’t play with their purchases. They open the doors, bonnet and boot just once. They take a look, marvel at the engineering and then put the model on the shelf to display it. This is where most replicas stay, except for the occasional dusting. We don’t steer them around the carpet and very few of us vocalise engine noises. Our models are for displaying and looking at. So what are the essentials? Well, we want stunning surface detail and, of course, in this respect a closed bodyshell is actually superior. The shutlines are perfect and the gaps around the doors and windows are more in proportion than they are when the relevant parts open. Put a Spark 1:18 Porsche next to an AUTOart or a Minichamps, a TrueScale or a CMC Porsche and we think that, visually, the Spark will come out on top. That doesn’t mean that Spark is a better model-maker necessarily. It just means that they have fewer things to get 66 STARTTHINKINGINSIDETHEBOX
We’re fans of closed bodyshell models like those produced by Spark. We reckon that they look better than traditional diecast bodies. (A Spark replica might currently be expensive but that’s only because their models are produced in such tiny quantities).
wrong. They can concentrate on getting the things you can see, to look perfect. We would suggest that collectors still want to see a nice interior in their models, with the right seats, carpeting, dials with numbers and so on. But do you really have to open a door to appreciate
Are collectors really bothered about looking at the engine under the bonnet of a model? If the price were significantly lower would collectors still be so concerned about such detail?
this? We don’t believe so. Just leave the window glass halfway down; that should do it. A detailed engine is surely a must have, it has been put to me. Well, I’m not so sure. I know owners of full size classic and exotic cars who never look under the bonnet, so why the obsession to look under the bonnet of a 1:18 replica? It might be suggested that the appeal is in knowing that the engine is there. Which is like the answer Chris Bonington gave when asked why he wanted to climb Mount Everest. But I’m not convinced that the same logic can be applied to model cars. The real question, the question that the makers of replicas need to ask, is this. If there are two identical looking models of, say, an Aston Martin Vantage. Both look fabulous, with good lines, detailed wheels, windscreen
The diecast business is in trouble. You don’t have to be a genius to realise this. And we can’t see any grounds for the situation to improve. Manufacturers who ignore the facts appear like Nero; fiddling whilst Rome burns.
wipers, door handles and so on. One is made from metal and one is made from resin. The former has opening parts; the latter doesn’t. But, crucially, because the resin model is easier to make, and much cheaper to tool up for, it costs just £70, rather than the £120 of the metal version. Which model would collectors go for? I would estimate that in nine out of ten cases the resin model with the closed bodyshell would outsell the diecast car many times over. And if that assumption is correct, that’s the route the manufacturers need to go down. Anyway, that’s enough from me. We’ve been told to fasten our safety belts as we approach Heathrow and I’ve got to put my pad and paper away.
In closing, I have to acknowledge that all I am expressing here is an opinion. And we all know what opinions are like: every ******** has got one! So I don’t know and cannot prove that I have got it right, but what I do know is that, at this point in time, the diecast companies have got it wrong. In some cases they are playing their fiddles ever louder in an attempt to drown out the noise of Rome burning all around them. The diecast business is in trouble. Every month prices seem to go up. Yet China is not going to get cheaper and if the international community succeeds in getting the Chinese to upwardly revalue its currency, the situation will only get worse.
The factories who make our models are demanding ever larger orders to make the business viable for them, whilst the prices the manufacturers are charging collectors are reducing the quantities that can be sold. In the film, A Few Good Men, Tom Cruise asked Jack Nicholson if he wanted to know the truth. Well, that’s the question we’d like to pose to some of the diecast manufacturers. The problem is that, as Jack Nicholson suggested, they almost certainly can’t handle the truth!
We’d like to ask whether the manufacturers would like to hear some truths about the diecast business. But we feel it’s likely that Jack was right: “You can’t handle the truth!” STARTTHINKINGINSIDETHEBOX 67