The Waving Flag: 2011 May Be Expensive For The UK Hobby

Saturday 9 October 2010

2011 May Be Expensive For The UK Hobby

A bit of a change for today’s post: some economics!  I’ve found some data on the rising price of tin, I ponder on how traders make money at shows and finally look at the possible impact of the impending 2.5% rise in UK VAT in 2011.

Firstly, fresh international speculation and increased demand from China is pushing up the price of the tin that’s used to make metal soldiers.  As this graph shows the price of Tin has risen sharply the the last few months It looks like we may see a return of the all time high prices of 2008:

I wonder how long this will take to work its way through to the retail price of miniatures? I suppose it depends on how much manufacturers have stockpiled metal and the exchange rate for Sterling against the US Dollar.  As most manufacturers buy in bulk a few times a year I suspect many are facing really large increases which they will need to pass on to customers.

Next, there’s UK wargames shows.  I’ve already started to see the odd comment from UK wargames businesses that shows are getting less economically viable.  As their costs rise they run an increased risk of failing to meet increased petrol and other costs from sales on the day.  Rubbish I hear you cry; show traders make money hand over fist!  I began to wonder about this and did some sums.  Consider this for a 400 mile round trip for a one man business:

Expense Cost
Fuel & transport. £160.00
Table hire. £90.00
Food etc. £25.00
Total £275.00

So if the trader manufacturers their own stock they’ll have a gross margin of 65% and they would have to sell £423.00 worth of toys on the day or immediately thereafter to break even. If they are a retailer operating at say 35% then they’d have to sell £785.00 worth of toys to break even.  As most traders are businesses and need to earn a living let’s assume they put in a ten hour day and earn close to the minimum wage of £6.50 an hour.  To cover this in show sales a manufacturer would have to sell a further £100.00 and a retailer a further £185.00.

I have to admit these are sobering numbers; imagine a retailer taking nearly £1,000 at a show in sales to earn £65 in wages.  No wonder traders focus on advance orders and local shows.  Even as a marketing exercise attending just one show looks expensive compared to other forms of advertising; it certainly is if you attend shows regularly.

Finally, there’s the 2.5% rise in UK VAT to 20% due 04 Jan 2011.  This will further erode both retailers and manufacturers profit margins.  For some it may endanger their viability.  Many wargames businesses are not registered for VAT but this doesn’t mean they aren’t affected; far from it.  From 04 Jan 2011 anything they buy will increase by some 2.00% as most materials and services will come from larger and VAT registered suppliers.  Perhaps more worryingly they will have to find an extra 2.00% cash to pay their bills or order new materials like casting metal.  It may not sound much but poor cash flow has undone more businesses than failure to make a profit.

I suspect 2011 is going to be tough year for wargames businesses in the UK. Fingers crossed for all in our hobby.


Andyroo said...

I would be surprised if the margins are that large! In some cases you also need to factor an overnight stop and they are not cheap now (B&B £40 was one offer I had two months ago)

I unfortunately agree with you - my spending has been reduced over the last year and I've not made a single show - next year looks harder personally and I can see my lead pile being reduced in two ways:

1) Its cheaper to paint than buy - over the years I've put lots in cupboards and thy are coming into the daylight.
2) I have worked out how to sell on eBay (I know I'm very slow) - I'm happy to sell at a loss compared to original purchase price for cash flow rather than profit and as some of these figures are still available which would you buy?

From a manufactures point of view for myself, I'm not convinced that new ranges help - I need to kill the 'ooh shiny' reaction again (did it at the start of this year) and to be honest if I have any spare cash it will be to complete ranges I have rather than start new. They will stand a better chance of getting my cash by adding to an existing range rather than a new one.

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Vexillia said...

Interesting comments Andrew.

The margin figures were possibly a bit high but that only makes things worse. You're also right about overnight stays adding to costs.

I've seen lots of new 28 mm ranges but mainly from start-ups looking to create a niche. If your approach is common they could be in for a real hard time.

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