Why can't the hobby shops survive?

Tbone Jun 25, 2007

  1. BarryC

    BarryC TrainBoard Member

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    As a newcomer to model trains I can make the following assesment..:angel: I was looking for a Precision Craft locomotive with sound,my local shop has them for 239.00 MSRP...I figure I would give him the business as he has answered a ton of my questions. While skimming through N Scale modeler awaiting to pay at his counter, and ad from Precision Craft says. "New Price" see your dealer for 199.00..Now when the your own supplier is cutting your throat its pretty tough to compete..My local says he would match that price as well..Just got me thinking if he could drop the price 40.00 instantly, and had to know about Precision Crafts pricing,how bad are we getting ripped off..(I still gave him the biz by the way, and I saw the same engine on the I'net for 169.00)..Now we are even..!!
     
  2. Rossford Yard

    Rossford Yard TrainBoard Member

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    I still think it goes back to the big picture of the number of $$$ vs. the number of shops, to a large degree. That said, there is little training for an LHS owner and most don't necessarily have the business or people skills to warrant us coming back.

    Also, it seems that even in my best LHS, the info the owners know about N scale is less than what I read here, or get from Wig Wags site, or conversations. I have had them profess no knowledge of a new loco, even after its been on here for a few days or weeks. Sounds like that was the case in Barry's example.

    As someone said, most customers go away for some small reason it would be hard to put a finger on if they told you, but it generally involves a bad experience.
     
  3. broadway zephyr

    broadway zephyr TrainBoard Member

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    Jeff,

    I am not sure if it is so much a "bad" experience as it is for the most part nothing at all. Not all the time, for sure, but you go in there, find what you want, and pay for it. Then you ask yourself what "value-added" you received for paying what may be a full price. There is usually not a whole lot of interaction with the shop staff for the most part, so the opportunity for them to add any value is small.
     
  4. Rossford Yard

    Rossford Yard TrainBoard Member

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    I agree. As I said earlier, I generally have more interaction with George at Wig Wag than I do in most local shops, other than the biggest one here in town, where there is a nice mix of the surly to the genuine customer friendly staff.
     
  5. r_i_straw

    r_i_straw Mostly N Scale Staff Member

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    Years ago there was a little shop in Houston called House of Trains. Some folks called it the House of Rude. I believe the only reason the guy stayed in business at all was his extensive stock of hard to find HO brass. This was before the internet of course. Then there was another shop, it still exists in Houston off [SIZE=-1]Westheimer[/SIZE] , that opened a branch store in Sugar Land. They had a little of every scale but if you were not in the market for Lionel O scale they would hardly talk to you. The branch was open less than 6 months.
     
  6. BarstowRick

    BarstowRick TrainBoard Supporter

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    I think you guys are expecting to much from your LHS.

    We all wag about the prices and lack of discounts but follow me on this.

    Etailers: A etailers usually buy in bulk. By doing so they pass up a number of middle men who want their cut. Therefore, the etailer is in a better position to allow you a discount. I might add most etailers are involved in some sort of conglomerate which gives them buying power.

    LHS: In the meantime your local LHS is buying through a network of middle man and more then likely is buying on credit. The LHS isn't able to match the etailers price without cutting off his own income. He might as well give away the object you want to purchase and close the doors.

    Let me put it this way. If you really value your local LHS and you want to assure he or she will be there for you in the future. You will support him or her by purchasing and paying the full amount or MSRP. Simply put, he can only survive if he can generate an income and at the end of the day proclaim a profit. No wonder he is in a surely mood.

    You can accuse your LHS of ripping you off but actually it's the other way around. Should you insist on the etailer's price from your local LHS, you just cut his throat. More then likely, should all the LHS customers insist on etailer prices, your local LHS will eventually close.

    Bulk buying allows for bulk pricing which is usually less then vendor purchasing for LHS's at a 20% to 30% gain.

    LHS buying is usually done through vendors or the "Middleman" who want their cut of the profit...therefore the LHS is purchasing at a 10% to 15% gain.

    Got it? It really is up to you...your local LHS customer as to whether or not he or she stays in business. Your support is paramount.

    The best plan would be for the Local LHS's to join together via some sort of buying organization to insist on getting or having the same purchasing power some of the conglomerates and/or etailers have.

    One last thing. Although it is always a good idea to treat a customer as the most important person in the world...and the customer / he or she "IS"...because a well footed business depends on customer types. The sales person isn't there to make you feel good, or hear stories about a none issue, he or she is there to sell something. So, the next time you want to go in and talk about your family, the latest Fox news item, or eat a sandwich while on a lunch break remember this the sales person has a job to do.... generate sales. It's not a sandwich place or picnic ground, it's not a soda or ice cream fountain and it's not a bar. This doesn't mean you can't get acquainted or chatter some. Just stay focused.

    My two cents on a Tuesday Morning.
     
    Last edited by a moderator: Jul 4, 2007
  7. Tony Burzio

    Tony Burzio TrainBoard Supporter

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    Great idea! ...and they haven't because?
     
  8. Tbone

    Tbone Permanently dispatched

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    You make good points BarstowRick.I do support my LHS and I dont mind paying more for my product but I do know alot of modelers here in Nashville that do not support them and would rather buy online.Its a shame but I guess it is the future.

    We are a society that has moved from a smile and a handshake to a email and a avatar.
     
  9. Rossford Yard

    Rossford Yard TrainBoard Member

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    Rick,

    According to LHS managers I have spoken to, the middle man is eliminated just as easily by buying a steak dinner or two with the mfg rep at the National Show. One well known LHS manager told me that he was astounded to see different color price sheets dragged out, with better prices after each bottle of wine.

    Depending on exactly what lines we are talking about (scenery vs. locos, for example) there is some room to play, and getting materials at wholesaler prices - say $40-48 for a loco vs. $55-60 allows discounting without shaving off the profit margin.

    I wonder how these buying cartels would emerge. I would think it would not be regionally, since one shop wouldn't trust the other to make the order without getting a few extras on the side.
     
  10. broadway zephyr

    broadway zephyr TrainBoard Member

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    Rick,

    With all due respect, the LHS has to add value to achieve success, and, following your logic, the LHS has failed miserably at this by NOT banding together with other shops, buying a steak dinner (as Jeff suggests!), or doing whatever else is necessary to achieve better wholesale pricing.

    Why are other channels able to achieve better pricing and the poor old LHS achieves the highest wholesale pricing? You be the judge as to the reasons. But if the LHS can't get better pricing, then the LHS shouldn't feel bad when I choose to deal with another channel who HAS done the extra work to achieve better pricing. That alone is a value-added service that an etailer---or whomever else---has found they can provide to earn (my) business.

    The LHS is leaving the money on the table---the table that has too many middlemen around it each taking a cut. That is not my creation, or my fault. They have accepted that model and they are suffering for it.

    As for the suggestion that I, or anyone else, is slitting the throat of the LHS by asking him to cut his price...well, that is insane. Anyone who suggests a different price to the LHS owner is OFFERING AN OPPORTUNITY to the LHS owner. He can act on that opportunity or pass on it---its his call. But what you are saying is he doesn't even want that opportunity, which he would be crazy to pass up. At the very least, it gives him price information that leads to price discovery. If he constantly is missing out on business "opportunities" then he should seriously reassess how he is going about doing his business.

    Just think if the LHS owner achieved the same wholesale pricing as the etailer. You suggested the "middlemen" take 15%. He could immediately lower his prices by 15% and actually achieve a HIGHER return on investment, because he just as you say "financed" 15% less up front and at the same time, made his old %. He just improved his cash flow, profitablity, turnover...everything.

    If he doesn't choose to do this, why should he expect the hobbyist to support his poor decisionmaking and bail him out?

    I think what a lot of people here are saying is that they don't even "show" the LHS the opportunity anymore---they just go right to the net. After you ask a few times, and you hear how his cost is more than that, how he can't sell it that cheap...whatever, you tire of hearing it, and you just go to where you CAN get good service from a net dealer, AND a fair price. A fair price is not determined by one party. It is determined by TWO parties when a price is agreed to via a pricing decision by the seller, and a purchase decision by a buyer.

    I've heard dealers respond to a price with "I can't even buy it at that price myself." I've then offered to sell the LHS some of the item at that price---because I know I can buy it on the net for a lot less---and it really "irritated" him. So he doesn't want to sell at a price, and I've offered to sell him some at the price, and he chooses to do...nothing. A recipe for disaster.

    I will let others fund the LHS's uncompetitiveness. As for advice: overall---and that doesn't account for many of the excellent LHS owners out there---but overall, the information is better right here. If I have question, concern, problem, and I go to my LHS, I MAY get a response there that is worthwhile. Here I can get a response and insight from 20, 30, 100 people. WHat a huge increase in datapoints. Everyone adds a bit of experience and expertise, and it is FAR better than the answer I get from the LHS. And there is no obligation to buy something from you guys because of the info. Your payback is when you have a question and maybe I can help.

    As to the hobby shop not being a coffee shop, lunch place, etc. I agree. But the last time I was in what I would consider my LHS (45 minutes away), the staff was doing just that. They were standing around, shooting the breeze with a customer about NOTHING, couple of guys were sitting in a back room, etc. And I made it pretty clear I had a question on something. And this shop is considered to be a good one. So I've given them a couple shots at business, and they couldn't convert. My only option---thankfully---is the net.

    These guys have to change if they want to make any money.
     
  11. farish

    farish TrainBoard Member

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    This may have been said already......in the world of business there is the mature or the growth business. In my humble estimation, the local hobby shop owner places himself in the mature business mode.....he tends to place his growth or current cash flow on those the are in the hobby, he tends not to advertise to the general public to grow his business, he tends to leave on the table the normal tools that a sales shop uses...discount pricing, two for one sales, etc. Very few support those that are in the hobby through sponsorship, etc.

    A recent conversation with a LHS, told me that he was not interesting in marketing his business. I offered to prepare handbills for him that would be delivered to homes within a 3 mile distance of his shop. The handbill would contain a discount coupon of some value. Why did make the suggestion, because he told me that his neighbors do not buy from him. He turned down my offer saying no one would read the handbill. I would guess that he may be one of the next to fall by the wayside.

    Just my humble opinion
     
  12. Benny

    Benny TrainBoard Member

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    If the shop help isn't working on making a sale, then they need to be "culled"...

    But there IS an answer and it has already happened.

    First, the hopbyshops banding together for volume and price. That happened. Its called Hobbytown now. Same concept.


    Now if the LHS doesn't go away, where will people Learn about trains?

    EASY!

    WALMART!!!!

    Horizon is supplying the only part necessary to get the boat on the road. After that, a mag subscription is all that;'s necessary!!!.
     
  13. BarstowRick

    BarstowRick TrainBoard Supporter

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    Now We're Getting Somewhere!

    To Tony Burzio, Tbone, Rossford Yard, Broadway Zephyr, and all others tuned in here. I really do appreciate your comments and insight.


    This will take us slightly off track however the purchasing principals are the same. Example: During my hospital assistant administrative days. I used to actively participate on a purchasing task force. It's complicated but the simplest way to put this is: When we could order in bulk the greater the discount. Down side, now we need a place to store everything. Never mind the cost factor for storage. Another incentive is cash on the barrel but when the cash flow is down and we need to buy on credit...oh well! The one that seemed to work best for us: We utilized the vendors warehouse and insisted on contract prices good for a year, based on last years performance.

    To try and answer Tony's question. Quoted above. We did try a hospital association purchasing program. Downside, the products delivered didn't measure up to the quality or standard we desired in our hospital environment. Only certain vendors participated in the program. To give you a easy comparison within our hobby world, look at what's happening with Horizon and Walthers. Each one carries specific product lines. This requires a LHS to find vendors who carry lines like Kato, Atlas, Athearn, Peco and so on... Downside any hope of cutting his wholesale cost is gone out the window.

    Well, this has taken us off track a bit. What I learned and the point already made: There is indeed different wholesale price sheets based on your buying power. Sadly, most LHS's don't have that kind of buying power and I would guess they are buying on credit...which wipes out any kind of potential savings.

    As far as hobby shops uniting via a hobby association. It would work if all the product lines are made available, through the associations purchasing program. If the LHS's would let down some of those competitive barriers and work together. I'm not sure that's going to happen. Besides I think that's what Walther's and Horizion is currently trying to do. Conglomerates, like Hobby Town are having buying problems and you will find some of these stores hurting as they lack for product to sell.

    The question of why support the LHS's if they can't give us a discount? I'm sitting here shrugging my shoulders as I don't have a answer. Yet, I have found LHS's that do give discounts and I've even seen them sell at a loss or below their cost, just to move items off the shelf to make room for the Christmas Inventory, sitting on the doorstep. May I answer with a question? Is it important for you to have a LHS? In the past I couldn't have done without one. Now after years of experience and many lessons learned I can honestly say NO. Still, I enjoy the trip and visit to my local LHS.

    I've concluded with this point in the past. Hobby shops need to step into the future. Wig Wag, Internet Discounts, KSI, Feather River, just to name a few are in the future. You will find a user "Easy" (friendly) website and shopping cart, allowing you to make your purchases with relative ease. Mail costs are reasonable and in some cases picked up by the etailer, depending on the amount you spend.

    Hey guys and gals that's enough from me. Besides Rossford and others here have already made these points...just in different words.

    Catch up with you later.
     
    Last edited by a moderator: Jul 4, 2007
  14. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

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    Web sites. That is an important aspect. Especially making them user friendly. I've visited too many which seem to be simply thrown together. Cluttered. Not easily navigated. Seeming like the results you'd find after a major earthquake. Take some time to think about your page layout.

    Also, the color scheme- Make it warm and comfortable. I understand wanting your own unique "signature." But please, not like a rainbow that exploded....

    Boxcab E50
     
  15. YoHo

    YoHo TrainBoard Supporter

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    My biggest problem with my local Hobby shop is the same problem I have with many small businesses... Hours.

    They close early during the week and on weekends. Apparently only the retired or those close enough to come in at lunch are of value to them.

    I realize that I'm essentially asking them to work hours that I won't, but then, I don't own my own store.
    I generally get home from work between 6pm-7pm. 7pm is when they close. A couple of the shops aren't open on Sundays and even if they are, weekend hours are still early.

    Heck, I'd be curious to see what the average shop's sales are during the 9-5 monday-friday grind? Again, unless it's seniors or kids on vacation, I just don't see it being worth turning the lights on.


    Having said that, I've yet to do any shopping online. There are a reasons for that.
    1: I bought more locos then I could ever use when I was younger and the gotta have it fetish doesn't appeal to me.
    2: I'm doing fit and finish stuff to my cars right now. Couplers, metal wheels... There's really no need to buy that stuff in bulk.
    3: I really like to use swap meets to feed my impulse buying needs. It's more fun then sitting at my computer staring at an online storefront.


    I dropped $45 at Reed's last saturday. Of that, $14 was on magazines, $10 on stuff from the used shelf (I wonder what the markup was?) and coupler parts. I'm not keeping them in business for sure, but that's what I needed and buying it online would have been a waste of time and shipping money.

    Now if I lived far away from a LHS, then that's a different story, but then, that's always a different story. You can't really compare.
     
  16. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

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    We have similar troubles here, along our old Main Street. The business people are used to keeping those same outdated hours. A bad old habit. They whine about the newer businesses, around the growing fringes of town, taking away their customers. Many people have told them what's wrong. But they won't change. So they've slowly been closing down forever. And everyone shops now where the stores are open until 9 pm every night...

    It's very simple- When a person is at work, they can't shop with you. And when they get off, there are other demands that precede hobbies. Vital errands such as banking, groceries, getting home to eat dinner with family, etc, etc. Which all are happening about the time hobby shops close. Frantically racing around to accomplish chores, then make the hobby shop is a highly unpleasant task. Those places keeping hours such as 10a-7p on weekdays, at least have a better opportunity to grab a few more customers.

    Oh well.

    Boxcab E50
     
  17. YoHo

    YoHo TrainBoard Supporter

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    Exactly. There are a couple places in my parent's home town that are open till 9pm Tuesday and Thursday. This is a reasonable compromise I guess. Never seen a hobby shop that did that. Even a more generic shop that has a bit of a toyshop feel really only needs to be open after school gets out.


    Which leads to another thought. I know of a number of specialty Toy stores. The small places that still stock play mobil and other less flashy toys. Boutique shops if you will. I can't understand why Hobby shops haven't merged with these types of places. They appeal to the parents with disposable income and the time and willingness to put effort into something and pay a premium.

    I guess we've covered the answer to that though. And, to a certain extent, that's what Hobbytown does. The Hobbytown that used to be in my parent's neighborhood was really nice. I have a lot of hobbies beyond MRR and it covered many of them. With a good MRR section. Yet, they went out of business.

    The Hobbytown down here has the smallest MRR section I've ever seen. It's not even worth stopping by.

    Also, as I said, there's a craft store near here that has an extensive MRR section. Though it focuses on LGB and other G-Scale (no debate on this here please) products, then HO and N sections and the scenery availability are decent with all the ancillary products needed for scenery just an aisle away.




    That makes me wonder, How do HO and N (and Z) sales compare to LGB/G sales countrywide? Backyard railroads are, I think popular well beyond the model railroader set as is Lionel of course.

    How many of those successful stores carry the business with those products?
     
  18. Route 66

    Route 66 TrainBoard Member

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    Hobbytown USA just don't scratch my itch. The sharing space deal seems like it might be an answer. Here @ my LHS we have a high end photo (cameras and equipment)store on 1/2 the floor space,and the other side models,RC and a good train area. Dual purpose sales,Longs drugs had the same drugstore and hobbies what a concept!!. Look at some stores such as ceramics they have classes where you buy and paint. They are involved with the community and bring in their own customer base. Sometimes you have to make things happen instead of just sitting behind the counter and waiting.
     
  19. BoxcabE50

    BoxcabE50 HOn30 & N Scales Staff Member TrainBoard Supporter

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    Bang. A solid hit.

    You don't just acquire a space, throw in some inventory, open doors 9a-6p. And then expect financial rewards will be automatic. You'll likely need to make some adjustments. (Store hours!) Plus, a further financial investment.

    Moreso than ever in our past, it's now a 24 hour daily business world. Which is one aspect where the 'Net is winning. Time to raise anchor, and set sail with the tide.

    :D

    Boxcab E50
     
  20. on30francisco

    on30francisco TrainBoard Member

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    We used to have five LHSs in San Francisco but now there are only two. One is a general LHS and the other deals with Lionel. Both sell at MSRP. Since I'm in a minority scale and gauge, I order online because the LHSs rarely if ever stock what I need. They offer to order it through Walthers but heck, I can do that myself from the many online shops - at a substantial discount - and a lot of supplies I use are from cottage industries that aren't listed in Walthers.
    The arts and crafts stores such as Michaels and Pearls have a huge selection of stripwood, paints, tools, glue, structural shapes etc at much less than MSRP - and they are much more conveniently located.
    I realize LHSs have to charge more to pay the bills but if they can't give me the service or stock what I need ,I'll shop elsewhere - and let's be honest, we all like a bargain.
     

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