hobby shops succumbing to mail order

In a business, the major part of your costs is fixed - rent, services, etc. If your sales drop, your gross profit drops but your overheads stay the same, therefore your bottom line net profit can vary a lot more than the drop on gross profit.

e.g. sales = $100,000, overheads = $80,000, net profit = $20,000 sales = $90,000, overheads = $80,000, net profit = $10,000.

- therefore net profit halved.

These are basic business rules the world over. You might argue that the sign of good business is the control of costs, not the increase in sales. :-)

Jim.

Margins. The last dollar earned is the most profitable.

Hmm. Sounds like my income.

It's stayed the about the same since 1996, gone up about $25 twice per month due to a tax cut, and everything has gone up. That includes government fees (taxes).

Not only have all my household expenses gone up, there's now "User Fees" (Taxes) on almost everything. Ranging from the driver's license that has gone up from $50.00 to $75.00. through eye exams that used to be "free" and now you have to pay, physio therapy used to be "free" and now you have a "fee" through land title searches which used to be a nominal fee but now you have to pay way more and medical insurance has gone way up and many, many more.

-- Cheers Roger T.

Home of the Great Eastern Railway

A variety of retail businesses are feeling the mail order crunch. I've given quite a bit of thought to it recently. Here is my take on it. The market has become very diversified with the sheer number and range of products available today, therefore it is increasingly difficult for retail shops to keep up with consumer demands for all these items. If you reflect back to the days of the 'healthy' hobby shop, times were much simpler and there were WAY fewer products available. It was easier for shops to carry it all back then, so we patronized them. Today we have a mulitude of scales, guages, DCC products, kit manufacturers, paint suppliers, road names and the list goes on and on. A typical model railroad consumer would be EXTREMELY fortunate if he had a local hobby shop that could service all his needs. In my own town, I have a great hobby shop and great repore with it's owner, BUT he is not into DCC, brass locomotives, regearing, repowering or hand laid track components. He can order them for me, BUT so can I, and I will get them faster and cheaper from mail order companies that specialize. As time goes by, I find myself going into the hobby shop fewer and fewer times. For instance, I may need a couple of Digitrax decoders and 4 bottles of Floquil paint. I think, hmmmmm, the hobby shop doesn't stock the decoders anyway, so I might as well order it all at the same time form the mail order company that stocks both. Hmmmm, what else could I use to fill up the order? My own free time and gasoline are also factors to be considered, so I save myself a trip into town and get some modelling done instead. The face of business is changing with the times. I can do without the hobby shop. I'm probably a typical modern day consumer.

=>Not only have all my household expenses gone up, there's now "User Fees" =>(Taxes) on almost everything. Ranging from the driver's license that has =>gone up from $50.00 to $75.00. through eye exams that used to be "free" and =>now you have to pay, physio therapy used to be "free" and now you have a =>"fee" through land title searches which used to be a nominal fee but now you =>have to pay way more and medical insurance has gone way up and many, many =>more.

Well, that's what you get when you get "tax cuts." Most of which don't come to you, but to the "friends of the government." (And it's even worse in the USA.)

There's only one wallet, and the consumer pays for everything. Remember that next time you admire some executive's or hockey player's multi-million dollar income - you're paying for it, And don't blame raising wages for inflation - wages always lag behind inflation - a fact that should be obvious to anyone with a grade school math education.

Wolf Kirchmeir ................................. If you didn't want to go to Chicago, why did you get on this train? (Garrison Keillor)

Dave says 200 more shops opened in 2003... I'm gonna go out on a limb and say ~increasing competition~ is weeding out some of the less efficient operations today.

I doesn't take much to become an Internet dealer, especialy if you are a B&M shop with distributor relations and staff already. Magazine advertising is more expensive, but also leads to increased sales.

My "LHS" (in this case, the L is for Lionel) does most of his business at shows and by mail order. Yet, he is in a stand-alone store, with regular business hours, where anyone in the area can come in and buy. The shows are his primary means of advertising, the mail order supports his customers who can't always drive several hundred miles to shop, but have developed a business relationship through years of his being a regular at shows. Pity I'm not a three-rail guy, though no effort has been spared in trying to convert me. OTOH, there is HO stock in his store that has been there since the first day I walked in

- 18 years ago. Probably worth a fortune on eBay...

And, of course, I first noticed my favorite dealer in a recommendation posted right here on this list.

Jeff Sc. Click, Ga.

snipped-for-privacy@aol.comspamthis (Dave Henk) wrote in news: snipped-for-privacy@mb-m25.aol.com:

One rule of thumb of marketing is that one satisfied customer will get about four more in your door through word-of-mouth. However, one unhappy customer will keep *ten* others away through the same word-of-mouth. I am fortunate in having a good hobby shop just a couple of miles away (King's Hobby in Austin, TX). They have been very patient with me as I have been trying to get back into the hobby after 30 years. I will buy from them, even if I could get the item cheaper by mail- order or on the web.

Another factor with web orders is a lack of knowledge about which on-line dealers are good and which are rip-off artists. I expect good service from Terminal Hobby Shop (Walthers retail operation) based on reputation and the experiences of

30 years ago. Others I don't know about. In photography, there are only about 2-3 on-line/mail-order that are any good--B&H, Adorama, KEH, and, maybe, a few more. Most of the others, like CCI, Cambridge, Abe's of Maine (located in NYC) have terrible reputations that seem to be well-deserved. At this point, I have no idea who are the crooks among the mail- order hobby shops. My two favorites from 30 years ago are long since defunct. (Thirty years ago, trying to be a model railroader as a teenager in SE Oklahoma, mail order was my only source, since the nearest real hobby shop was 90 mi. away.)

Just my $0.02 worth.

If the 10% not sold sits in inventory (in other words the ordering doees not decrease just the sales) then I can see how this adds up. I do see alot of stores carry inventory for years and years which I never understood how they can afford to.

They can't. They just don't know that they can't. ;-)

Peter King in NY

Growing up there was one so-so hobby shop. There are now a dozen high-quality shops within easy driving distance. A few factors account for this, the main one being a growing population, i.e. more customers. Also, these shops market themselves very well, via ads in local papers and on cable TV, participating in Greenberg and GATS shows, and -- yes -- offering mail order and internet sales. These guys and gals are very successful judging by their cars and homes (not that those mean everything) and the smiles on their faces (much more important, really).

A good point that I hadn't thought of. And let's not forget population REDISTRIBUTION! The Northeast has been losing population, while the Southeast and Southwest have been gaining.

Peter King in NY

I have been listing to shop owners complain about how the internet and mail order and traveling train shows are the reason that they are going out of business for years on this board. Meanwhile, well run brick and mortar shops such as Des Plaines Hobbies, Kleins, The Caboose, and many others seem to be thriving in this environment.

I have seen more than one hobby shop literally starve itself to death by hanging onto "obsolete" inventory for years while refusing to discount it and move it. Their working capital is tied up in stock that is not moving and the pile is growing. Because they do not have adequate working capital, their "fresh" inventory of newer higher demand items gradually decreases and they become more and more dependent on ordering it for you which today is just not a service that most of us need or are willing to pay a premium (AKA "List Price") for when we can all do it ourselves on the internet.

After decreasing their attraction to hobbyists along with the dwindling "added value" service that they provide, they sit in their stores stocked with old inventory and bemoan the impact of the internet on their business.

QUIT MOANING AND CLOSING YOUR SHOPS AND GET BACK IN THE GAME! Heavily discount and move the old stock generating working capital to restock with something that might actually sell at list generating more profits and working capital for more inventory. Stay in touch with your customers needs and wants and know what is moving and what is not and act before it gets so dated due to improved quality of newer stock or the box has faded or it has so much dust on it that I am hesitant to even touch it.

If mail order and e-commerce are taking business away from you, GET IN THE GAME by doing mail order and selling on the web. You don't like traveling shows with discounted products? RENT A TABLE AND PRICE YOUR PRODUCT TO COMPETE and again generate cash flow! Why expect your customers to protect you by conforming to your business practices instead of modifying your business plan to meet the changing needs of your customers?

No, I do not own a hobby shop or an internet business. But I am in business and I know that obsolete inventory will choke a business and cash flow (AKA "Bank Deposits) IS the only real metric to gauge your success.

IT IS NOT BY RESPONSIBILITY TO PROTECT YOUR BUSINESS IF YOU DO NOT MEET MY NEEDS AS A CUSTOMER!

Now, if this does not stir up a fire storm I don't know what will! Heck, I did not even make a personal attack on anyone.

Allen Cain

NEEDS AS A CUSTOMER!

All of your points are well taken. I have a similar argument going on with a friend who can't find employment in his specialty. My suggestion is to change your career if the one you pursue isn't working. The bottom line is change or wither and die on the sidelines. Lessons in life and business are the same.

ED

I would be overjoyed to find a way to help you reverse that trend. We have more Yankees in Georgia now than they do in Massachusetts and Connecticut combined. Don't they ever get homesick? Or are they just sick of home? Or................ could it be that they hate the ~freaking~ snow as much as I do?

..............F>

Elbow Room, GA.

I know an old fellow who is now totally "retired" and has finally closed his hobby shop. He was a curmudgeon by the time he was 45 and, now, at almost 90, he is totally insufferable. Not only would he refuse to discount old inventory, he would mark it up to what ever the current pric was for a new similar item. I have seen $1.50 Athearn kits marked up to $4.50 as the price of Athearn rose through the years. He had some old rubber band drive Athearn F-7s that he marked up to $45.00 because they were "collector Items". Those "collectables" are still sitting on the shelf in the now closed shop, rotten rubber bands and all.

I can't see how this would stir up a firestorm. I tink you pretty well hit the old proverbial nail right square on the old proverbial head.

Which reminds me, I need to go to Des Plains' web site. Bye y'all

................F>

Great advice. Right up there with hanging a bell on the cat.

....................F>

Give that 3 rail another look. They are making some really nice stuff Jerry

Without the local hobby shop where the customer can wander in an become interested in the hobby how do you expect the hobby to grow. I doubt very many are going to get into it thru mail order. Jerry