Retail Questions

[MAbruce]

Here's a question for all you people who own, or work a hobby store. What factors most into the retail price that is set on MRR items? Is the retail price mandated to you by the manufacturer? Is it the "cost", because you are forced to buy your inventory from a wholesaler?

[Anonymous]

Hi Bruce, Most "mom and pop" hobby shops have little profit margin to work with. Generally wholesale distributors only give 40 to 50 % discount on hobby items to small retailers. On top of that manufacturers set a retail price for thier products of which the consumer is aware. All of this tends to keep the "mom and pop" prices at or close to full retail.

As to the "chain store" hobby shops...they combine their buying power to obtain deeper discounts on the wholesale level. However, due to the high overhead that these "mall stores" have they do not really offer any substanial dicounts either except on "loss leader" items that they use to get you into the store in hopes that you will buy more than just that "loss leader" item. They may on occasions purchase direct from the manufacturer in very large quanities and at a substanial discount for a special promotion, again designed to get the customer into the store in hopes that he will purchase other items too.

The internet and mailorder shops have a relatively low overhead. Subsequently, if properly funded they can purchase either from the distributor or manufacturer at deep discounts and pass on the savings to the consumer and still make a good profit. Also they will offer items at times at or near cost to entice the customer to order other things with the savings.

Pricing structure in any retail business is a complicated thing and there are many many varibles that I haven't touched on. Hope this helps answer your question....Vic

[MAbruce]

Thanks for the information. I know that retail agreements can get pretty complex, but I suspected that something besides overhead costs is keeping hobby stores (especially the smaller ones) selling at a set retail price.

I ask because I recently had a discussion with a new owner of a "Mom & Pop" store who wants to expand his N-scale offerings. I would like to see him suceed at this, but had to cringe when he pulled out the 'ol Walthers catalog (his supply source). This leaves me wondering what his chances are if he is forced to sell at retail. While his territory is sparse of N-scale dealers, he will still have to contend with the internet stores & ebay.

[BRAKIE]

I agree with Vic.I work part time in a hobby shop.My boss orders everything by the mixed case or sometimes 4-7 cases of a given brand of locomoyive or fright cars usually mixed road names in both order.This he does so he can get a deeper discount so he can past along the savings to the customer and still make a profit to pay bills,taxes and his help.Now,the smaller Mom & Pop stores may not be able to buy by the case due to the cost and turn around time.You must have at lest 4-6 turn arounds in your stock a year.That is where you get a item in and it sells.In the area where I live,dcc does not sell will.So, my boss set on the dcc,then had a close out sale at 5% above cost in order to sell it.This did not work.finally he found a shop that sells alot of dcc,so,my boss traded the dcc for some P2K GP7/9s that we was hurting for.All of the geeps was gone in 2 weeks.Now,we do have a large customer base which helps the turn around time.As far as the Walthers catalog we also use it to find what a customer needs not for pricing.We also use the store computer to find items not in the catalog.I am at work now.My boss does not care about me being on the computer as long as it does not interfere with customer service.which it does not.

[MAbruce]

Larry,

It sounds like your store has found the right mix of products that your customers will buy. It's also great to hear that your boss is okay with your computer time!

I found it very interesting that it takes 4-6 turn-arounds in stock per year to turn a decent profit. That would make building a customer base from zero in a new scale a challenge. One would likely have to discount aggressively to build up a clientele while turning over the inventory at a faster rate to make money. Makes my head spin...

[BRAKIE]

Bruce,The secret is to run in store specials.This past Saturday we had a special on atlas cars,sold them at 20% off,they sold like hotcakes at a pancake breakfast.This is how we move stock.We have done this with most cars and engines.We also have weekly specials.This week it is on G scale track and Athearn cars.As far as a new scale,we run a introduction special,this works some of the time.
When a new locomotive comes out,and we recieve them durning the week,we will not put them out untill saturday.Now,we will call the customers that order them and let them know the locomotive is in and ready for pick up.Now,the stock engines as I said will be put out saturday.We will take one of the locomotives out of the box and place it on the test track,so anyone can test run it.Needless to say this helps sell the engines.
In the hobby shop business you must have a game plan to keep the customers happy and coming back,if you don't you are dead in the water.One look at Model Railroader will explain that with all of the mail order stores.Not to mention the www.hobby shops and e-bay.You must be aggressive in the business to stay alive.
In our store we alwys have fresh coffee for those who would like to have a cup.We greet our customers by saying "good morning or afternoon,If we know their names we will greet them by name.We always,always let them know their needs is special to us.This is true in all departments of the shop.The golden rule is The customer comes frist and foremost!

[Anonymous]

Larry Where is this shop.Wish it was in Charlotte NC.We need one like yours....

[BRAKIE]

Sorry,It is located in Ohio.

[Anonymous]

LARRY, are you any were near the Cleveland area? If you are, I'm gonna make a visit. At least let us know were you are so that this Ohio trucker can swing by if in the vacinity. Also, I made a comment on one of these other forums that I couldn't figure out how to get the shell off on my Atlas RS-3. I think YOU are the one who answered it, but But I need a little more in depth to acconpi***his feet without the fear of breaking something. Could you help me out.......Jamie

[MAbruce]

Larry,

It sounds like you have a great operation going there. I wish we had more like you out here in my area. Actually, I would like to see this new owner to suceed here just the same as you.

The point you brought up about competeing with mail order, internet stores, and ebay is something I would think is much more an issue than 10 years ago. Are the wholesalers and manufacturers making any allowance to you in order for you to compete on price?