Emphasis Trending Toward Prototype-Based Modeling?

[Paul3]

Sheldon,
Why were you taking the BLI drivers apart?

And what if one doesn't want to kit bash?  What good is it to have a ton of kitbash-able models for those people?  And you do realize that kit bashers are the minority, and always have been, right?  The far majority of modelers have pretty much run their Athearns right out of the box, possibly with only the addition of railings and other included details to finish the kit, even back in the day.  Manufacturers are going to go after the largest market possible, and that's not kit bashers.

Pre-ordering is not a "gimmick".  It's not a trick.  They aren't fooling you.  It really is a measure of the demand for a model.  Not enough pre-orders, the model doesn't get made.  Makes sense to me.

I seriously doubt anyone was "happy" to invest in inventory.  AFAIK, no one is "happy" about it.  It's a big risk, no matter the business one is in.  Buy too little, you lose potential sales; buy too much, and you lose your shirt.

And I wonder how many sales were lost in yon olden days when guys would go into a hobby shop, year after year, and find the same old stuff on the shelves.  Heck, one could travel across the USA and find the same stock at just about every model train shop he came across for most of a decade.  How many exact copies of the same engine (same name, same number, same performance) does one need?

As far as business is concerned, I also work & manage in small retail and have for the past 24 years (starting when I was 14).  I guess I don't know about business, either, right?

So let us test our business skills.  In 1971, Athearn cataloged 275 different locomotive SKU's, counting powered and dummy units.  The retail price of every single Athearn loco available in 1971 came to a total of $2,790.97 (that's $16,039.16 in today's money, according to the BLS.gov calculator).  So to fully stock a hobby shop with say, 2 copies of every loco, would have cost $5,581.94 ($32,078.32 in 2013 dollars).

In 2012, Athearn announced 480 locomotive SKU's, counting sound and non-sound units (but only counting 2-loco box sets as one SKU).  Retail price for all that?  $129,390.40.  Buy two of everything like the above example?  $258,780.80.  That's just one calendar year.  How many hobby shops can afford a quarter million dollars to invest in stock?  All just in case John Doe wants one in 10 to 15 years?  It makes no sense to expect any LHS to have that kind of inventory, let alone keep it for a decade plus just so some newbie model railroader doesn't get all disappointed that what he wants isn't available when he's ready to buy it.

If you ran a train LHS today, would you stock the shelves like it was done in 1971?

Paul A. Cutler III

[BRAKIE]

Paul3

If you ran a train LHS today, would you stock the shelves like it was done in 1971?

Paul

There's always two sides to a story.

Could a dealer sell (say) books if all he has in stock is stale books that's been on his shelves for years? I don't think so..The same applies for hobby shops you can't sell models if you don't turn over your stock and keep it fresh.You gotta have your customers wanting to return to your store to buy the latest model instead of going elsewhere or buying on line.You gotta invest money in order to make money since you can sell what you don't have.

 

BTW.Your prices is retail not wholesale..Shops buy wholesale.

[ATLANTIC CENTRAL]

Paul,

Once again my response is simple:

You ALLWAYS talk about this in terms of LOCOMOTIVE models, and I am talking about ALL THE SUPPLIES needed to build a WORKING layout. I'm not just talking about kit bashing locomotives, but rolling stock, structures, etc. Now we are even moving into built up structures?

There is a thing in this life called "balance". Sure a shop needs fresh inventory and needs to know its customer base - it also needs something to sell other than photos of future models. At first the pre order thing was only about locos, but it has moved into rolling stock and who knows what next? Track? Structures?

Your Athearn example is a straw man, because regional preferences can easily rule out "complete" or heavy inventories of some items. Here in Maryland B&O and C&O locos out sell UP locos 10 to 1.

Today - it is the places that HAVE INVENTORY that get my business - TrainWorld, MB Klein, Star Hobby - they have trains, and lots of them, sitting on the shelf for me to buy - and I do. 

The BLI drivers were, or became through operation, both out of quarter and out of square - removal and resetting, and/or some replacement parts were required to do the job.

Sheldon

[Paul3]

Sorry for taking so long to reply...  It's been a busy week here in Eastern Massachusetts and I've been distracted by non-hobby events.  Not that I'm even near it, but I admit to being glued to the TV.  Anyways...

Brakie,
First of all, you're right.  I should have worded my posting better.  Obviously, I was throwing retail numbers out there when of course the dealers are paying wholesale.  So, I will re-phrase my quesion as, "How many hobby shops can afford the wholesale cost of a quarter million dollars of retail value to invest in stock?" (italics are the changes)

Secondly, books are not the best comparison.  There are no "kits vs. RTR" in books.  No "limited runs" except for monthly series like Harlequins and Gold Eagle titles.  There still is a real demand for older titles as folks discover an author and then want to go back and read them all.  So it's not quite the same.

Still, I don't disagree.  New stock in an LHS is required to stay in business.  But is it logical to demand and expect an LHS to have it all in stock years after the models are made, just like what happened in the 1970's and 1980's?  I don't.

Sheldon,
Yeah, I talk about locomotives for simple reasons: there are relavtively fewer engines and it's a constant over the years.  I just spent hours going over every loco Athearn announced in 2012 and there are hundreds of data points I typed into an Excel file.  Do you want me to put in other stuff, too?  Freight and passenger cars?  Decals and paint?  Building kits and ground foam?  Throttlepacks and DCC?  Plywood and 1x4's?  Sorry, but I'm sticking to locos because I already have the info, and it's good info. 

Ignore it all you want, but the reality is that there have been more Athearn locos announced in one calendar year (2012) than was available from Athearn in all of 1971.

Paul A. Cutler III

[BRAKIE]

Paul3

So, I will re-phrase my quesion as, "How many hobby shops can afford the wholesale cost of a quarter million dollars of retail value to invest in stock?"

Paul,A quarter million dollars would be a lot of stock..

I suspect not to many small shops could afford that but,let's not fool our selves there are shops that have that much tied up in stock-trains,R/C models,supplies,slot cars,kits etc...We both know the owner didn't work his way up to a large store by sitting on his hands complaining about the Internet and all to sadly a lot of shop owners isn't willing to go that extra mile to become a top notch store..Like any business to become successful you gotta work at it by going that extra mile.

 

[NP2626]

BRAKIE

Paul3

So, I will re-phrase my quesion as, "How many hobby shops can afford the wholesale cost of a quarter million dollars of retail value to invest in stock?"

The above question is pretty meaningless.  A hobby shop is going to put as much stock on it's shelves, as it can afford and still be a viable business doing the things a business needs to do.

However, there certainly are hobby businesses that have more the a quarter of a million in whole sales dollars on their shelves! 

[ATLANTIC CENTRAL]

NP2626

BRAKIE

Paul3

So, I will re-phrase my question as, "How many hobby shops can afford the wholesale cost of a quarter million dollars of retail value to invest in stock?"

The above question is pretty meaningless.  A hobby shop is going to put as much stock on it's shelves, as it can afford and still be a viable business doing the things a business needs to do.

However, there certainly are hobby businesses that have more the a quarter of a million in whole sales dollars on their shelves! 

NP2626 is right on point here.

I will not get into hard numbers because every time I have in the past, I get nasty private messages from shop owners who read this board who say I should not talk about wholesale prices and store volumes and such.

BUT, I know many shops that existed in the late 70's, when I was managing a train department, that easily had inventories in the $500,000 to $1 million dollar range - in 1978 dollars. $500,000 would be nearly $2 million today - assuming you believe the US government - personally my own research shows the inflation level to be much higher.

As a practical business model, a retail hobby shop should be turning the VALUE of its inventory at least 4 times a year and six would be better - assuming a gross margin of at least 30%. If you can't buy the product well enough to make 30% (part of the problem for many small shops today) you need to be above 6 turns a year to even make a modest profit.

So figured backwards, a shop selling $1 million in trains a year would need $200,000 in inventory - assuming $200,000 in inventory could attract enough customers.

Now, remember I said turn the VALUE 4 times a year  - not every product. Some items will sell every month - some only once a year - a few worth while items may take even longer.

In the late 70's, we could see all this coming - the discounting, the higher product count, better detail, higher retail pricing, more product going direct from the manufacturers to the retailers.

We tried to find investors to open a "mega store" - buy direct, sell mail order, discount prices, BIG inventories. We almost put it together, but it really was a "venture capital" kind of thing and we just could not find the right partners.

The shops like Caboose Hobbies, Train World, MB Klein ( I've known Mr Klein casually since I was a teen), Star Hobby, and other BIG boys know you have to have stuff to sell - they buy mountains of it - to get the best price and have it when people want it.

I have no real sympathy or concern for people who try to run businesses on a shoe string, or who do not understand the market they are in. And I don't buy model trains from basement operators acting as special order outlets hoping to skim 10% off the sale of something I could just get from one of the BIG boys.

Back in the day, you could walk into MB Klein with a list of Athearn Blue Box kits (locos, cars, whatever) and walk out with six or 12 or more of each of at least 80% of what was on your list. To a large degree that's how that business still is to the limits of the current production schedules.

That's how you make money and have loyal customers.

I sold MATCO tools at one point in my life - my father and I had side by side MATCO territories here in Baltimore. That is another business were inventory is KING. You roll into a garage, the mechanic needs a tool - he needs it NOW, not next week. My father and I both had retail inventories on our tool trucks in the $100,000 range - in 1984 dollars. We turned that inventory over about 4 times a year. 

I have considered getting into the hobby business a few times - and always thought better of it - I know how tough a business it is. 

We have no way to know how big the model train industry really is because 99% of the businesses are privately held and their sales numbers are not public. But I suspect that if our little store was doing over $400,000 a year in the 1970's (full line hobby shop - about 1/3 trains) than there are lots of retail/internet/mailorder outlets today doing 20 times that volume - and a few doing way more than that. But I suspect the the ones doing the best, are the ones buying case lots from Athearn, Walthers, Bachmann, etc, etc - not the guy buying one or two of each item from Walthers at prices barely below what you and I can buy the stuff from Trainworld.

If you can't run with the big dogs - stay on the porch.

The fact remains the preorder thing is bad for brick and mortar retailers and not really good for the consumer either. Bachmann, Athearn, Walthers and a few others seem to be usning the preorder thing to their advantage while still putting product "on the shelf".

But outfits like BLI remain cash poor "special oder" brokers who never have anytihng to sell and who play games with prices - Why is it my local shop can buy BLI cheaper from Walthers than direct from BLI, but neither price is low enough to compete with FDT? Yet he can buy Athearn well enough to compete with Trainworld?

Why can a local shop/train show vender like Star Hobby have the same low prices and good inventory on Bachmann as Trainworld? But has little BLI on the shelf - because Bachmann makes the trains first and sells them at the same price to everyone who can buy resonable volume. He can't sell "preorders" at the train show - that takes actual product. Last time I was in Star Hobby, just a few weeks ago, his "on the shelf" inventory of Specturm locos was about 900 pieces - just Spectrum black/red/green/blue boxes - some made 10 years ago, some brand new releases - again 900 pieces x average selling price? - $175? = $157,000, just in HO Spectrum locos.

I don't know were you shop, but I shop in stores that have trains to sell.

Sheldon  

[JimRCGMO]

Well, since I'm a fan of "good enough, but not strict enough to drive me batty", so I model a fictional Southwestern short/bridge line (which in reality likely might never have happened - or lasted very long. But that's my story and I'm stickin' to it! I try to follow (generally/loosely) some of the practices of Southwestern RR's and have their rolling stock interchanging with 'my' RR line.

For me, it's designed to be fun most of the time (maybe except for wiring, ballasting and - when I get to THAT - DCC.

Jim in Cape G.

[rdgk1se3019]

I remember years back ........I had worked for a hobby shop called the Train Depot that was in Winter Park Florida..........the owner Stu Marshall was complaining to the LGB rep about their prices not being set in stone...........there were "Basement & Garage" dealers that would advertise 20-30% off...........

...............Well what exactly was the 20-30% off of ?????..........what they would do is add 85% then claim the 20-30% off was a deal.

The train Depot would sell at full price and there were actually people that were either dumb enough or were friends with Stu and buy from him..............people like me would go to BKW or Colonial Photo and Hobby <-------back when they still had trains.