Originally posted by Kzinwarrior He seems to know everything about every hobby in spite of the fact (at least I think it's a fact) that he's NOT a hobbyist. Go figure. His specialty is actually electric shavers, which he sells and repairs right there in the store. . Kzinwarrior - just curious if you are referring to a store in Kelowna, BC ??? ( the store referred to in your note sounded familiar, a store that I go to when in town) cheers, krump "TRAIN up a child in the way he should go, and when he is old he will not depart from it" ... Proverbs 22:6 Reply krump Member sinceAugust 2003 From: Beautiful BC 897 posts Posted by krump on Friday, October 17, 2003 12:06 AM how are the business plans coming along? cheers, krump "TRAIN up a child in the way he should go, and when he is old he will not depart from it" ... Proverbs 22:6 Reply MACKINACMAC Member sinceFebruary 2002 34 posts Posted by MACKINACMAC on Friday, October 17, 2003 9:03 AM I managed one of the larger Hobby Shops in Michigan in the 80s. I gained a lot of exeprience & knowledge doing so. Working there put me through college and now I'm a CPA. So with that said let's look at the hard numbers. Typically on train items our margin was roughly between 25 & 40 %. Very low by retail standards but typical of Hobby stores. This means that a product selling for $ 100.00 has a cost of between $ 60.00 to $75.00. On some of the more collectable train items (Like Lionel), to stay even with the mail order places we'd sell product at cost + 20%. So an item costing us $100.00 would sell for $120.00. As you can see there is very little left for G&A costs which is your rent, utilities, advertising, payroll, taxes, insurance, etc. So to crunch some numbers; Say you wanted a salary of $30,000. Payroll taxes would be roughly 3,350. Estimate your rent & Utilities. Lets just say 1, 000 a month for rent & 1,000 a month for utilities and phone. Advertising budget roughly 10,000 a year and so forth. Added up your G&A is roughly 67,350 but lets say 75,000 total for insurance and office expense etc. You would have to have annual gross sales of $ 187,500.00 just to break even at a 40% margin and $300,000 to break even at a 25% margin. A hobby store can be very profitable, but most people don't bother with this type of analysis before opening up a store. Remember also that to make these numbers work you'd have to have this kind of sales volume in the first year you open. A daunting task for a new store but it can be done. Get your self a good CPA who can walk you through the analysis process and get as many cost estimates as possible IE rent, insurance etc. DO YOUR HOMEWORK BEFORE OPENING A STORE. I've seen a lot of stores open and close because the owners failed to look at the hard numbers. Also, as retail goes, LOCATION, LOCATION, LOCATION. While a hobby store is considered a specialty store, location is still a factor. You don't want to put the store in a city or area where there is no demand for trains. I've seen this happen a bunch of times where a store opened up with a great deal of train product and the community was only interested in R/C or something else. While alot of train hobbiests will travel to a store, your bread and butter is still the local area. Don't be afraid to be flexible. In fact expect to be. Another point, You must carry a wide variety of product to be successful. Hobby stores that cater to one hobby don't do as well as those with a full range of products. In other works, you may want to specialize in trains, but consider carrying Model kits. R/C, Games, Dollhouses, Art supplies, Science, etc. This way you'll broaden your customer base. We did just that and found out that while Dad & son looked at Trains & R/C, MOM & Sis shopped Art, Doll Houses (not to sound sterotypical but this is actually how it was in our store). And be prepared to carry a huge inventory. In todays world people want things now. If they go to your store and you don't have they will glady go to the next store or order it online. And plan a huge advertising budget, Get your name out there so people know your there. As you can see, there are a lot of considerations to opening a new store. not to sound discouraging but remember that 2/3 of all businesses opened will fail in 3 years and 80% fail within five. Perhaps an alternative is to buy an existing store. So do your homework very carefully. Don't leave anything to chance. A Hobby store can be very profitable. The store I managed just expanded and is now roughly 10,000 square feet and has been in business for over thirty years. Good luck if you open a store. Reply coalminer3 Member sinceJanuary 2001 From: WV 1,251 posts Posted by coalminer3 on Friday, October 17, 2003 2:14 PM I worked in a hobby shop for a spell and learned a great deal from the experience. Here are some thoughts (in no rank order) 1. Location is critical. Place where I was was near a commuter train stop and shared a block with a restaurant and a bank - steady traffic throughout the day. 2. Stock a wide line of materials; we did everything from model rr to crafts, r/c, miniatures, Breyer horses, art supplies etc. 3. Knowledgeable salespeople can have a real impact; we had a craftsperson in that dept, I did a lot with railroads and plastic kits, artistic folk in art supplies, etc. It made a difference to the customers because we spoke the language and the boss expected us to keep up with new products, techniques, etc. BTW, some were older folks, some were younger; the important thing was that the boss had high expectations and motivated his folks to meet those expectations. There was an atmosphere of mutual respect and "team" in that place which was/is rare in many businesses. 4. Do clinics or at least have somebody doing something where passersby can see them. e.g.. we'd build dollhouses, rr car kits, model planes and do scenery "workshops" at Christmastime - packed the place and people bought stuff to work on at home. 5. We'd repair trains from other retailers. This gave us a chance to meet the customers and often upgrade equipment that they had - guess who got the upgrade sale and repeat business. We also spent time explaining things to the customers; folks are scared to death in many cases to ask questions because they think they'll be made to feel stupid. Remember how you felt as a beginner and went to a hobby store? It hasn't changed. We had folks tell us, it's great because you spend time with us - it's worth paying as little extra because we get objective recommendations and help with our problems. 6. Also be prepared to not make a dime for the first 18+ months you are in the business. The owner of the place where I was started the hobby shop as "something to do" while he kept the family business up and going. Eventually the hobby shop was able to stand on its feet and the business expanded into wholesale also. IOW, the man planned his work and worked his plan. He told me one night over a few cold ones, that he went into it with his eyes open and prepared to, as he put it, lose $ until he built it up. Sorry to run on so long Work safe Reply Anonymous Member sinceApril 2003 305,205 posts Posted by Anonymous on Friday, October 17, 2003 2:22 PM Sell online as well as local for max profits. Otherwise I have no input ;) Reply Edit Bikerdad Member sinceOctober 2003 From: Southwest US 438 posts Posted by Bikerdad on Friday, October 17, 2003 4:53 PM 1) Cross-selling. This ties into your marketing. Generally, we all have a sense of who the end user of the product will be, but do you have a sense of who the PURCHASER will be? If you can expand THAT category, then you can greatly improve your odds of success. Say for instance that you're located in a retirement area. That means the majority of your end users will be retired gents. Okay, so market to their wives! Find related hobbies that are dominated by women, and figure out how to do holiday cross-promotions with their retailers. Reciprocity, joint mailings, etc. In a similar vein, the potential crossovers within the hobby market are such that you don't want to close the door to any of them. Just because you may not carry Warhammer 40K doesn't mean that you can't sell a boatload of scenery supplies to the Warhammer 40k market. 2) Make sure that your love of the hobby won't be extinguished when it becomes your livelihood. 3) Consumables - keep them stocked. I don't know if its the distributors or what, but always having a 1/2 empty paint rack is a bad thing, ESPECIALLY if its the same paints! 4) Local Interest - If you're in Boston and you decide to do a layout, don't do the Santa Fe! Do the NYNH, in the fall. Have a 'comedy section' for the Big Dig. If you're in a Navy town, then by gosh, play up the ships and play down the tanks! Work with local historical societies. 5) Name - Make sure that the name of your store manages to be both explicit enough to identify your specialty without giving potential customers the sense that you don't have what they want. 6) Presentation and Atmosphere - Make sure your place is clean and well lit (Spend a little extra and get color balanced flourescents!) Don't stuff too much in. If you have stuff that's inclined to "walk", put it behind glass that people can press their noses against, NOT on the wall behind the counter where people can't see it. If your specialty is trains, then CREATE an atmosphere that says "trains spoken here." 7) Pricing - Make sure your price tags are a) always located in the same general area on the product, b) don't obscure important information (and yes, "Made In" is important to many customers), and c) use a large enough type to be easily read. Tiny faded price tags are annoying at best. 8) Bathrooms - keep 'em clean! 9) Telephones - The customer in the store is ALWAYS more important than the one on the phone. 10) High End - ALWAYS have one "high end" product. That means if you're bread and butter is the $150 steam locomotive, you should have one $600 loco. Why? Because, most consumers are very leary about buying the most expensive item. If your most expensive loco is $150, then most will step down. It is a truism in most folks mind that the cost/quality curve is NOT constant, and they don't want to be at the top, but rather where they percieve the most value to be, and that is 1 or 2 steps below the top. You may never sell that $600 loco, but it will move more $150 locos. This "high end" item is a MARKETING expense. 11) BE FLEXIBLE. Remember Woolworths? The prototypical 5 & Dime, all gone now. Pity those poor investors who lost their money... or not. Ever go to a Footlocker? Welcome to Woolworths... http://en2.wikipedia.org/wiki/F.W._Woolworth_Company 12) KNOW YOUR GOAL! Is it making money, underwriting your own hobby, serving the hobby, having something to do, etc? Each of those have different, and sometimes conflicting, paths. 13) Learn the core principles of retail, of which the most "foreign" is inventory control. When do you put that product on the clearance table? 14) No food, no drink, no customers. If you feel it is necessary to restrict beverages or food, HAVE A PLACE FOR CUSTOMERS TO PUT THEM when they come in, other than the trash. Being force to toss a soda that was just purchased has a tendency to put the lockdown on the ol' wallet. 15) Research - Research your market. Research your customers. Research your suppliers. Research the industry. KNOW your product, but if you don't, DO NOT try to BS the customer. Customer service comes down to two things: what you KNOW, and how you share that with the customers. 16) Signage - Make sure somebody looking for you can find you! Make sure the signage in your windows (if you have them) are CURRENT. Leaving old signage up, especially faded, is tacky. 17) Use the 'Net, for marketing and to communicate with your customers. 18) Support - If there are other people who this is going to affect, be sure that they are COMPLETELY on board with it. Even if you manage to become a latter day MRR Leland Stanford, it ain't worth losing your family. Grace and peace, BD Reply 12 Subscriber & Member Login Login, or register today to interact in our online community, comment on articles, receive our newsletter, manage your account online and more! Login Register Users Online There are no community member online Search the Community ADVERTISEMENT ADVERTISEMENT ADVERTISEMENT Model Railroader Newsletter See all Sign up for our FREE e-newsletter and get model railroad news in your inbox! Sign up
cheers, krump
"TRAIN up a child in the way he should go, and when he is old he will not depart from it" ... Proverbs 22:6