Would You Open a LHS?

[MAbruce]

There have been numerous topics over the years lamenting/praising the role of the Local Hobby Store (LHS). But I’d like to throw a question out there: If you had the necessary starting capitol, would you open a (stand alone) LHS?

My inclination would be NO. I think the overhead would be too costly to compete with on-line/mail order stores. Besides rent & utilities, I think the current distribution model would kill my store pretty quickly. There are just way too much “middle-man” costs that come with all sorts of complex terms and conditions attached.

Add to this that even with a good local market I would be competing against on-line stores that reach into a far bigger market – the world! They can even do this 24x7 while my store would be open only during retail hours.

So what do you think? Am I wrong? Could you make a new LHS work?

[brothaslide]

I have heard it said that making a business out of your hobby takes all the fun out of the hobby. If I was independently wealthy, I would consider opening up a store and hiring some staff. We have no LHS where I live. That would keep it fun because my lively hood would not be dependent on sales. Consider this, most hobby shops are open on the weekends. Would you want to give up your weekends just to manage the store - NO WAY!!!

[Anonymous]

NO. I would open an online LHS.

[Adelie]

No. I can divorce my attachment to the hobby from the business end of it. I'd be entering a market that is on the decline right now and no real indication that it is turning any time soon. It does not sound like a winning business model to me.

If somebody told me I had to, here are a few ideas:
1) Work to develop a name in a specialty (DCC, general locomotive repairs or improvements, layout design, etc).
2) Price some things as leaders that will draw people into the store.
3) Keep an urn of coffee handy, a pitcher of water full and maybe some tea or lemonade to make people feel comfortable.
4) Get the online business running immediately.
5) Get rid of aging inventory through sales and finally listing the dead inventory on ebay. Turn the inventory instead of throwing it birthday parties.
6) Have an operating layout or two, space permitting, to draw interest. Moving things draw attention. I even know of one store that has operating sessions on their layout (after hours) almost like their own club. She's been in business a while and seems to be doing okay.

If I won the lottery and had time and money to burn, it might be an interesting thing to do, but then I would not have to worry about turning a buck. Promoting the hobby could be a hobby in itself. But as a business, I think you pretty much summed up the challenges.

[Anonymous]

I have done a lot of research on opening a hobby store here in Pittsburgh including visiting about 20+ of them in the area. I have been on the fence because there are people that do make money at it. SO my answer is maybe.

I have two questions that I still am working on getting answered so maybe people can post answers to these in this thread.

1) What do people go to the hobby store for?

2) Why wouldn't someone go to a hobby store for?

Regards,
Mike

[Big_Boy_4005]

I would have to agree with those who said no. I've worked in a couple of hobby stores, and was never envious of the owners.

MA mentioned overhead in his original post. Has anyone ever noticed that some of the best hobby stores are in some of the worst neighborhoods or buildings?

[Javern]

I would be more inclined to open a unique type of hobby store. perhaps a book store and half train hobby store. Include internet sales also

[ARTHILL]

I think it is a better dream than reality. My LHS may be an exception and I hope he hangs tight. I really like going in there. I hope he is making a good living. I like retirement at the moment.

[SpaceMouse]

I own a store and I would not open a hobby store--unless...

...unless the hobby store was going to be part of my hobby.

[andrechapelon]

QUOTE: Originally posted by MAbruce

There have been numerous topics over the years lamenting/praising the role of the Local Hobby Store (LHS). But I’d like to throw a question out there: If you had the necessary starting capitol, would you open a (stand alone) LHS?

My inclination would be NO. I think the overhead would be too costly to compete with on-line/mail order stores. Besides rent & utilities, I think the current distribution model would kill my store pretty quickly. There are just way too much “middle-man” costs that come with all sorts of complex terms and conditions attached.

Add to this that even with a good local market I would be competing against on-line stores that reach into a far bigger market – the world! They can even do this 24x7 while my store would be open only during retail hours.

So what do you think? Am I wrong? Could you make a new LHS work?

Why does it have to be an either/or proposition? There is no reason you can't have a bricks and mortar store and have an online/mail order presence as well. My favorite LHS is The Train Shop in Santa Clara, CA and they've been in business in one location or another since at least the 70's (when I discovered them). They also do a brisk mail order business despite the fact that they have no web presence. Apparently word of mouth advertising still works. They also sell at about a 20% discount to MSRP. Perhaps not as good as some online retailers, but certainly nothing to sneeze at. It's also in a good location relative to drop-in traffic. I have no idea what the lease payments are, but the store is has been in the same location since the late 80's, so they can't be too out of line.

TTS is well stocked, well lit and the natives are friendly. My impression of the "employees" (even though I've never asked) is that TTS is a second job (part-time) for them and that the second job is a way of earning some additional income for the purchase of model railroad items. IOW, the money stays in the store. The father and son team of Vern and Dennis Cole run the place and, unless I'm mistaken, Vern's wife does the bookkeeping.

As to the question of whether or not I would open a LHS, the answer is probably not. It's not that I don't think I couldn't compete, but that I wouldn't want to make a business out of a hobby. And it is a business. If one has no business savvy, one is doomed to failure. That's probably why so many LHS's are failing.

Andre

[skiloff]

If I won the lottery, absolutely, but otherwise no. I would want cash in hand of at least a half million (and likely a million) before doing such a thing. Further, as others have said, I would start an internet site and run it out of the back to supplement the income. Mark had some very good ideas for promoting yourself. I would take it one step further and have a portable layout you can take to local trade shows and other exhibitions, and even further out into festivals and the like in rural areas. This hobby requires promotion and once you have people hooked, as we all know, they can't let go.

[Big_Boy_4005]

Andre, hobby store failure has little to do with business savvy, and everything to do with customer base erosion. Society today doesn't have the time, disposable income, or desire to do hobbies, like they did 50 years ago.

In general the wealthy don't do "traditional" hobbies, they are too busy yachting, playing golf, sitting in suites at sporting events, or simply working.

Hobbies are the domain of the middle class, which is slowly being squeezed out of existance. Look at your neighbors, and think about how they spend their spare time. How many of them fly RC planes, collect sports cards, coins or stamps, or build plastic models?

Craftsmanship is nearly dead, replaced by highly detailed plastic injection molding, which now comes out of China. Instant gratification is the name of the game, and all of the technology we have created delivers it.

Even we as model railroaders have fallen victim to some of these outside pressures. We are constantly seeing topics here in the forum bemoaning the lack of craftsman kits, and criticizing MR for it's shift in editorial content. The problem is this is the direction the entire hobby market is heading, down hill fast.

Sorry for the slightly off topic rant.[:I]

[Anonymous]

QUOTE: Originally posted by Big_Boy_4005



MA mentioned overhead in his original post. Has anyone ever noticed that some of the best hobby stores are in some of the worst neighborhoods or buildings?

I've not noticed the "worst" part but over here they're frequently in out of the way areas - it's rare to find them in the main shopping streets. I've yet to visit one where I didn't feel comfortable about parking nearby but one has come close - wouldn't have liked to be there after dark!

[Train 284]

No. There is just to much work owning a buisness. If I did though, it would be an online store.

[mondotrains]

Hi Guys,
I personally wouln't open a hobby shop because I too am retired and wouldn't want to tie my self down.

Now, for those who might consider opening one, some thoghts above from Mark would certainly help. I especially like his idea about having a coffee pot and a pitcher of cold water to keep me in the shop.

I've always said that if things are done correctly, one can succeed at almost anything. If someone took all the positive attributes I've seen in the various hobby shops I've frequented and "rolled them into one", they would be successful. However, most guys don't seem to be capable of making that determination.

I remember one shop that lasted about 1 year. The guys had some of the right ideas....they even started clinics on Saturdays to help newbies get started. I went to one and was totally disgusted. They had a guy come in to show newbies how to build a 4x8 layout. The guy was a master carpenter and insisted that the benchwork be made of ASH lumber and then he proceded to use a radial arm saw to build what looked to be precision cabinet-like grids to set on top of his legs. The newbies that were there were completely turned off and most left after 10 minutes because as I'm sure you would agree, not everyone has a radial arm saw and the skill to built cabinet-quality benchwork. Heck, I built my benchwork using a hand saw and only used a circular saw to cut the plywood and Homosote for the top.

One shop I've gone to is absolutely sloppy and unorganized. Items out of stock never, never get reordered.

Another shop has a guy running it that wouldn't be able to tell you what to use to fasten track in place, let alone how to wire your layout.

Another one has stuff that's been sitting on the shelves, taking up space for over 10 years, yet the current releases are no where to be found.

One guy is running his store as if it were a mail-order business...you sign up for a new release and he orders it. When it comes in, you pick it up. He won't order any extra items to entice the walk-in folks to make a spur-of-the-moment purchase.

One shop sells at 100% of retail most of the time. Why not offer even a slight discount to try to compete with the discounters.

Like someone said above, many folks open a business (not just Model Railroad stores) with no business experience at all. That's why we've heard for years and years that about 90% of all new businesses fail. I'd bet that with the current direction we are headed, we'd be hard-pressed to find even 1 guy in 10 with the smarts to be successful.

So, bottom-line.....if you're willing to do the homework and really study what it takes to become successful and most of all, build a PLAN, you could be successful. But if you think that you just go out, start paying rent, order some measly inventory, and sit on your butt waiting for the money to roll in, it ain't going to work.

Mondo

[rolleiman]

Answer in one word, No.

QUOTE: Originally posted by msbcms

I have done a lot of research on opening a hobby store here in Pittsburgh including visiting about 20+ of them in the area. I have been on the fence because there are people that do make money at it. SO my answer is maybe.

I have two questions that I still am working on getting answered so maybe people can post answers to these in this thread.

1) What do people go to the hobby store for?

Magazines, rail joiners, small stuff like that. And to look around killing some time.

QUOTE:
2) Why wouldn't someone go to a hobby store for?

Regards,
Mike

Truthfully, Anything I can get cheaper without leaving my house. Sorry but it's a matter of cash for me. It looks better to me in my pocket than in yours. Couple that with the fact that having it delivered is hard for anyone to compete with.

I hit the LHS maybe three or four times a year so I'm probably not a good example. WHen I first Really got started and had money to spend, I was in the hobby shops every other few days. There were enough of them around that I could visit a couple in a day and a few days later visit a couple other ones. Depending on what side of town I was on determined which ones I visited. Now, on one side, one that was my favorite, is gone. Another that I use to visit a lot moved 10 miles further north making it over a 2 hour round trip, usually in traffic, to get to.. I'm not driving 2+ hours to get a magazine and Maybe something else. None of these places has closed for lack of My support, I've supported them plenty over the years. These days however, I just don't need what they are offering.

So if you are intending to open a business that carries the Same stuff the other 20 shops do, come up with a hook to draw people in. Otherwise, you are going to have a hard time attracting customers.. Regardless of what anybody says, it IS about competition.. Paying rent, for inventory, employees (if you have them) can get mighty expensive and lonely. I'm sure that people have a good time shooting the breeze with the LHS owner or worker but it's free and is doing Nothing to suport the business.

I have a freind that for years talked about opening one and I did everything I could to talk him out of it. His angle was that he would be open 6pm - Midnight. So when the people with money to spend got off work, needed a piece of track, rail joiners, etc they would have a place to go. Might have worked, probably not.. We'll never know because he never did it.

A word of advice if you are going to try it.. On your grand opening day, Have stuff for people to look at and buy. They'll never return if you don't..

Jeff

[BRAKIE]

Opening a hobby shop was my dream at one time..But,after working part time in hobby shops and being a part time Train Show dealer I can assure you there is NO WAY I would open a hobby shop not even a on line shop even if I was a multi millionaire and needed something to do to past the day away..

[Big_Boy_4005]

QUOTE: Originally posted by Railroading_Brit

QUOTE: Originally posted by Big_Boy_4005



MA mentioned overhead in his original post. Has anyone ever noticed that some of the best hobby stores are in some of the worst neighborhoods or buildings?

I've not noticed the "worst" part but over here they're frequently in out of the way areas - it's rare to find them in the main shopping streets. I've yet to visit one where I didn't feel comfortable about parking nearby but one has come close - wouldn't have liked to be there after dark!

OK Matt, maybe worst was a bit strong, but the after dark part sums it up pretty well. It's all about the rent, and how low can you go, and still expect people to visit.[;)]

I think the store Art was refering to is the one I visit most often. It is located in a former bowling alley in the basement of a building on the corner of 2 very busy streets. The surrounding neighborhood isn't terrible, but a mile or two east is about as rough as it gets. Diagonally across the intersection, there used to be a gas station. A little girl was killed in a drive by, about 8 years ago. The scary part is I used to live 3/4 mile west of the store. We moved to the burbs before the drive by.

[Anonymous]

No, if I win the lottery, I'll build a bigger house and put in a basement size layout,and make my lhs owner a rich man.

[oleirish]

QUOTE: Originally posted by msbcms

I have done a lot of research on opening a hobby store here in Pittsburgh including visiting about 20+ of them in the area. I have been on the fence because there are people that do make money at it. SO my answer is maybe.

I have two questions that I still am working on getting answered so maybe people can post answers to these in this thread.

1) What do people go to the hobby store for?

2) Why wouldn't someone go to a hobby store for?

Regards,
Mike

I go to the LHS for things like track,cork,scenery,paint,rail joiners,kits,autos,ECT,ECT! I don't like ordering things out of books,the wate time is to long,Most of the time I can ask the owner for something and he will get it for me,if he does not have it in stock,Would I open an hobby shop? yes if I had the money.

JIM

[Big_Boy_4005]

QUOTE: Originally posted by BXCARMIKE

No, if I win the lottery, I'll build a bigger house and put in a basement size layout,and make my lhs owner a rich man.

Ding, ding, ding!!! Give that man a cigar. [:D]

By investing in real estate, he has made the first correct move toward keeping his winnings, and enjoying his hobby.[tup][tup]

[selector]

No, I would not open an LHS.

We have begun to develop a culture of seeking wonder and awe, a culture of easy entertainment, where batteries are optional. Look at the success of Playstation, Nintendo, and other forms of 'tuning-out'. Next time you ride the bus home from work, notice how many people wear headsets. The "Look" is a generational thing that means they don't have to listen to you and others babble meaningless things to them, hassle them, or otherwise interrupt their thoughts. It is a form of control. So, we are developing inward-looking people who look first to their own interests. They have learned that computer technology offers them a refuge from the pressures of dealng with people. If you want my opinion, THAT is why internet hobby shops are proliferating...we never have to actually stand at a counter and deal with another person. Instead, we decide if the price is worth what we are offered, and then tell them to ship it to us. Why is the price right? As someone said, it is because the overhead is virtual (or virtually non-existent), so they can undercut the LHS by up to 30%.

If you had the choice of paying $500 for a highly desirable loco, or $430 plus shipping, which would you choose?

I suppose it isn't that cut-and-dry, but I firmly believe there is a great deal of truth to what I have presented.

[Anonymous]

Gee let me think umm...no

[whitman500]

From what I have seen, hobby shops would be most successful if they catered to two types of business:

1) Impulse purchases (e.g., modest kits, magazines/books) and basic supplies (e.g., paint, track, etc.) that people often need immediately and/or don't want to order online because of the delay and the shipping costs being a high percentage of total transaction value.

2) Entry-level train sets for newbies that need some guidance on what to buy and who are overwhelmed by the range and complexity of the online offerings.

On other items, particularly big ticket items, online will dominate. While I think local shops should be able to compete successfully in selling the above two types of items, because of the low sticker price for these items, they will have to drive a lot of volume through their stores to cover the fixed costs of running an operation. This suggests to me that local stores will only survive in major population centers where there is a critical mass of hobbyists who can support the store off of small purchases. Since I get the sense that the hobby is generally shifting away from the mass market and towards a smaller, older and wealthier customer base, the number of communities that will be able to support a local store is likely to decline over time. There should continue to be areas that can support one for some time but the long-term outlook is not good. The ultimate result of this trend may be that hobby shops are folded into general craft stores like Michaels that already sell basic modeling paints, brushes, etc. If these stores expand to carry some books and magazines, some of the better paint lines, track and basic scenery supplies, they could really finish off the local stores.

[Shopcat]

Yes you can make a LHS work.

There are lots of businesses, hobby shops included, who depend on residual leisure income. There are lots that are in hot competitive markets, and lots that are in the boonies. There are lots that compete with the e-commerce market, and with big box retailers.

Like any business, the LHS to be successful must be run as a business, smartly, competitively and lean. The LHS should work hard to build its market and support its customers in many ways. Of course there will be pressures from within the industry and from outside of the industry. A successful business would need to adapt to today's market and today's competition. The business model of 20 years ago would be unsuccessful.

I work as a manufacturer's rep in an industry that is so similar to the LHS market that its frightening. Everything that has been said in this thread and related threads could be said about all my dealers and all my customers. Nearly identical.

Yet, in spite of all the negativity in the business world, in the industry and the economy in general, I have a bunch of dealers that are doing well...some VERY well. I also have some that are failing, some that are on the ropes waiting for that last pu***o go over the edge. They tend to be people that got in their busines because they loved the activity....and they are not business people. The let emotions of the product run their decisions rather than making decisions that will run a successful business. You would be surprised at the dealers I have that fall in love with each and every item and can't bear to sell it...except at list price. Those days are over.

So if you want to open a LHS....go for it. But open a business...not a hobby activity. Prepare to work very hard, suffer disappointments and failures. But follow good and contemporary business practices. Wal Mart won't win if you operate a good business. Wal Mart only puts out bad businesses. Same can be said for the big box and e-commerce MR companies.

Now, let me propose something else to consider. In my very similar industry, we have two controversial policies. Tell us what you would think of these in the model railroad industry....

1. MAP pricing. The manufacturer restricts everyone from advertising prices below a certain point. LHS can compete in ads with EC (e-commerce) stores. The EC has to avertise a higher price than they do now. Would you support that practice?

2. Restrictive sales. The manufacturer chooses not to sell their products to any company who sells via EC channels. That would include LHS who run EC sites. They would not be able to sell those products via EC. They can advertise them, they cannot sell them. Would you support a product line if you could only buy it at a LHS ONLY?

Regards....

[loathar]

If I hit the lotto I would. It would be nice to run one and not depend on it solely for income.Where I live, it would be more of a service to the train crowd.

[Anonymous]

This discussion has been pretty interesting to me as I also have thought about opening a hobby store. Now right off the bat I'll let you know I have more experience with 'gaming' hobby stores than trains, and you will never become rich beyond your wildest dreams opening a hobby shop.

I do think the key to everything is being able to answer the basic questions of:
1. Why would people come to your store?
2. Why would they come to your shop rather than order on-line?
3. If there is more than one shop in your area why would they come to your's rather than the other one?

Personally if I was going to open a shop I wouldn't specialize in just one genre, but would try to appeal to a wider audience.

As some people have mentioned, planning is one of the most important keys.
To really be successful you will need a lot more capital than most people would think. As it was mentioned; from day one you pretty much need a fully stocked store. You have to be able to buy all of the inventory and then wait it out until it begins to turn over.

I also agree that in today's age you really are going to want a web presence also: increasing your market base, an outlet to push inventory that isn't moving, and over all helping you churn the inventory turnover.

I'm going to have to argue it is the business savvy that is going to determine if you are successful or not. There have been too many stores over the years that just 'didn't get it' and were doomed to failure before they even started. I think Cash Flow, Unrealistic Expectations, and Apathy to Customers are the top killers of the hobby store.

The 'Value-Added' is the key to compete against the mail order companies.
Key points there is:
1. You have to demonstrate the product and encourage customers to use/play/try the product. One of the main advantages you have is that people can physically touch the product. Have trains, operating stock, and accessories out and working in the store.
2. Be knowledgeable of the product that you sell. How does it work, how do you get the most out of the product, how do you fix it, etc. It is all great and fine to buy that DCS system on the Internet, but if you can't get it to work what good does it do you?
3. Be willing to share your knowledge. If I'm going to spend hundreds to thousands of dollars in a hobby I want to be confident that I'll be able to build the infrastructure to enjoy the hobby. I can get a starter train set and run a train around a loop of track pretty easy, but where/what do I do when I need to take the next step. Is there someone who can take a look at my proposed layout and offer suggestions or advice, help me understand wiring, what types of product is out there and how it works?
I think clinics and how-to demonstrations are great. The key, as someone has already pointed out, is to make them 'real'. When I watch someone showing me how to do something, I need to be confident I could go home and to some reasonable level do it too.

You also need to make sure you keep your objectives in mind and adapt your game plan as things evolve. The idea of having the coffee pot and lemonade flowing is a good idea, as long as you don't end up with 4 or 5 coggers standing around your store all day shooting the breeze, drinking your free coffee, keeping customers from being able to get to the product, or even worse driving your potential customers away. Always determine who your customers are and tailor your retail to them. The concept that 80% of your sales come from 20% of your customers is pretty accurate. Make sure you're top 20% customers are happy!

I know this is too long already, but one last thing is if this is truly your dream and what you want to do... Once you have a solid game plan and the funds to make it happen don't let people persuade you not to follow your dream.
Remember there have been lots of people who were told they were crazy to try and start their business and drove on to be highly successful. Dave Thomas was told by almost everyone in the industry that he was crazy to build a hamburger chain because there was no way he could compete against McDonalds and Burger King. The founder of FedEx got a D- from a Yale professor for his business plan because "there was no way he could compete against the U.S. Post Office". There are hundreds of similar stories I'm sure.

Good luck in your endeavors and remember, we are all pulling for you.

[DavidH]

The reality is, you can't answer this question in a vacuum. To open an LHS would mean I couldn't carry on with the employment I have now, which is quite demanding. I am in the final part of my peak earning years where my defined benefit plan pension amount will be established. To replace my income, I'd have to be able to take out of the store rather a lot more than I think most LHS owner's are netting.

On a local note, there would just be too much competition here. We have at least half a dozen very good to pretty good shops in a metro population area of 2 million or so. I doubt there is much room for anyone else.

David

[tjsmrinfo]

Yes I would. As of right now I have to drive 1.5-2 hrs to a LHS. All I have where I live is Hobby Lobby and they dont have a lot of things I need ie scale chain, MR paint etc, I also dont have the funds to order onlone when I NEED something right now.

I would open a shop that caters to all modllers/gamers like Hobbytown USA
This is what I ould stock

1.MR products with a knowledgeable staff in that dept
2.plastic modl kits with same
3. wargames with same
4. crafts- for the females that have an interest in a hobby and also kids for school projects

I personally wouldnt be in the store, I would have a store manager and a general manager, plus a knowlefgable sakes staff to answer any and all questions.

I would also offer 20% off MSRP on all products, plus MR clonics and repairs etc.

I has an experience at the LHS I go to a few years ago. I was looking for an N scale item for a friend the owner asked if I needed help as he didnt do N scale he was honest enough to admit it and turn it over to his N scale "expert", however they didnt have what my friend was looing for.

That is what I would do. But thats me.

So to all who consider opening a LHS I say go for it.

Just because you live in a metropolitan area doesnt mean you cant make it work.

Tom

[BRAKIE]

Montbard says:The idea of having the coffee pot and lemonade flowing is a good idea, as long as you don't end up with 4 or 5 coggers standing around your store all day shooting the breeze, drinking your free coffee,
============================================================
I see you don't know the whole story..You ever think those" 4 or5 coggers"just *might*be your high spenders? I know of 3 hobby shops where the faithful gather every Saturday have coffee and shoot the breeze..Of course these groups of coggers as you called them spend more hobby dollars in those shops then then the casual once a month customer that usually spends less then $20.00 (or worst check out a engine then go home and order it from a on line shop)and will be the first to complain about these "CUSTOMERS" having coffee.I feel those that complain has never stop long enough to have a cup and say"howdy".