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Old Jul 21, 2011, 12:55 PM
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Frustrated Hobby Shop Owner

Hi guys, I am a new member here but a long time listener of "The CrashCast" and RC Radio. So, I I feel like with all the mentions I already know this place. My question is to LHS owners.

I have a small store in a large metro area and a loyal group of customers. I have been expanding my business into E-Commerce. (My original career revolved around E-Commerce) But I noticed on places like amazon it seems as if some retailers are selling products basically at cost after fees of what I get the same product from my distributor. How are they able to that?

I know that this is an odd place to ask but, its hard to have any discussions with other LHS owners. Not because they aren't friendly but most are very hush about business ideas since technically we are competitors. (I can't blame them)

So if there are any LHS owners or others who wish to discuss I would appreciate it. Privately or otherwise since I know this can become touchy for many. Thanks guys
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Old Jul 21, 2011, 09:06 PM
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Well, I own a manufacturing company in a different industry (tactical gear) but we have online sales and dealer sales. One thing that I've seen is anytime a big order comes through with one of our dealer customers, they add on enough stock for themselves to have at our lower bulk pricing.

That can be from "group buys" or just getting a big order from one of their customers or the military. Then they're set on that product for a while. Takes some investment of cash.

Other things - advance orders for delivery throughout the year, do that on your faster sellers. That might get you some deeper discounts with some companies. Work your sales rep(s) or manufacturers. Free freight programs, extended terms, co-op ads...

But I hear ya! The pricing people offer some things at is near cost. I can only think it's a loss leader and the other items make up for it.

I hope some of this helps ??
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Old Jul 31, 2011, 07:50 AM
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Originally Posted by HexNut View Post
Hi guys, I am a new member here but a long time listener of "The CrashCast" and RC Radio. So, I I feel like with all the mentions I already know this place. My question is to LHS owners.

I have a small store in a large metro area and a loyal group of customers. I have been expanding my business into E-Commerce. (My original career revolved around E-Commerce) But I noticed on places like amazon it seems as if some retailers are selling products basically at cost after fees of what I get the same product from my distributor. How are they able to that?

I know that this is an odd place to ask but, its hard to have any discussions with other LHS owners. Not because they aren't friendly but most are very hush about business ideas since technically we are competitors. (I can't blame them)

So if there are any LHS owners or others who wish to discuss I would appreciate it. Privately or otherwise since I know this can become touchy for many. Thanks guys
HexNut: Give Jim a call to set up a dealer account. BP Hobbies supports MAP pricing. Lots of good stuff. http://www.bphobbies.com/view.asp?id=V815101
Bob
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Old Aug 01, 2011, 04:12 PM
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Joined May 2009
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I know that some businesses that have large amounts of money and a large variety of items do in fact sell some items at cost or even under cost, for the purpose of drawing customers in who will buy other items with higher markups. The long-run overall result is still a profit, but merely arrived at in a more complex way. With enough resources, such companies can do research to find out which items to do that with, and the most flexible companies out there are so clever and resourceful that they adapt to daily changes, resulting in such competitive behavior that it is almost impossible to understand how they do it without being on the inside!! I know that information plays a big part in this, and of course the other things mentioned here such as bulk pricing, pre-orders, etc. So as you can see, there are many things that can go into it. The internet has made all businesses more competitive as people become more and more capable of finding the lower price. It means that all of us as customers have a lot more bang for our buck, but that any of us as business owners have to be that much more savvy to survive! Unfortunately, there is no easy fix/answer to your problem. It's just the nature of the new internet era.
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Old Aug 10, 2011, 10:42 AM
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United States, MA, North Attleboro
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Originally Posted by john-doe View Post
I know that some businesses that have large amounts of money and a large variety of items do in fact sell some items at cost or even under cost, for the purpose of drawing customers in who will buy other items with higher markups. The long-run overall result is still a profit, but merely arrived at in a more complex way. With enough resources, such companies can do research to find out which items to do that with, and the most flexible companies out there are so clever and resourceful that they adapt to daily changes, resulting in such competitive behavior that it is almost impossible to understand how they do it without being on the inside!! I know that information plays a big part in this, and of course the other things mentioned here such as bulk pricing, pre-orders, etc. So as you can see, there are many things that can go into it. The internet has made all businesses more competitive as people become more and more capable of finding the lower price. It means that all of us as customers have a lot more bang for our buck, but that any of us as business owners have to be that much more savvy to survive! Unfortunately, there is no easy fix/answer to your problem. It's just the nature of the new internet era.
This is nothing new, and it's not even an internet era tactic. It's the very classic brick and mortar concept of "loss leader". You put up the thing everyone wants at a price that loses you money based on the theory that they will pick up a couple more things that are priced at high profit.

For example. Milk and Bread and (usually) loss leaders. There is a reason they tend to be at the back of the store. You have to walk through the other temptations on the way. Ever notice the display rack of cookies or the fact that the milk is right there by the 'bake at home' refrigerated items? Because that $3 gallon of milk might be costing the store $4, but that pack of $4 cookies only cost them $1.75. They'll gladly lose the $1 on the milk to pick up the $2.25 on the cookies. (Milk may be a bad idea as many states now have minimums on that item).

Bread's another good example. It's no accident it's usually near the peanut butter and jelly. High profit items (by percentage) are almost always right next to low profit or loss items that most people consider 'staples'.

it's such a crazy process in the grocery world that the goal is to hit an average of from 1-3% PROFIT per bag at check out. So you can imagine the loss leaders impact when you know that the candy bar rack at the check out is typically packed with 30-50% profit items.
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Old Oct 01, 2011, 06:19 PM
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cocoa, Fla
Joined Jul 2009
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i have owed a store for 20 years

there is a old saying in the hobby business that says its a love for the hobby that keeps it going, there was a time when we had mail order to deal with, but you where still up against a business, and the mark up was around 12 percent, but in most brick and mortor stores the break even cost to sell something is around 15 percent, you could always get a little more for your help and bye having it,today i do not think it is fesable, things change fast you lose on old inventory with out enough turns to make a profit,you have a garage sale in your own backyard with classified sections all over the web, i have just sold three saitos for almost a 100 less then you can get them, how can you or anyone compete with that? what can i say. light bill was due,but its not just me people buy stuff and decied they do not want it all the time, and dump it on line,the information you have, whether good or bad, most customers are not willing to pay extra for it,sure everyone wants to hold it and see it,first but pay more for it, yes sometimes but not so much, also the add on sales are gone, everthing is in one box,traxxas sells there cars with a battery and charger, we made more on them then the car,the only way i see retail working is if, most of the storefront shops press the manufatures to floor plan them, here is my thought, lets take cars, unless the manufacture consighns the kits, shops will not carry them, or service them AT ALL, this gives value to you and there product, that you cant get buy saving a buck, the parts you stock as a shop. you pay for, both partys have a investment, people need parts and will pay list to have them today and support there source,it is a losing propasition to provide a store in a reasnable location, staff it with people who know what to do, and sell at cost, big ticket items with no margin,ANYONE that thinks this can work as is, has more dollars then cents. its not the economy, people have to do something our hobby is cheap compared to a lot of things, and for the most part the guys that do this on the real extreme side of things do not support local hobby shops out side of threaded rod and glue,
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Old Oct 01, 2011, 06:27 PM
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cocoa, Fla
Joined Jul 2009
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i just reread the post on grocerys

he is right on that info the problem with a hobby shop is everyone needs to eat, the numbers are so low in the hobby business, that these ideas will not work,the other thing is most high inventory business grocery stores and auto parts store are floor planed, we are still in the 70s the way we are set up, but a hobby shop is just starting to be ok at a 100,000 in inventory, even there you will be saying sorry i can order it for you, way to much to keep customers, unless maybe you just do cars, dont think any other segment can really stand alone
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Old Oct 03, 2011, 11:38 AM
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I'm not an owner, but I want to see LHS survive. I am also part of the problem in that I spend about half my hobby dollars on line, in spite of a conscious effort to divert my spending to LHS.

I have three suggestions that may help.

1. Play on the guilt factor. Many hobbiests feel guilty about not supporting LHS. Don't be overt about it but be visible. Send a representative to flying clubs, boating sites etc on a regular basis. Ask questions, be interested, etc.

2. Focus on quality. I used to buy LiPo batteries at LHS. Paid substantial premium, and got several duds. Not the kind that could be returned, but low end on output, and later turned out low end on cycke life. I then bought the same brand on line. Lots cheaper, and the same spec batteries had higher output and have had far better cycle life. I don't buy Lipos at LHS any more. I don't know how the LHS can avoid these problems, but solving would help over time.

3. Tie business elements together. The RC car guys do this by putting a track on or near their premises. Creates steady market for parts, upgrades, fuel, batteries etc. Heli guys could do something similar. It's harder for the plane element, but maybe something like the lunch truck that feeds coffee breaks and lunch at plants across the country. These are the obvious ties, but I am sure there are others. Crazy stuff like tying in with a lawnmower/chain saw shop, or getting in with the law enforcement UAV stuff.

Best of luck to all of you who are fighting this battle.
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Old Oct 03, 2011, 12:54 PM
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cocoa, Fla
Joined Jul 2009
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catalina u are right

you are right about a car track, that helps a lot, unfortunatly. it is very expensive to do it right, and if you do not do it it right you will be faced with another break even at best business,its difficult, to run a track without the help of your racers, and in a lot of cases its very difficult to turn your best customers into friends,and loss the money you where making on them.you are also right on the battery situation, the problem is, most customer that shop in a lhs, do not know enough to see the value in a good battery and will not pay for them, price sells,but there are no smoking deals in batteries, you get what you pay for, and hobby shops can not get any better deals then you can, so when they mark them up, they are out of line,and if they sell with no profit they are out of business, i think things will get so competative that the box art you see today will go away soon, to save a few bucks, then it will dawn on the end user that the product you ordered was never meant to be seen first on a hobby shop shelve,in this market too. price will sell above all, and the quality of things will go down,just for a better price point=sales,and the driving force behind all the good stuff in the hobby(a true love for it) will be gone, this is when the real price of not supporting your local stores will be paid,look at wal-mart most of the name brand things they sell are still junk,and today there is simply nowhere else to go,i still think floorplanning is the only thing that will turn things around for the lhs,really i think the only ones that would do it would be the china companies,american ceo's are greedy and do not want to change,until its too late,pretty soon american owned business will be the middle men and not the lhs, then it will be there turn to get axed,china will not need them to copy there products that sell well and offer them direct to the american public, come on horizon and great planes ect,ect what are you thinking? your days are numbered,once you no longer have a customer base of dealers, what will be your need that you are filling? this is the very basics of business, and you saying selling our products directly to the end user, what a joke the guys making your stuff can do that with out you,
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Old Oct 05, 2011, 08:54 AM
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Another problem is just plain stubborn people. I know of a few hobby shops in my area who went under because of lack of local support. They just couldn't pull these guys in. The local clubs just won't support the shops. They'd rather buy through the big distributors directly rather than support the store sometimes out of just plain stubbornness or maybe they've got a grudge against the guy. Up here in Northern Michigan hobby shops are few and far between. I have to drive 35-45 miles ones way. Even then they don't everything I might need or want. I order whenever possible through them but many times what I need just doesn't seem to be available through the store especially when I want to purchase a real kit and not an ARF.
I realize it's difficult to compete with some of these online dealers who operate out of their basement or garage with little or no overhead that a store front incurs. Let's face it: if somebody wants to start up an online store all it takes is enough money to purchase product and pay for somebody to set up the website, add in a tax license and a few other sundry expenses and he's in business.
As a store front owner you know how much expense it requires to stay open.
Good luck.
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Old Oct 05, 2011, 09:55 AM
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cocoa, Fla
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i did love making a living in the hobby shop

i hate to sound so hard on the hobby shop, thats what i did for 20 years and got out of bed everyday with no regrets, that said its behind me now and i just manufacture and buy what i need for that, one of the big things that burned me up, was sending a new guy to the club field ,was sending him to mail order as well,hands down no matter how close my prices where to mail order, or how much time i spent telling someone they did not want to start off with a p-51. all my time spent went in the toilet, when the customer went to the local flying field and was told he could have gotten a better deal on line, and that was true if he new what to buy, had all the needed info,and saw the value in a hobby shop only based on price, we did not keep the doors open for 20 years because our prices where not competative,we where, but even with that in mind the value of the shop is little things you need now, and so what, you might have to pay a few bucks more on a kit or motor, thats the cost of having one guy sitting on thousands of little toy parts, now with our doors locked and us just selling on line and building our boats, everyday people come and knock on the door and tell me how they do not want to drive 80-100 miles round trip to get something they need, i simple tell them they should have thought about that when they where ordering on line, shops have no choice but to sell little foam electric planes, the guys making big nice quality hobby type planes will all be gone before long, craftmans days are numbered,if you are one of them, when was the last time you bought anything real from your local hobby shop? or got a new guy into the hobby? you see with park flyers you dont need club fields, and soon that will be a thing of the past as well, who would without any influnce or help (no shops,no clubs) order a 500.00 airplane site unseen? and is that number high enough to keep the ball rolling. its NEW people that keep the ball rolling and when they stop getting into the hobby, its game over.
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Old Dec 30, 2011, 07:21 AM
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My working solution

I run a small hobby shop in a small town in Upstate NY. I'm a retired GM worker and was told by my accountant that I'm not running a business, but simply involved in a hobby, because I'm not making a profit.

Thing is, I'm able to stay open and pay my bills at the shop with on an average of one customer per day.
How I'm able to this because I mainly sell RC airplanes and helicopters and ask literally everyone who comes in the door if they would like to fly a RC airplane or helicopter. I have a flying field 2 miles away and a trainer airplane ready to fly in my van. Usually the first thing most say is they are certain they will crash. Once I convince them they won't and that if it did happen, it would totally my fault and they wouldn't be held responsible.

Once I get them to fly, they become hooked and come back and make the purchase of a complete outfit. I then give them an offer of indefinite flight instruction and if something should happen to their plane while I'm teaching them, I will either repair or if necessary, replace their airplane.

Now I will explain how I can do this. I've developed an instruction method that works extremely well. Now, most of my big sales are repeat business from customers I trained to fly. If there are clubs around and for whatever reason, my customers won't or can't come to me for instruction, I point them to those clubs for further instruction. You, your employee or anyone, can give hands-on promotion for your business and you don't have provide full instruction if there are clubs in or around your area. Just take even one day out of the week to offer this test drive, just to make the sale.

I think I have a way to help other hobby shop owners do the same thing. If they were to come to me so I could teach them this promotion/teaching technique, they could go back to their shop after they learn, so they could at least be able to safely give their customers a test drive (flight) to get them
to make the initial purchase and them send them to a club for further instruction.

I've tried to pass this on to the AMA and MAAC, but I finally figured out why they so quickly dismissed my growth plan. Clubs really don't want more members. AMA is the membership and the membership is the AMA and MAAC.
My problem has been the local clubs. If any spectators show up at the flying field, the club member makes it a point not to send them to my shop. As far as the club member is concerned, not skin off of his nose. Ater all, he buys mail order.

So, I'm appealing to those who have a bottom line, i.e. the industry including hobby shops. Unfortunately, too many hobby shop owners either are club members or depend on the good graces, (read: held hostage) of local flying clubs.

Here is a testimonial of sorts to prove my point: http://www.runryder.com/helicopter/p...pcinc#p1463695

I firmly believe that I could teach just about anyone how to use this promotion method, be it a veteran flier or even someone who has never flown before, all within a week. Imagine being able to bring in as much business as you need, at least as far as RC aero modeling is concerned?

I know it sounds to good to be true, but since non profit oriented clubs and modeling organizations (same) have a problem with my growth program, maybe someone involved in the industry would take a chance to at least discuss it with me and hopefully come to my area next flying season or even sooner so I could show them how to do this and how it can work.

Clarence C. Ragland
http://www.abchobbyshop.com
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Old Dec 31, 2011, 01:42 PM
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Central Lake, Michigan
Joined Dec 2002
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It sounds like you're making every attempt to promote the hobby and you're methods seem quite sound. I have to agree with you concerning many club members not promoting you're shop....why they don't support yours or others shops is beyond me. As I said before they would rather buy from the distributor although I can't imagine why they believe they are saving money when doing so. I believe they're being stubborn and bull headed, some may even harbor ill feelings towards hobby shops.
One example I know of occurred when a business owner decided to open up part of his store as a hobby shop. Even though he was a member of the local club, the other club members would not support his business. There were some of us in a different club who lived 40 miles away who would make the trip just to visit and purchase what we could sometimes buying some expensive kits such as from BUSA and Sig. I can remember a number of times when I walked out with over $100.00 worth of supplies.
He eventually had to close down the entire shop as he could not compete with the big box stores....he also sold outdoor power equipment ( lawnmowers, leafblowers, snowblowers, etc and fishing tackle). Another sad story of the way the situation is today.
As far as clubs not wanting new members...that may be true in some situations but our club is desperately trying to attract new members to replace ones who have passed away or moved to different states.
Keep on keeping on. Don't give up. I would keep after the AMA, some inside the organization are a little old fashioned and don't seem too interested in new ideas.
Good luck
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Old Dec 31, 2011, 03:31 PM
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Originally Posted by jollyroger View Post
It sounds like you're making every attempt to promote the hobby and you're methods seem quite sound. I have to agree with you concerning many club members not promoting you're shop....why they don't support yours or others shops is beyond me. As I said before they would rather buy from the distributor although I can't imagine why they believe they are saving money when doing so. I believe they're being stubborn and bull headed, some may even harbor ill feelings towards hobby shops.
One example I know of occurred when a business owner decided to open up part of his store as a hobby shop. Even though he was a member of the local club, the other club members would not support his business. There were some of us in a different club who lived 40 miles away who would make the trip just to visit and purchase what we could sometimes buying some expensive kits such as from BUSA and Sig. I can remember a number of times when I walked out with over $100.00 worth of supplies.
He eventually had to close down the entire shop as he could not compete with the big box stores....he also sold outdoor power equipment ( lawnmowers, leafblowers, snowblowers, etc and fishing tackle). Another sad story of the way the situation is today.
As far as clubs not wanting new members...that may be true in some situations but our club is desperately trying to attract new members to replace ones who have passed away or moved to different states.
Keep on keeping on. Don't give up. I would keep after the AMA, some inside the organization are a little old fashioned and don't seem too interested in new ideas.
Good luck
Thanks, I plan on keeping on, as I'm sure business will get better. I'm confident because I've been getting new faces in the shop on a regular basis.

What I want to do is to show hobby shop owners how to bring in more customerss and clubs that actually desire to have more members how to do so. I've totally given up on the AMA for help, as I realize they seem to not want more members. Hard to believe, but I've presented my proven promotion method to them on several occasions. Evem though they are fully aware that it works, all they can say is "we can't endorse anyone's teaching method". They never said why, just won't touch it with a ten foot pole. Can't figure that one out, since they continue to ask us for help and offer (the membership) suggestions on how to bring in new blood. http://www.modelaircraft.org/insider/10_01/leader.htm


Thing is, they know for a cold hard fact that I have no problems at all bringing in new AMA members, as I have made use of their Sign 3 - Fly Free Ambassador program since they first created the program. I haven't had to pay the $58.00 for dues in all that time.
BTW, I've found that there are many members who don't even know it exists.

I've created several school programs and plan on teaching indoor flying in school gyms after the holidays and then outdoors next flying season.

How many schools are there? How many kids? How many teachers? How many friends and relatives? Yes, because my promotion method works so well, I will have no problem taking care of everyone. Anyone care to learn more? No one has anything to lose and much to gain. I don't plan on charging anyone for the time being, but hypothetically, it would be worth a large investment to be able to bring in as much new customers as any related business owner would want or need. Once more, I fully realize that it sounds too good to be true, but hopefully, someone would be brave (not stupid) enough to take a chance.

Yes, business is all but guaranteed to increase.

fliers1
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Old Jan 04, 2012, 01:18 PM
fmw
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How do they do it? They eat the loss. What you see are people converting inventory to cash because they need the cash more than the inventory. I'm an e-merchant as well but in another industry. I use Ebay from time to time to move unwanted inventory at about cost. On Ebay, cost often isn't low enough.

I have no idea how to keep a hobby store in business against the on-line competition. I know I wouldn't try it. Getting into e-commerce is definitely a good idea for you. If I were getting into hobby e-commerce, I would concentrate on importing directly from China. Good luck to you.
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