Advice on opening a train store

While easy and with good reason to say don't do it.  The best advice was seeking a job managing a store in your area.  Learn all the real issues.

 

If you think the customer base in your area will support it, I still think you need all scales.  Or at least HO and some N with the O.

 

I do think if you need to make a living out of this, you not going to do it, unless you have some unique skills and large customer following already.  G 

So far you've received lots of answers. Mostly emotional (i.e., subjective) answers.

 

Go to your library.  They all have reference books on (can't remember the name) all industries broken down by title and tax code.  You can find them under the "hobby shop" area. These books have typical incomes, volume, stock turnover, taxes, real estate costs per square foot, etc.

 

Then write a business plan.  Find a book that tells you what to include in your business plan.  Then, find your local SCORE office (Service Corps of Retired Executives), and have them critique your plan. Be prepared for a bloodbath.

 

Once you've hashed this out a few times to where they agree you have a sound plan, THEN study the numbers and see if it will work. It may not, but for you it just may.

 

You need quantifiable data. Yes, there's lots of subjective things about walking into a hobby shop, but having empirical data on sales volumes, etc. will bring some reality to your decision.

 

Best wishes in which ever direction you pursue - just be educated about either one!

I would do a hobby store not a train store. RC planes, helicopters, drones, cars. GoPro cameras, and supplies. All scales of trains. I would have a working layout. Great window displays. Maybe even a doll house and doll area. If you have a location in mind, sit in your car and count the foot traffic. I would open a couple months before Christmas to give your shop a good start. See if you can work a deal for the first year with the owner of the store. Maybe they will give you a discount tell you get your feet on the ground. Remember it's going to be like a farmer. To make money you have to work long hours. You need money for advertising and you must have a web site. Just a few things to think about. Don

 

Lots of luck !!

My first thought to you were:

 

I think the business climate is not good right now.

What is the future for Brick and Mortar Train Shops.

I don't think a "O" Gauge shop can exist on its own. I think maybe a full line train store with lots of inventory might.  I'm thinking of a store having about a million ties up in stock.

 

But, whatever YOU decide,   GOOD LUCK in your future.

I think one problem you have is affluent area means affluent rent,
Low profit margins are a killer!
Profit margins are so low a bank won't lend you any money to get started, it's a tough business I would really look at it with open eyes before you comit. Have you ever even worked in retail before?
There has to be reason all those other trains are shutting their doors they can't all be run poorly.

Well, as a guy who lives in Agoura Hills, I would LOVE having a train shop in the neighborhood.  You would get all of my attention and money!  As far as how many other customers you'd get... who knows?

 

All I know for sure is that there are three electric train shops in the greater Los Angeles area.  And another one down south of Anaheim.  I have dropped hard cash at each of these four stores and have had issues with Customer Service and/or arrogance in three of them -- these are clearly the biggest 'no no's in a brick and mortar shop.  

 

I'd like to think that if there were a shop that was completely accessible, offered friendly faces and nice words to all customers (rather than disdain for newbies and browsers) and maintained a beautiful store front and shop interior (this is an issue that two of the LA shops have.  Tired and sad.).  Well, I'd like to think that there might be some goodness in it for you.  Yes, this will cost some big outlay.  But that's what investors are for...

 

Obviously, the biggest issue is people browsing for stuff, then going home and finding it online for less.  But that is part of the game in any contemporary  brick and mortar situation.  The key is to offer a wonderful Christmas-like joyful experience all year 'round.  Host events.  Invite people to drive trains on a layout.  Invite them to bring their own trains in on certain occasions for a club-like scenario.  And basically, just be friendly and helpful and eager to spread the delight of model trains.  (you might open an espresso counter as well... yeah, really. I'm sorta being serious.  I have a great bike shop here in Agoura on Kanan Road that is half bikes and half artisan coffee shop.  It is the greatest place ever and they get much of my business!)  The point is, be different than the tired old shops that look and feel so very down on their luck.

 

There is a lot of money up here in this area.  There are a lot of older people and retirees with bank vaults sitting around.  And there are millions of bright faced kids in this part of the world.  And there are tons of R/C folk.  Head over to Paramount Ranch and see the R/C planes on the weekends.  And see the R/C boats out at Lake Malibou.  Hobbyists are clearly hiding around here somewhere.  I'd like to think that it would be worth a shot to start a great shop that would put the others to shame.

 

Anyway, that's my half a cent.  I say, Seize The Day!  (but really, I just want a new train shop in my neck of the woods for my own edification).

 

- Tim

We were talking about this just the other day. I feel that the ideal mix,especially in So. Cal.( where I grew up and continue to live), would be a Kraft brewery and a train store combined. Let this sink in for a while and you will realize what a perfect idea this is!

John

Correct me if I am wrong but when I was thinking of starting a hobby shop, many years ago, one of the requirements of the larger mfgs was to have a brick & mortar shop.  I don't know if that's changed but definitely needs to be addressed as some of you mentioned to start with an internet business. Unless you can find a distributor to work with that would not require a physical shop.  Also, if working with mfgs, you may need to guarantee them a certain amount of money spent with them.  Check with mfgs web site they usually have a tab for working with them and what they require.

 

Rick 

You just have to make sure that to exit the brewery all patrons must walk through the gift...errr...I mean train store. Then just advertise tours and beer specials and stock lots of high end toys along the exit route.

I would think that a major part of your business income plan would have include the entire process for on-line ordering, billing, packaging and servicing, web page creation, maintenance, etc, etc. I can't imagine any brick and mortor store surviving without it.

 

My advice would be to try and seek out  hobby shop owners, past and current and try to ask about their advice for running a successful hobby store business.  They would be the only ones with this kind of experience.  

 

You mentioned you were going to start out with 0-gauge. if I understand that to mean that you won't be selling anything besides trains in the beginning then I would venture you might have a difficult time making a go of it. You'd have to sell a heck of a lot of trains to pay the business bills and then generate enough profit to pay your personal bills, salary, savings, etc.

 

It sounds like you are in a good area to offer hobby shop services where none currently exist. That seems to be a big plus.

 

But again, my advice would be to ask actual business owners who have been there and done what you are proposing, be it hobby shops or any other small retail operation.

 

I wish you much success in your endeavor. 

Ed

 

By "train store" do you mean the traditional concept of distribution?  Inventory turnover rate, margin, blah blah blah.  Or do you have a store-of-knowledge about trains that you can leverage?  Maybe your bricks-and-mortar is just a showroom for your business of designing and installing custom train layouts.  Someone once told me that some car dealerships make more money servicing cars than selling them.  As others have pointed out, the online sales makes it quite a challenge to compete using the traditional distribution concept of a "store."  I know a guy who has a business simply maintaining the trains used in displays at other (non-hobby) stores, restaurants, etc.  There are businesses that install and take down holiday lights; I wonder, given your demographics of people with more money than time/imagination, if you could make a seasonal business of installing around-the-tree or front-lawn (So. Cal) Christmas layouts or something like that.   Or Halloween layouts. 

Hi

This is an interesting thread.  I think you could do it.  I have thought about it myself.  I think you would need to have enough stock to make it a destination trip for people.  I would put your shop near a heavy mainline and hook up with a great local restaurant.  Get some coupons from them or something and promote a fun day - watch a few trains, but a few train cars or a loco, and then grab a good dinner.   Sounds like fun to me!

Good luck!

Don

Exactly the word I was going to use, right down to the bold caps.

 

If you have the money to invest in a train store, just invest it in quality stocks or mutual funds. You'll have a lot fewer headaches.

Hello

I went to my local train store over the weekend and was talking to the train guys and the owner came over and joined in

He was talking about if it was just trains he would have been out of business  a long, long, long time ago.

It takes  Trains ,Model kits , RC stuff and Camera and Picture framing to make money.

He also owns the building and rents other spaces out

He has to have ;

staff

 stock for sale

a service department with tools and parts

and the internet too 

They have been around for a long time and are know to be able to help the new comer and the old pro.

One thing he said as joke :

Want to make a million dollars with a hobby store

Start with two million

Let's look at some numbers. I have been in the hobby and craft business back in the 70s. I do miss it but.

 

Let's say your revenue for the year is $1.00. In These days your merchandise will cost you 60 to 65% or 65 cents. The mark-up in O Scale averages 33% HO about 40%. So let's say you still have 35 cents left after buying merchandise. The rest pays taxes, rent, insurance, and help you have hired, oh, and you want to buy more merchandise and expand. So now you want to make 10% on your investment. $40,000.00 sounds like a good number. You would have to sell 400,000.00 a year to net 40,000. Be prepared to make 10 or 15,000 IF YOU ARE LUCKY. My wife works so we had some income. It is a ball to own your own store, really. 

 

I never lost money. I never made enough to pay for my time. You are there 6 days a week or maybe 7. You will take work home at night. You will be shoplifted by someone whom you knew and trusted. That hurt! Everybody in the community will come by and ask you sponsor this and that. You can't give to all.  You will make mistakes that will sit on the shelves. You need to turn your inventory 4 times a year.

 

I got lucky and sold the store. I then took my G.I. Bill and finished college.

 

Yes, it was fun.

 

Good luck.

 

Dick

How times have changed! Seems funny train guys giving advice on not to open a new train store but they are right, unfortunately. It's not the right climate out there at this present time. Me? if I wanted to venture down that avenue, I'd approach the rc crowd and the model-kit/die-cast guy etc and put forward some sort of partnership, you won't survive on trains alone. Even rent space in antique malls just to get a feel, it takes awhile for word to get out.

i wish you all the best.

That's so old fashioned!  People now will just pop out their smart phone and order on-line while still looking at the item in the store.   If they are lucky, there might even be one of those scan-able codes on the box so they can link directly to Amazon, etc.

 

Back to the locale:  in most of my unprofessional observations of train sellers over the last 18+ years, almost none based in CA have competitive pricing when compared to sellers in areas with lower overhead costs.  For hobbyists living in CA, they may think it's worth the extra cost to support a LHS if they are lucky enough to have one.  As admitted by some members in postings above, some buy everything on-line due to the much higher costs of buying locally in CA.

 

-Dave

I have almost 30 years of retail experience, 20 of them owning my own store (retail camera shop and one hour photo finishing). Everything said here regarding business plans, suppliers, financing and start up costs, inventory etc. is appropriate - you need to master these aspects to be successful. 

 

That said, I believe having the ability to see where the industry is headed and to react quickly is as or more important than anything above. Imagine being the shop keeper who decided not to stock any TMCC equipment because you didn't think it would be popular. You realize too late it's here to stay, and while you try to catch up, everyone is buying from those who saw the future.

 

Lastly, if you give it your best shot and it doesn't work out remember what Kenny Rogers said - " you gotta know when to hold 'em , know when to fold 'em, know when to walk away, and know when to run". 

 

With that said, best of luck to you whatever you decide!

 

 

"As others have pointed out, the online sales makes it quite a challenge to compete using the traditional distribution concept of a "store."  I know a guy who has a business simply maintaining the trains used in displays at other (non-hobby) stores, restaurants, etc.  There are businesses that install and take down holiday lights; I wonder, given your demographics of people with more money than time/imagination, if you could make a seasonal business of installing around-the-tree or front-lawn (So. Cal) Christmas layouts or something like that."

 

    I think a couple of the easier ways to make money in the hobby are a business buying estate trains in lots and selling them by the piece on ebay or custom painting and decaling of high end models. Neither requires a storefront or much investment and each seems to be an in demand service. The markup on used trains from estates is much greater than the markup on new items from the manufacturers and the older stuff is often in demand from those who missed it before it sold out years ago. Painting would take some skills development but one could probably train some young guys to do the jobs then mark up their labor. Custom lettering of the paint jobs  if one had an Alps printer would be a value adding service.....DaveB 

Just a couple questions. How long have you been thinking about this? You mentioned you thought about starting out with "O" Gauge trains. Lionel and MTH. Presently, how many Lionel and MTH trains do you own. Do you have a layout for yourself? How long have you had it. What all do you know about Lionel and MTH trains? Which of these organizations do you belong to. T.C.A., L.C.C.A, L.O.T.S or T.T.O.S? Have you ever repaired a locomotive?

Roy, the esoteric aspect of a brick and mortar store selling trains and the associated products is truly alluring. I would venture to guess that most of us reading this thread would like to dial back the clock, 40 to 50 years ago, when the LHS was the destination source that fed our fledgling dreams, accommodated our needs and inspired our careers, without us noticing the effect at the time. And now we find ourselves (not painting with a broad brush) looking to relive that experience. With the option of the Internet and the access to the myriad of "stores" that are on line that were not available in our youth, and the existing brick and mortar stores that have adapted and have made it or not, please give careful consideration to your time and money.

I have a very close friend in the train store business.  What Lionel Grandpa and Carl Orton suggested is very good sound advise.  Follow it first.

 

Your plan to have Thomas is a sound one as my friend does the same.  At times Thomas carries the store at other times the O gauge.  However, his store is combined with selling & repairing an entirely different product.

 

During the summer months things could get very slow for trains.  During the holiday season things could get hectic and at times unnerving as Lionel and MTH are at times late with delivering their Christmas merchandise for the holiday season.   If they mess up and you miss that window when people are walking about the store.  You'll be holding those items until the following season.

 

The discount you have from the authorized distributor is not the best as your online competition can at times sell it at your cost or less!   The mixture of trains like HO is helpful as it will draw in some business.  Keep in mind HO represents 80% of the train hobbyists.  The remaining balance of 20% consists of N, O, O scale, G Gauge etc.

 

In order to get a distributor to sell you trains, Lionel must approve of you first. This will include having an onsite inspection of your store looking for a in store operating layout, adequate Merchandise (purchased at retail prices!) and checking to make sure your store location isn't too close to another retailer.   All of this costs money.

 

My friend barely ekes out a living, but his shop isn't the best stocked either.  He tried caring locomotives and had a very difficult time selling them as they were typically cheaper elsewhere.   Over time he has learned his customer base and stocks those items that they are attracted to.   He does not carry everything nor do I suggest you do the same.  Some items will sit on the shelves forever.  Also bear in mind local road names as they tend to do well.  Obscure road names of smaller carriers (say in your case from the east coast) will rot on your shelves. 

 

You'll need lots of track and switches, and other small items needed to maintain a modest or carpet layout.   Many people simply only run their trains at Christmastime around the tree.  Thus they won't need much in the way of layout scenery.

 

My advice would be very very very carful. Your not a spring chicken anymore and you don't have 30 yrs left to make up for any mistakes unlike someone in their 20's.

 

Wishing you much luck.

 

I don't know how much money you have to start with but if possible buy the building as well if you can. Most of your return will go to rent right off the top. Stocking HO and N will be easy, stocking O may not be, MTH and Lionel may not even bother to answer your queries. O is also a hard sell for families comparing the price of a first set to HO. You should consider an all round hobby shop including artist supplies but I would not go into RC, it is very cut throat with very low margins and your wholesalers will sell to your customers on-line. Be prepared to be flexible, I have been 18 years in this business and the store that I have now is not the one that I started with. My only regret is that I missed out on a building when it was affordable and it is too late now, c'est la vie!

Somebody in the business told me you need at least a million dollars in inventory to be successful?????????

No numbers to back this up, but observations suggest that those who combine the online store with a brick-and-mortar store allow the online to backstop the brick-and-mortar store.  

 

The physical retail store is just too expensive in overhead with too small a customer base to provide a livable income to the owner.  

 

Don't try to do just the brick-and-mortar store.   Instead, start with a small online operation with low margins to build a presence.   Then expand your online offerings.   If you can build a large business over a couple of years, then perhaps you can afford the luxury of a storefront.   

 

Best of luck!

Roy MacKinnon,

I notice you haven't responded to anybody's comments advising you want to do. I hope you are still with us. Please keep us posted as to your plans and thoughts.

My cousin tried on his own and with a partner and then with 2 partners. As long as he / they had to buy inventory from another larger train dealer they could not make it work. Now he works at a food distribution warehouse.

bigo426,

I believe your cousin had two to many captains on the ship. I never liked partnerships. I always said, a ship can only have one captain.

With the current environment,  I could not recommend for doing it.  I'm in Central Florida (Tampa area) and we are down to 1.   And it is being offered around for sale I am told second hand.

 

Hard to make a profitable living.  Labor of love only?  Maybe..............  better have deep pockets and be willing to lose a bit.

 

I said it 10 years ago locally to train friends we would be mail ordering in the future,  possibly only direct from the manufacturers.   So far,  unfortunately,  I am partially correct.  Depending on the manufacturer,  I am completely correct already..........  and I am not living out in the sticks...........

 

Not a positive flowers and roses message,  but the truth is the truth.

 

Mark

Gentlemen, quite frankly I am blown away by the sheer volume of replies. I read every one of them and I get it. Much of what was suggested I kind of already knew in my heart but just wanted to validate. I ran my own record store for 10 years so I have quite a familararity with retail, sadly I also know what it is like to run a business that is rapidly changing/disapperaing; so sad to think most kids will never really enjoy vinyl the way many of us did.

 

I can't thank you all and some of the responses were so short (Don't) they need no acknowledgement, but the private email from Mr. Muffins was greatly appreciated as were the comments from Jim Sutter, the shop owner in IN who shares space with wife's real estate biz and Ramon (you are right, too few train stores in our area). Plus the suggested concept of a craft beer establishment/ train gift store is definitely worth considering. But in the end, it really comes down to huge overhead plus low margins and without the volume, a storefront just doesn't make sense. As one comment so apply stated, I'm not a spring chicken anymore and I certainly do not have 30 years to make this work so like I said above... I get it. I'll stick to just making O scale my passionate hobby.

 

I'll leave this topic with a parting glimpse....the store front I was considering was in a very, very high trafficked shopping center. The store would have been sandwiched (pun intended) between a Subway and a Frozen yogurt/gift shop and there is a Wells Fargo next door too. I don't have to imagine the sheer numbers of kids and stay at home mommies because I see them in droves everyday, not to mentionI see all the money daily because next to the Silicon Valley or Dubai no where are there are more Tesla's, Ferraris, Maserati's and Mercedes. Seriously. Folks here like expensive toys but they may also just not be true train folks either (because they probably all have their own Lear Jets!).

 

Again, my sincere thanks as you have all helped me see the forest from the trees.

 

Cheers, Roy

First as mentioned on page 1 you need a heap of money just to get the business started. Then you need a larger heap to buy. inventory. Then a third pile of money to keep the store open, even when the register says no sale at the end of the day. If you were to take the leap I hope you are successful.

Roy, this is an argument between heart and head, and I'm glad to see that your head has ruled the day on this. I see from your profile that you have been a member for a while, but that you don't check in too often. One thing that you have missed is, what seems like an average of once every other month, the topic of another hobby store closing.

 

Earlier in this discussion, I gave you my short answer. What I didn't mention was it is based on first hand experience. More than 20 years ago I had a train business at Mall of America. I wasn't selling trains, I just built a display and charged admission. To this day, I'm convinced that my business plan was sound. I failed because of my location within the mall (because the mall was so large).

 

When I chose my location, I too thought that being near food would bring the traffic. It didn't.

 

There are other ways to exercise your passion for trains without the huge financial risk. Why not build a modular layout and either do train shows with it, or even try to find a vacant store front and see if the landlord will let you set up for a while.

I didn't comment in the thread, but I think you have made a wise decision. 

I just learned from the news that FAO Schwartz is closing in New York.  I think that if a famous toy store that has been in business for a very, very long time can't make it today then it must be almost impossible for a someone new.  FAO Schwartz was the toy store to the stars and nearly everyone else.

 

I think you made the right decision.  Perhaps you can start a model railroad club?

 

Good Luck - Joe

 

 

I can just imagine how much inventory you have to buy.  That will never pay for itself.  I have heard dealers complain about the low profit margins on Lionel etc.
I can't see that working.  Unless you are a full line TOY store.  All types of toys for girls and boys.  The fancy toy trains for the older crowd will never make you a dime.
Just my opinion.  Just like the lumber business I am in.  There is more profit in a couple boxes of gun nails shipped than the rest of the big lumber load combined.  Educate yourself and sell your business as a mega TOY store.  So you can make money while you lose money selling and servicing the relatively small train clientele..

Roy, those kind of "prime" locations tend to hit tenants with rent increases, and quite often only the landlord is really making the big bucks while managing a revolving door of tenants whose businesses are shaky. 

 

An accountant who does our taxes is very lucky now, in that his father purchased a fairly large building (along with the land) years ago when he first established the family business.  Today the accounting practice occupies less than 20% of the building... and there's undoubtedly a tidy sum of rental income the family now sees from all the other businesses who rent space in that building.    A nice annuity for sure.  THAT's how I'd open a small business if I were so inclined. 

 

Without having other sources of income, this "hobby" would be a challenging business to say the least.  Certainly not impossible, but best to proceed with both eyes wide open... which it sounds like you are.

 

If you love the hobby for relaxation's sake, keep it as a hobby.  

 

David

 

Best of luck to you in what ever you do.

What small retail business isn't tough? Some business are tougher then others,how about a restaurant? LOL.. If you have the cash on hand and can live comfortably without the income from trains then try starting small.

 

I have a friend who is retired. For the past 20 years and before he was retired he started selling trains, Selling his trains at train shows such as Greenbergs, Springfield MA, etc. he started small and is still small, He might spend $10-15k on an ONE estate sale of used trains. Sometimes he buys up a few collections a year.

 

He sells mostly used as he buys up estates of former tca members and others in the area who are no longer interested or Passed on.. He also sells out of his garage, better then the LHS in terms of sales volume And without all the overhead. His home is in a zoned commercial zone. It's not all roses, he has a few nut bucket/rude customers that bug him with issues about their new model trains. I guess it goes with the territory.

 

2 years ago he started selling new MTH TRAINS he is doing ok but the margins are razor thin. He has found a niche market with his used HO and O trains and accessories and he does ok without the store front and no web presence. His is more a labor of love and to be honest he really doesn't need the cash but he still manages to turn over inventory and make few bucks. And I often support him by stopping by his house or visiting him at a train show ;buying a 1/2 dozen Weaver or Atlas freight cars etc.

I deal with a couple of stores on the East coast.  One relies on established walk-in customers.  It pays the bills, but the owner doesn't draw a salary and can't afford to hire any help.  The other keeps the store open mainly because it brings used items to sell.  70+% of the sales come from ebay or advertising through ebay.  He could not survive on the store-front alone.  Both put in LONG days during and after hours to keep up with paperwork, inventory and shipping.  I know of one store owner that tried to sell an established store for years with no success.  He ended up just closing it.  Yes, it can be done, but be prepared for long hours with little free time.  I value my time, so I would never do it.