Opening a Train Store.

Its like a magic , you take a big pile of money and "puff: make it disappear"

As soon as my wife wins a lottery above ten million, I'll open one.  Be there every day offering a wide selection of O gauge items including LaBelle and American Standard kits. Two rail as well as three rail.  Free coffee, donuts, advice and a test track to those who will then go home and find a cheaper price on the Internet.  I'll do that while paying utilities, taxes, cleaning crew, insurance and miscellaneous expenses until the money runs out.  John

Its  been twelve years since my wife and I retired from selling trains. I just can't believe not one person from this forum wouldn't want to be their own boss and sell trains.

Jim, would you be available to provide guidance to someone who wanted to start a store?

Not me, but maybe someone?

RoyBoy,

Absolutely. I would be more than glad to help some one. My phone number is 724-549-2672.

In today's market you'd be better off flushing your money down the drain.  Don't get me wrong if you are an established store with a great internet presence you're probably doing ok but to start up a train store today would be IMO a poor decision.  Maybe buy as business from an established store but not startup.  Any business startup is a risk but trains seems like not the startup business I'd want to try.

Gee I bet most of us could start one right now and have a pretty good inventory based on what we currently have in our basement/trainroom/garage or what ever part of your home houses your layout/collection!!!!

Opening a train store in an economy that is hampered by high inflation, rising interest rates, and in general people having less disposable income to spend on trains.  Sounds like a good plan! 

Since it sounds like you miss selling trains, why don't you invest your retirement fund into doing this? 

I would love to open a hobby store in general. But the risk of starting any type of business as my main source of income is insanely high because of soul crushing student loan debt. It's not worth failing to make payments on those loans when I have a good paying steady job. I also have very little knowledge in business. I wouldn't know what tax forms I need and yada yada yada.

With the doom and gloom out of the way, I would aim to cultivate a customer base. Some ideas would include letting people run trains on the store layout. Heck, let them rent trains from a store roster to run on the store layout so they get the bug. Host scenery classes, maintenance classes, nights where people can run trains, etc. It would be a cost to the business to do these things but I think experience and knowledge are often barriers for people wanting to start something new. Creating low/no risk opportunities to try model railroading might be an excellent way to remove those barriers. I just don't know if the cost of doing that would be less than the revenue generated afterwards. Hard to say! I'm more or less brain storming for the sake of discussion at this point. And maybe I would love to own my own business one day.

@BillYo414 posted:

With the doom and gloom out of the way, I would aim to cultivate a customer base. Some ideas would include letting people run trains on the store layout. Heck, let them rent trains from a store roster to run on the store layout so they get the bug. Host scenery classes, maintenance classes, nights where people can run trains, etc. It would be a cost to the business to do these things but I think experience and knowledge are often barriers for people wanting to start something new. Creating low/no risk opportunities to try model railroading might be an excellent way to remove those barriers. I just don't know if the cost of doing that would be less than the revenue generated afterwards. Hard to say! I'm more or less brain storming for the sake of discussion at this point. And maybe I would love to own my own business one day.

I don't see an issue with what you presented BUT I think it would require a lot of startup cash until that customer base is built.  Most likely over many years.  I watch restaurants fail all the time mainly due to not being able to survive the startup.  The food is always excellent but they just don't have enough funds to survive the 3-4 years to get out of the red or break even.  I suspect a train shop could take a lot longer to clear any type of profit.

I don't have any experience in owning a business so I may be way off base but I do pay attention to those that do and startup seems to be one of the biggest hurdles.

My retirement dream is to start a train exhibit, not store per se, rather acquire desirable building (and real estate location) and build a operating layout of first-class, museum quality lighting, scenery, but not a large rectangle, more of a walk-thru experience around sinuous benchwork, yet one that is also interactive and unique such that people would want to purchase a ticket to see and come back again. No delusions on this however, as we lost Roadside America in eastern PA, so I figure it would need an accompanying first-class business selling candy, cookies, beverages, whatever profitable niche I could find via additional hard work to pay the bills of the whole thing. The train exhibit would be secondary to whatever main business I can figure out or partner with. Location is key, and ideally in the countryside - semi-suburban/farm regions of eastern PA where model trains are still appreciated, albeit not as much as they once were. If anyone wants to join me, contact me...I am at least 4 years away from a theoretical retirement, so now is the time for planning & brainstorming.

The fact that so many are closing indicates that we're in difficult times presently.

Without a radically new approach a new store, brick-and-mortar, or online, or both, would not be a slam dunk opportunity.

One positive was the pandemic because it pushed folks into hobbies to keep themselves busy.  This is tempering as more and more people consider it to be over, but the seed has been planted.  Maybe it can finish blooming and the hobbyist markets can continue to grow.

Mike

@MartyE posted:

I don't see an issue with what you presented BUT I think it would require a lot of startup cash until that customer base is built.  Most likely over many years.  I watch restaurants fail all the time mainly due to not being able to survive the startup.  The food is always excellent but they just don't have enough funds to survive the 3-4 years to get out of the red or break even.  I suspect a train shop could take a lot longer to clear any type of profit.

I don't have any experience in owning a business so I may be way off base but I do pay attention to those that do and startup seems to be one of the biggest hurdles.

Agreed! It would take tremendous startup money! I also have seen what you're describing. Owning my own business as a main source of income is out of my reach anyway so I try not to spend too much time thinking about it. I'm trying to start a side hustle and that's difficult enough.

MartyE writes:

”I watch restaurants fail all the time mainly due to not being able to survive the startup.”

Nationwide, Bars have the highest failure/turnover rate. Called “bust out joints” where it’s all happening, until the next “bust out joint” opens in the same area, and it’s all happening there, but no longer at your place!☹️

Independent restaurants are next highest in failures, and the most stable business to own? A jewelry store. Initial start up cost is staggering due to inventory procurement. That’s why there are now jewelry store chains, like Zales.

As others have pointed out, a very difficult thing to do. You would need to be in a place where there is enough population density to support the business along with an internet presence  (It is amazing to me how bad some places internet presence is, stores that basically say "yep, I exist" with little to nothing else on it, or a 'store' that doesn't list all they have and is difficult to use. My favorite are the ones where you order something, and there literally are no confirms to email, and you can't even look up your order status..).

Bill above had some great ideas in terms of being engaged with the hobby, having a layout, having in store classes,events, etc. A lot of stores IME lack that, they are like "I am here, I am doing you a favor, don't count on more". 

You also have to have something unique to offer. A good quality repair service would be huge, given how bad that side of things is these days, with manufacturers barely offering warrantee repairs and nothing beyond that, and the quality (or lack thereof) that is often talked of on here. Also, with stock, if you have the same things let's say Charles Ro has or whatnot, I don't think it would work (they would beat you on price), I think being able to find unique things would be a boon (and not saying that is easy, that means knowing where to find unique things).

Even with all that it will be tough. For all the bemoaning the loss of local hobby stores, a lot of the people moaning the loudest will also go and look at a train in a store, then go buy it on the internet to save a couple of bucks , literally (Have directly seen people buy stuff from the internet to save on total cost 5 bucks on something costing like 800 vs local store). One saving grace is these days lot of internet places are charging local sales tax, that was a huge disadvantage to being a local store.

Even if you do everything right, you are facing an uphill climb on an icy road. It does take a lot of start up capital (even buying an established business, I would bet it still will be, to maintain current base and add new customers) and it will take a while to become profitable, if ever. Lot of hobby stores are retirement jobs where the person running it does it as a hobby in a sense, where they had enough capital to buy into the store and make enough to cover operating costs and make something out of it. One downside is that unless it is one of those rare birds, a hobby store that is flourishing, if they decide to get out it is prob unlikely they would be able to sell the business for much if anything. Might be able to recoup some money via selling off inventory, but one factor in all this would be to assume it will not be easy or possible to sell the business off.

Put it this way, for all the talk of buying local, take a look at what the profits of places like Amazon or the big box stores are doing, and you have an idea of the problem. People talk big of buying local, complain when a small store goes under...and then buys from Amazon, Home Depot, etc, etc. 

Would love to read the business plan from someone who is opening a Train Store.

IMO, any train store that doesn't also have a strong Internet presence would be in for a very steep uphill climb.  During the pandemic, a stabilizing force at Henning's was their Internet presence.

A friend and I thought about buying a small local hobby shop, that was closing due to a death, a couple years ago.

After doing some research, considering the store front rent (high here on LI), insurance, utilities, etc, it was clear that it would be a big $ looser - even factoring in that our time would be without any $ compensation.

Too many people were going in the existing store to buy paint, balsa, glue and not much more. Train and hobby kits languished on the shelves - seems that most people don't want to pay retail at a small store when such great deals can be had at the larger retail/mail order outlets and train shows. Completely understandable.

Too bad - it could have been fun.

@jim sutter posted:

I just can't believe not one person from this forum wouldn't want to be their own boss and sell trains.

Wanting to is not in doubt, I suspect.

The harsh financial realities combined with turning your hobby into a full time business occupying your time is a severe impediment.  The numbers here that actually know how to run all aspects of a self-directed business is probably very low.

@mwb posted:

Wanting to is not in doubt, I suspect.

The harsh financial realities combined with turning your hobby into a full time business occupying your time is a severe impediment.  The numbers here that actually know how to run all aspects of a self-directed business is probably very low.

I suspect the original post was meant to be sarcastic, something the internet doesn't handle well......

@jim sutter posted:

I just can't believe not one person from this forum wouldn't want to be their own boss and sell trains.

Oh, I'm quite sure the majority of folks on this forum would (1) like to be their own boss and (2) sell trains, but most also recognize that this is most certainly not the ideal time to be undertaking such a venture. Too much economic uncertainty, too many changes in the industry itself, and then there's the matter of changed demographics to deal with, among other factors and considerations. And without significant prior business experience, it would, at the very least, be a risky venture. BUT, keep in mind that many of the most successful entrepreneurs in our nation's long history were folks who were initially told that "it can't be done."

Thank you for all your replies. Everyone of you had good reasons not to open a train store. I know it wouldn't be easy.

@Paul Kallus posted:

My retirement dream is to start a train exhibit, not store per se, rather acquire desirable building (and real estate location) and build a operating layout of first-class, museum quality lighting, scenery, but not a large rectangle, more of a walk-thru experience around sinuous benchwork, yet one that is also interactive and unique such that people would want to purchase a ticket to see and come back again. No delusions on this however, as we lost Roadside America in eastern PA, so I figure it would need an accompanying first-class business selling candy, cookies, beverages, whatever profitable niche I could find via additional hard work to pay the bills of the whole thing. The train exhibit would be secondary to whatever main business I can figure out or partner with. Location is key, and ideally in the countryside - semi-suburban/farm regions of eastern PA where model trains are still appreciated, albeit not as much as they once were. If anyone wants to join me, contact me...I am at least 4 years away from a theoretical retirement, so now is the time for planning & brainstorming.

Sounds EXACTLY like EnterTrainment Junction in Cincinnati.  The majority owner was (is?) a hotel magnate (Columbia Sussex) who enjoys trains. He built essentially (with the help of an army of volunteers working constantly) a museum train layout walkthrough with an attached kids entertainment center.  He also has an outdoor small-gauge train.

Interestingly, we got called to the Columbia headquarters in Fort Mitchell KY to look at one of his larger gauge ride-on trains that was installed as a curiosity around the base of the 20-story building.

www.entertrainmentjunction.com

A model of business used years ago  still can work today. The key is diversification.  Sell Trains and say bicycles or sporting good. They are both seasonal and one can help carry the other in the off season to sustain the business model. Look at Forum sponsor EZ Catch as an example

@MartyE posted:

In today's market you'd be better off flushing your money down the drain.  Don't get me wrong if you are an established store with a great internet presence you're probably doing ok but to start up a train store today would be IMO a poor decision.  Maybe buy as business from an established store but not startup.  Any business startup is a risk but trains seems like not the startup business I'd want to try.

But that scenario is also risky as not only are you buying the store, its inventory, but possibly iys name AND REPUTATION that went with it too!

Unless you buy a well established train store with a great Internet presence and regular customers, you had better be selling something else along with it to be profitable.

@prrhorseshoecurve posted:

But that scenario is also risky as not only are you buying the store, its inventory, but possibly iys name AND REPUTATION that went with it too!

Gotta do your homework.

I thought about it. The last remaining train store in the Phoenix area that deals in O is selling. The price was staggering but I’m sure negotiable and I assume the seller and I could work something out. What option does he have? He is retiring.  The store does not have an e-commerce presence though and I don’t know how to run a hobby shop, or more importantly, an e-commerce web site. I’m a litigator. So is my wife, so we’d still have her income.
Presumably you get the seller to hang around for a few months to help me get up and running and I’d spend a lot of time learning the e-commerce trade. All doable, but then what’s the upside? What’s the income potential? This is where the plan went off the rails for me. I’m sure we all have a dream on some level of running a hobby shop but when it comes down to it you still need to eat.

Now if I win $10M in the lottery, the gloves are off. I’ll open the world’s first o gauge train store/classic car dealership/coffee shop/wine bar!

One question I would have with this venture- how is pricing for an item set? In other words, why can the larger dealers sell for lower prices online? Is it purely their sales volume? Or, are they getting a greater discount from the importers than smaller distributors? Is Ro selling to consumers for less than I can purchase from the distributor?

I think knowing that would go a long way in building a business plan. If you owned the building and could control overhead that way, could eat several years of red numbers to establish yourself and pick up marketshare, and provided top-notch service and sales experience so that you were a destination (online and brick-and-mortar), it would go a long way in making this work.

I suppose that many, if not most of us have fantasized about owning a train store at one time or another.  In today's day and age, if I were to set out to open a train store without a huge pile of cash to start, I'd probably start on the internet (internet only plus local train shows) and buy and sell used trains to start, and then branch out into new once established, and then once a customer base is built up, gauge the potential local interest in a physical location.  Personally, I would then look for a location to buy or build, rather than rent, to help keep the store's overhead as low as possible.  It would be a long, slow process, and a lot of work to just be able to make a living at it.

Andy

In this age of many train Stores closing?

I own buildings in Downtown Harlingen.  I deal with people all the time that want to, 'live the dream'.  My rents are cheap even for here, about $0.40 per foot per month.  For some reason we don't quote annual rents.  A good deal of the time when I say I get first and last month and a year lease, the response is, 'can I pay the last month in payments'.

People do not do a 'business plan' and most people do not know what one is.  When I say SCORE can help do one I suspect no one ever contacts them at the Chamber.

The two major O Gauge manufacturers have now adopted a business plan for top end 'Collectible' trains that states that they will only build what you have in advance promised to buy.  They have moved the risk somewhere else.  That might be the dealer or the end buyer depending on how the dealer chooses to deal with payment.  Moving forward I suspect it will ultimately be moved to the end buyer/operator/collector.

Regularly, I have people say, 'why don't you do a museum?'  I tell them I am willing to throw a building at the project if they are willing to cover the insurance, taxes, utilities, maintenance and finally hire the people necessary to keep the doors open.  There is literally no reason beyond winning the lottery, as some people have mentioned, to consider opening a train store or hobby shop.  That dream like so many others is pure fantasy.

I realize that playing with toy trains has a fantasy component but let us not be completely nuts.

@Andy Hummell posted:

I suppose that many, if not most of us have fantasized about owning a train store at one time or another.  In today's day and age, if I were to set out to open a train store without a huge pile of cash to start, I'd probably start on the internet (internet only plus local train shows) and buy and sell used trains to start, and then branch out into new once established, and then once a customer base is built up, gauge the potential local interest in a physical location.  Personally, I would then look for a location to buy or build, rather than rent, to help keep the store's overhead as low as possible.  It would be a long, slow process, and a lot of work to just be able to make a living at it.

Andy

Agreed. Many hobby shops today own the building that they are in. Rents especially for commercial use properties get expensive FAST not to mention utilities are 7x the rate of household utilities, insurance is another huge cost plus Point OF Sale [POS] on the internet for the stores website. Not much in foot traffic these days compared to e-commerce! Just ask Justrains and M.B. Kleins in Baltimore!

@RJT posted:

Gee I bet most of us could start one right now and have a pretty good inventory based on what we currently have in our basement/trainroom/garage or what ever part of your home houses your layout/collection!!!!

Now, that makes sense. As I have not bought much of anything for years, all my stuff is fully depreciated and off the books, so anything I sell is pure profit, so long as you don't allow for inflation and original cost. It would be like printing money!

Capitalism - the answer to everything.

@Bill DeBrooke posted:

The two major O Gauge manufacturers have now adopted a business plan for top end 'Collectible' trains that states that they will only build what you have in advance promised to buy.  They have moved the risk somewhere else.  That might be the dealer or the end buyer depending on how the dealer chooses to deal with payment.  Moving forward I suspect it will ultimately be moved to the end buyer/operator/collector.

Which they took the idea from the 3rd major O gauge manufacturer who has been using this business model successfully for many, many years.

I can only speak for myself, but I retired so that I can do what I want when I want.  Being obligated to be somewhere or do something on a regular basis doesn't appeal to me, especially if it's financially challenging.  And when you own your own business, there is no such thing as a day off - I learned that the hard way when one of my rental properties had a clogged drain while I was hundreds of miles away at York.  (I still have trains, but no longer have rental property. )

A few years ago, I got some glimpses at the wholesale price lists for MTH and Lionel.  Wholesale prices were (and I'm guessing still are) a larger percentage of MSRP than one normally expects for retail products.  As I recall, wholesale prices varied by item, but were generally around 62-70% of MSRP.  And remember that most of us expect to get at least a 10% discount.   You do the math - gotta sell a whole lot of stuff to make some money.

I have the utmost respect and appreciation for the folks who choose to run a train store.

Several of us have been looking for a suitable building to open a RR Museum with emphasis on 3 rail model railroading. Between us we have the inventory, the tools, and we believe the knowledge to create, build, and operate a very nice display including real RR pieces for the viewing enjoyment of the general public. Two of us are able to repair trains with one being a current Lionel Service Station owner.  One has much prior experience working with several museums in NY and loves working with kids and scout groups. The hurdle for us has been the facility. I am a real estate broker with a lot of contacts. Have written to most of them asking for leads and have come up with nothing so far in almost a year. No one seems to be interested in sponsoring or willing to provide a building (even off the beaten path) for us to occupy and we don't have the wherewithal to purchase or rent one. We have offered for a landlord to charge admission with nothing going to us with no takers as yet!

It seems to me that the allure of owning a real train shop is sitting behind the counter surrounded by train merchandise while a train circles your store layout. Basically, it is putting yourself in the middle of your own model railroad empire while you entertain customers, talk trains with buddies, etc.

Actually making a real profit at this is problematical but the pleasure isn’t in the money; it’s in the accoutrements and the  ambiance. The Christmas-all-year glow you feel.  
So my advice to you is to create your own “train shop” in your basement where you can be master purveyor of trains to all who come. And then invite your friends over to join your playtime.

@Dave Warburton posted:

...
So my advice to you is to create your own “train shop” in your basement where you can be master purveyor of trains to all who come. And then invite your friends over to join your playtime.

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