Opening a Train Store.

There's a Hobby Shop near me in Cary NC called Hanger 18.  We have a model car club that meets there along with gamers.  He recently expanded to the vacated store next to him.  I asked why he didn't carry trains and his answer was the amount of inventory would be staggering to satisfy all aspects of the hobby.  His biggest seller is model kits called Gundam which I can't understand the attraction.  Gaming kits and components are big too.  Sells lots of electric RC cars and accessories.  Also carries a large selection of model kits, favoring military.  As was stated before, variety is the spice of life.  BTW he stayed open during COVID and said the local officials said it was ok as it was keeping the populance sane. He also stays open past 8:00 as opposed to the early closings of some shops.

His diversity of products is a key to his success.

@CSXJOE posted:

His diversity of products is a key to his success.

... except, unfortunately, that this diversity doesn't extend to trains.

Mike

Trains are my hobby and I plan to keep it that way. No thank you.

@dk122trains posted:

A model of business used years ago  still can work today. The key is diversification.

There is one hobby shop in the area where I live. They relocated their established business and started up new here in an area where interest in trains is very minimal. They sell R/C, diecast aircraft, models, model supplies and trains. Most of their local sales are R/C. They have a good website and stay afloat through internet sales.

@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.

Actially setting up by an active short line with scenic train rides such as Steamtown, New Hope, PA, Jim Thorpe, PA Boyertown, PA or even Orbisana, PA ,etc. Would help you out immensely. Just look how the Choo Choo Barn worked out!

Two shops are closing in my area in the next few months. The last nearly closed but managed to keep its lease. It is sad times.

@Mellow Hudson Mike posted:

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

Mike what your are stating is very true.  But most of the LHS that are closing the owners are retiring. My two favorite shops The RailYard in Roanoke ,VA and Catotin Mountain Hobbies in Thurmont MD both are closing for retirement. Paul was Thurmont was open for close to 25 years and Jim in Roanoke for close to 35 years and both were hobbies for the owners after retiring from their jobs. So IMH owners age is a big part of all the LHS that are closing and I’m sure Jim closed his shop in Homer City PA for probably the same reason all three of the shops I mentioned were/are great shops that were run by great fans of the hobby.  Bill your idea sounds really great and I think it would do really well you could count on me to visit not sure where you are located but weekend field trips to train stores are a lot of fun done a couple with a train buddy of mine and always had a great time and met neat folks like Mark Boyce and Dave from Mercer Junction and Jeff at McCormicks.

Wait, what? Arizona still has an O gauge train shop? I was under the impression that they had all closed...

When "improving the quality of father to son relationships in families" becomes a goal of the government with accompanying grants and operating subsidies to train hobby businesses, that would be the time to open a train store as a 501(c)(3) organization.  Use the subsidy to stay financially afloat until the subsidy expires. Likelihood of that happening ... zilch.

Mike M.

@Bill DeBrooke posted:

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.

A couple of comments... Any form of opening lease arrangement invariably gets questioned/negotiated by some potential tenants. Some just don't understand how the leasing process works. It gets even worse if you operate in an area where "1st, last, AND security deposit" (three payments) are all customary. Smart landlords can compete by cutting one of those or negotiating one -- if they can get away with it. (Pressure from landlords' associations and real estate brokers is a real thing.) I've done real estate sales, and leasing -- residential or commercial -- can be lucrative but it's also full of its own unique headaches. Inflationary costs right now are really making commercial leasing even more challenging. In some areas it's hard to keep the going lease rate down to what the market will bear. Cost is up everywhere, and it makes finding a tenant willing and able to pay more difficult than ever.

My wife has run a microbusiness focused on high-end yarns and knitting. She discovered along the way that conventional training for business planning, as well as the expectations of banks and finance organizations tend to favor larger-scale and more "conventional" businesses. Hobbies and forms of entertainment that don't deal in large enough sales volumes are more challenging to fit into typical business plan formats (and get taken seriously) or fit into funding sources' expectations and understanding. She's found that SCORE chapters frequently don't have nearly as much microbusiness expertise as they do for more conventional enterprises like bars, restaurants, franchising, etc. To the point that she was asked if she could help fill them in on her experience to some extent... which wasn't why she'd come to them!

The trouble for hobby shop enterprises like trains or independent craft-focused shops is that they frequently deal in lower volumes and narrower margins which just don't fit or have enough profit margin to appeal to the conventional (and profit-seeking) business financial support sector. That shifts the risk and effort squarely onto the individual business owner -- as in, you will have to carefully bankroll the entire operation yourself, and build up much more slowly as you can afford it, with careful planning and doing your own market research. Not for the faint-of-heart, certainly. Especially considering the cost of acquiring inventory at wholesale for higher-cost items like trains.

@CSXJOE posted:

There's a Hobby Shop near me in Cary NC called Hanger 18.  We have a model car club that meets there along with gamers.  He recently expanded to the vacated store next to him.  I asked why he didn't carry trains and his answer was the amount of inventory would be staggering to satisfy all aspects of the hobby.  His biggest seller is model kits called Gundam which I can't understand the attraction.  Gaming kits and components are big too.  Sells lots of electric RC cars and accessories.  Also carries a large selection of model kits, favoring military.  As was stated before, variety is the spice of life.  BTW he stayed open during COVID and said the local officials said it was ok as it was keeping the populance sane. He also stays open past 8:00 as opposed to the early closings of some shops.

His diversity of products is a key to his success.

Years ago when I first got into trains and O-gauge, there were considerably more local hobby shops than there are today. Quite a few that were nominally "train shops" carried a good deal more than just trains. Military models, the Japanese "giant robot" kits and tabletop gaming models/figures were all popular and viable back in the 1980s as well -- and they often took up as much as a third to half of the shelf space at successful train and hobby shops. Sounds like the shop you're referring to has kept that formula going successfully.

It seemed to me that many of the trains + diversified hobby shops quietly closed even before the rise of online shopping mainly through a combination of retirements and a leisure trend through the 90s and early 2000s that focused more on sports fandom and collectibles than on craft-type hobbies. Then once online shopping took hold, even when hands-on hobbies like model-building and trains regained their footing, the market was vastly diluted.

I think getting a table at a local train show now and then has all the fun of a small hobby business without the hassles and risks--no lease; no business, payroll, and sales taxes; no utility bills; no advertising and marketing costs; no redtape from the local jurisdiction or from the manufacturers; no pressure that if I don't sell something or make a certain amount then I can't pay my mortgage, my insurance premium, my kids' braces--really, none of the sacrifice, financial risk, worry, and headaches of a real business.

Take a look at the listing of Lionel service centers on the sheet MPC supplied with their trains or even the listings in old 50's Lionel operating manual, better yet, the retailer listing in old OGR magazines.  How many are left now?

It seems to me that to be viable as a train store these days requires that one concentrate on internet/mail order business for the mainstay of  profits. Have a bricks-and-mortar building is probably necessary just to store inventory and pack and ship merchandise out. So why not maintain a physical presence since a facility is needed anyway? Depending on cost per square foot for a storefront versus warehouse type facility, of course.
If one structures sales around the on-line business, it may make sense to maintain a physical store as something of a sideline to garner local and even regional customers and make a little extra profit. And perhaps to please the owner with his/her desire to run a train shop and interact with customers in person.
But today, on-line sales are where it’s at.

Just Trains in Delaware is located in an industrial park and is basically a warehouse with an operating layout.  Looks like a low expense operation IMHO.

After MTH put many LHSs out of business, and Lionel's current "shaft the consumer and techs" decision, opening a LHS is simply playing Russian roulette with a bullet in every chamber.

Simply put, and very unfortunately, it's a  fool's game to even consider that possibility.

@CSXJOE posted:

Take a look at the listing of Lionel service centers on the sheet MPC supplied with their trains or even the listings in old 50's Lionel operating manual, better yet, the retailer listing in old OGR magazines.  How many are left now?

  I have one from the 50's that indicates they have service centers in Havana , Cuba and Tehran ,Iran.

Do you think they are still open ?

Remember that even back in the golden era of train shops (1950s), many were dual-purpose retailers due to the seasonality of model railroad sales. Since most train sales occur in the Fall before Christmas and in the winter months, having another product line to offer during those other months was often a necessity.

@CHOO-CHOO MIKE posted:

  I have one from the 50's that indicates they have service centers in Havana , Cuba and Tehran ,Iran.

Do you think they are still open ?

I'll bet the one in Tehran is not open!

@john in western pa posted:

After MTH put many LHSs out of business, and Lionel's current "shaft the consumer and techs" decision, opening a LHS is simply playing Russian roulette with a bullet in every chamber.

John,

How was it, precisely, that MTH put many LHS's out of business?

This is new on me.

Just asking.

Mike

@Jeff_the_Coaster_Guy posted:

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

Entertrainmentjunction sounds awesome. Am surmising from the video that the layout was done in G-scale - they must be some tall buildings! The hotel magnate is illustrative of people years ago who initiated their passions after earning their way of life in other businesses.

@Mellow Hudson Mike posted:

John,

How was it, precisely, that MTH put many LHS's out of business?

This is new on me.

Just asking.

Mike

I don't know whether "many" was correct, but here is one example:

https://ogrforum.com/...tore-mercer-junction

Other than perhaps health, there is usually several reasons that a store closes.  If the loss of one supplier causes a business to close, then something is wrong with the business model.  I suspect there were various other reasons and the uncertain future of MTH may well have been the final straw.

@Paul Kallus posted:

Entertrainmentjunction sounds awesome. Am surmising from the video that the layout was done in G-scale - they must be some tall buildings! The hotel magnate is illustrative of people years ago who initiated their passions after earning their way of life in other businesses.

Paul, it's almost entirely O Scale. And it's huge. I think it's the largest train layout in the USA but don't quote me on that.

I think  most here would be more interested in if:

A hobby shop that we knew and loved  WOULD reopen again. Evan it

meant same name different owners  ( but kept it the same lol ) .. ...daniel

There’s a well established train store in Hagerstowm Md that’s up for sale. Not a sponsor here so I won’t mention the name. Good way to get a start if you’ve got the bucks.

Perhaps it's beem mentioned previously, but a multi-purpose shop might work. For instance, a Christmas/Holiday store with trains. There used to be quite a few Xmas stores around, but most are now gone as well. almost all gift-novelty type places have gone the way of the dodo.  Just not enough interest/money from the public to keep a brick and mortar open.

As others have said, customers come in, pick your brain, manhandle the stock, then race home and order online. They are also usually the first ones to raise holy hannah when the locals close down, but what did they ever do to support the little guy in the first place?

Right after WW2, a lot of Lionel authorized dealers (reading the lists, as has been noted, many were appliance dealers or hardware stores) were listed in the books that came with trains. Do you suppose that that's because instead of store owners' looking for trains to sell, the Lionel Corp. reached out to them, and signed them up into what was to become the dealer network? Appliance guys and hardware store employees were probable a good bet to be established not only as dealers, but as a repair network.

Back then, there were three manufacturers of note: Lionel, American Flyer, and Marx. (Speaking of the toy segment of the larger train hobby) Didn't those companies have middle-men/salesmen who travelled around the country, contacting the stores and making deals with them?  Travel was probably cheaper than a phone call back then, and if the traveling salesman represented several different lines, he could be successful and help all those stores be profitable. He couldn't email photos of the products and fax a sales document. It was legwork that brought success.

In the current climate of internet sales, and the plethora of manufacturers, I doubt if any of them are eager to support a network of small dealers other than the few already established big guys. How would the wholesale pricing compare to what is offered to the established stores? How much product would a new guy need to commit to? Draw a circle of say 50 miles diameter around your proposed location.  How many model railroaders with disposable income are in the circle? Fifty miles is an hour's drive, generally.

I can't remember the last time I bought an expensive item (trains, sporting goods, automotive parts, tools, etc, etc) by walking into a store. It's just too convenient to "ask the Google" to find the product and click. Amazon promises 4-5 days, and the next afternoon, more often than not, the box is on the front porch, with free shipping.

Considering the MSRP of many of today's trains, I imagine that a small fortune is needed just to assemble a reasonably diverse inventory that would attract a client base and keep them coming back. "We can take your deposit and have it for you in a week or two" is not what it used to be before the internet.

One anecdote, for what it's worth: A small train shop opened in Riverhead, NY, 20+ years ago. Just trains, a few plastic car and boat models, some model plane supplies and a magazine rack.  I figured, this is great...let's go in, introduce myself, offer encouragement, and buy at least something.  "Grumpy" (I don't know his real name, because when I offered mine, he didn't reciprocate) took my $5.00 for a Garden Railways Magazine that I really didn't want, and turned his fat asset back around to continue watching the TV in the store.  Not a "howdy" or "thank you" or "come again" or "what sort of trains are you interested in" or any other vocal interaction.  The store was gone the next time I was in the neighborhood, a few months later. I would love to hear the whole story about that store.

Only three manufacturers of note for 3 rail O scale.  There were lots of 2 rail manufacturers including Walthers, All Nation and others not to mentio.  This was the period where HO started to flourish with the likes of Varney, Mantua, Gilbert and Penn line.  I spent yesterday with my father, and he shared with me an acquisition of a Gilbert prewar catalog that had some amazing HO product.

To the topic, I would think a modern train store would need other business lines to be successful; at least if one was to only sell O scale.  HO and N make up the bulk of the hobby and that is where any profit might be found.

I'm curious what dealers are ordering now that hasn't already been allocated to a customer through the "bto" method.

When I first started in this hobby (back in 2005), I would visit the local hobby shop (which was an MTH "MegaStation") and find new and interesting things.  I probably never walked out of there empty-handed.  Seems like better times to me back then.

@Dave Warburton posted:

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,

Send me your mailing address.  My email in in my profile.

Lou N

On the other hand.......

You could decide to manufacture trains.  Find yourself a good oriental contract manufacturer and get a letter of reference (hard to do, most companies won't share their sources).  Get a good banker for letters of credit.  Then get ready for a 14 hour plane ride to Seoul and another 4 hours into HK.  Hey, 4 meals, 3 movies, and 2 crews.  Learn a little Chinese and enjoy the food (I did). 

Regards,

Lou N

We have a great train store, Electric Train Depot, one hour away and half way between New Orleans and Baton Rouge, the largest cities in Louisiana.  It has operating layouts and a large inventory of new and used trains.

It operating hours are 10am to 4pm, SATURDAYS ONLY.

I can not think of a poorer business to be in than train stores to lose your money and shirt.  You can have the best business plan in the world but the important thing to know is the size of your probable train customer population is, and that they have lots of disposable money.

Charlie

@CSXJOE posted:

His biggest seller is model kits called Gundam which I can't understand the attraction.

Gundam is a long-running Japanese military fiction (giant-robots -- essentally bipedal combat tanks) anime franchise going back to 1979. Sayeth Wikipedia:

The popularity of the series and its merchandise spawned a franchise that includes 50 TV series, films and OVAs (direct-to-video animated movies) as well as manga (comics), novels and video games, along with a whole industry of plastic model kits known as Gunpla which makes up 90 percent of the Japanese character plastic-model market.

The media fosters interest in the merch, sales of which in turn helps pay for the media. Something modern purveyors of animated media here in the West have forgotten (which is why so many ostensibly good animated shows (with decent-or-better ratings) in this day and age...still wind up canceled)

/offtopic

---PCJ

I got my forum moniker from a failed idea to build and sell layouts for Christmas. I figured people would ask me how to build or help a layout so maybe there was a market for train tables, maybe with a loop of track on it, maybe a tunnel. So I built a few small ones got tables at a few local train shows around Christmas and quickly realized people want it cheaper than it can be built. Lots of comments like, "I can build that myself cheaper" or "That shouldn't cost more than $100" or "What do I do with it after Christmas?" to one guy who got on me for cutting in on the limited and small train market. After my third show I cut my loses and said forget this.

While a hobby store does sound like a dream job to us it's still a job and one you really can't go home at the end of the day from, if you're struggling it's a nightmare that sucks your soul and if it's thriving it generally is a 24/7 thing to deal with.

Jerry

Finish this line..."If you want to make a million dollars in model trains, then start with________________"

It's never how much you sold it for the real question is "how much did you buy it for?"

The folks who have had long relationships directly with train importers have the deep discount deals and they order in quantity.

In my other business there is the courtesy 10 or 20 percent discount, then the commercial or dealer discount of 40 percent,  then the long deal is 60 percent WD or warehouse distributor discount.

Of course buying overruns is the greatest deal going.  Very sharply cut pricing.  However, BTO is killing that situation.

With overhead today one needs to have a heavy spread to make it in the long run.

two million, if you want to have a million left...

@CSXJOE posted:

  I asked why he didn't carry trains and his answer was the amount of inventory would be staggering to satisfy all aspects of the hobby.

That is one of the core problems, often overlooked, I think. Model RR'ing is such an  old, deep and established hobby, even now, with so many branches, including the dead-end ones, that a typical establishment, even before the Internet was around, had trouble offering everything for everybody.  I have seldom been a buyer at a train shop (admittedly I have never had access to many) because what I wanted was not in stock.

It's a complex field of interest, hard to serve by small physical establishments, especially at a profit. It probably always was.

“Buy high, sell low.” That’s always been my motto selling at train shows and on Ebay. It works pretty well, too!
You remember the old joke about the fellow that noticed his retailer friend was not making any money at all on his sales, so he asked him how he could possibly turn a profit that way. The fellow replied, “volume.”

It’s kinda like that…