Not sure if this is par for the course for every location of this hobby store (not to name names) but the two locations in my city out of only 4 or 5 hobby stores still in business here have typically had the highest prices. I happened to be near one of their locations yesterday and thought I'd stop in since I'd not been in either location for a year or so. To my dismay they had increased the price on every Dragon kit as far as the eye could see. Figure kits had been marked up around 40%! Figure kits that had once been around $7 and had sat there for years were now $9.49! Some of the newer ones up to over $11 (not Gen2, they were pushing $17). The armor kits had also taken a substantial price increase. It's no wonder online hobby superstores have sent the LHS packing. OK rant over.

I agree. There are three hobby shops in my area. Two are part of a chain and one independant shop. Each one of them has prices substantially higher that what I can find online or on e-Bay. I ususally stop in the shops to buy my supplies, (paints, brushes etc.) and that's about it. I'm very tight with my modelling dollar and I try to stretch it as far as I can. If it means I have to wait a few days to get a kit (kit price and shipping) for less than the LHS, I'll wait

Wolfe

I too have seen the disparity between LHS prices and the on-line retailers. I try to support the LHS but money talks.

I don't mind paying a few extra dollars to support the local guys but when the difference is $10.00 or $15.00, the on-line guy will get my business everytime.

If I was running a LHS, I would rather have lower prices with a smaller profit margin per item in the hopes that the profit margin would be made up by selling more volume. My theory may be flawed though.

Wolfe - you wouldn't happen to be from around Pittsburgh, would you? I ask because I see the same thing here.

Both charge practically MSRP on their kits. I do buy kits from both, but only on things that I might find out of stock online, if the online price is only about $5 less, or if I have a coupon of some sort to offset the difference. I try to buy kits at least occassionally, because it is nice to walk in a see them firsthand.

- Frank

Hi Guys,

I can not speak for your LHSs, but can tell you my experience. I used to wonder about the prices, too. In the past 15 years I have been close friends with two LHS owners, and now work at one for fun.

It has always been a fantasy of mine to own a LHS. Reality is killing that dream. "Click & order" is killing "brick and mortar"; if you do not own your own building, the overhead is murderous. The former one here closed business because the landlord raised their rent and they could not make the margin ( 15%--yeah, they were only making 15% before paying employees, etc. ) )and it still be fun / worth the hassle. The current one also pays more per foot than a bigger one a couple of hours away, but he is stuck with the lease for awhile.

Then there are federal labor laws written for mega companies that small business people are forced to comply with. Then there are the distributors. I frequently have to re price items--sometimes up, sometimes down. Often the wholesale price changes and so the business owner has to decide if he wants to keep the price the same, or bump it up. There are things like amortization to consider.

Blah blah blah, one has to make money to stay in business; it is a tightrope to decide how to price that which one has discretion with.

Let me tell you, it is great to buy a bottle of paint or two, maybe a $10 kit, and some X-acto blades to "support your local hobby shop" ( yes, I used to do that too ), but a LHS can not pay the light bill with what spare change we drop there.

And don't get me started on distributors and back orders! Trust me, LHS owners really want your business, but something are just out of their control. I have about $250 worth of goodies that are still on order from last year! The distributors are not sending them. Why? Dunno. Maybe because "Just in time" inventory leads to waiting until a certain minimum demand exists before resuming production. Consider a certain mega model railroad company: if I order from them I can get whatever is in stock--even single items--for a certain shipping cost per total dollar amount; but the LHS can not get them to send the order until a certain minimum dollar amount is achieved. And perhaps a minimum quantity of a specific item.

Does my LHS owner make too much $$$$? He puts in 8-10 hours per day running the store during hours; often he is there a few hours before and after business hours trying to process orders and inventory. He is the
entrepreneur that put together a business plan, obtained the loan, and got it all going, and risks everything in event of failure. Does my LHS owner make too much $$$$? How much do you think you are worth for equal time and investment?

He has some 23,000 items in the store, from Tamiya models to Flames Of War game stuff to My Little Pony to metal detectors to RC helicopters... He is expected to be an expert with everything. Ha! He is expected to know exactly why some distributor's inventory system inexplicably shows him wanting 0 issues of Widget Magazine, when he ordered a dozen per month; he is expected to know why Flames Of War hasn't sent the SAS and LRDG special order in 4 weeks. I don't know why, and neither does he, even after talking to them.

Back on topic, the long and the short, LHS have to charge higher prices than on-line. That or run LHS for philanthropic reasons.

Regards,

FRed

My LHS has a praticularly despicable pricing practice, they put two prices on each kit, a 'recommended price' and 'our price'
the recommended price is MSRP +20%
the out price is MSRP +10%.

So the Tamiya LeClerc kit is marked as

recommended price 61.46
=====> our price 56.46

admittedly they give the small local club a discount, but all I buy there is paint, glue (I had to beg for years and eventually buy a 12 bottle flat to get them to carry the Tamiya Extra thin) and some evergreen sheet.

I do not buy kits there, he goes out of buisness, oh well. I drive farther to get paint.
I stock up when I drive to Nashua/Tyngsboro already since he had model master paints and I like Gunze/Tamiya acrylics.

My US$0.02

Mike

This must be a fairly big chain store, because we have one here that does that. The bad news is the independent shop on the other side of town charges even more than they do, and those are the only 2 in town. The other Indie shop went under a couple of years ago. I'm not too worried about this Indie shop going out of business, they do a fairly brisk railroad business.

I don't have to stretch my dollars as much as some of you do, since I build so slowly. I try to buy my kits from these guys when they have what I want. The flip side to my build speed is I don't want to waste time on a kit I'm only 'meh' on, so if neither of them has exactly what I need, I mail order it without a second thought.

My area also. The chain LHS is a little less than the indi LHS, but both are higher than most on line sources. Although I don't remember it being any other way. Lately, I've been saving my money all year for the one show a year and make great deals there in the swap meet area.

I'm pretty lucky in that the one decent LHS nearby has pretty good prices. Yes, they are usually a little higher than what I can find online, but with no shipping costs, they are acceptable. Unfortunately, their armor selection is only about half of what their aircraft and car selection is, but it is still pretty good and they always stock a couple of the newer kits when they hit the street. I buy from them whenever possible, but to be honest I still get most of my kits via the net. It's just too easy to surf, point, click and hit the Buy button.

Guys, I've gotta join in on this rant.

While I have to agree with you fellas on "money talks," I also have to agree with Fred and what he says about amortization and overhead. Nobody goes into business to lose money or hoping to simply break even. He's also absolutely right with his comments about the LHS owner being expected to be an expert on everything in the store.

Now, I believe in shopping local as much as possible. If you support your local economy, your local economy will support you in the long run. So, as a result, while money talks, I don't mind paying a little more for my models. The thing that really drives me batty about the LHS is the sketchy service, and that's what will drive me more towards the click and order. Here's the example:

Over a month ago, I ordered an M1 and an M4 in 1:35 for the "Father & Son" campaign. I gave them my name and number, and they know me there (there aren't that many of us building military models other than ships and planes,) and have waited. And waited. And waited. I have even been in there since for other things. Nothing. So. The campaign starts Wednesday, so if things aren't in, guess what? Off we go to "click and order."

That, my friends, is the thing that will hurt the LHS more than anything. Or save it. You should be able to get better service from your LHS than you do from the 'net. It's just like any other store, to me... everybody has the same stuff, and the only difference between them (other than the name,) is the service you do or do not get.

A LHS can be only as competitive as their buying power, enthusiasm and customer base permits. LHS purchase from distributors at a lower discount than those purchasing greater volume like chain stores or some internet retailers. If a LHS doesn't have the customer base and inventory turnover, they cannot remain competitive.

Overhead is up, discounts are smaller and profit margins are squeezed thin. Anyone can open a business, whether or not it will be profitable it is up to them. Hopefully they did their homework before starting or if it is a well established business they continued to adapt to the constantly changing market. Becoming and remaining a shopping destination is key to success.

Many LHS are old school, not adapting to a growing internet savvy world. Even if you decide not to sell online, an internet storefront is almost a mandate. Consumers are better educated and compare products and pricing more than ever. Most use the internet to do so. Many folks have their computers on 24/7, never picking up a phonebook to search the Yellow Pages to locate the retailer of the product they seek, they simply go online and Google it.

Major companies that import, distribute and retail model products have the most secure footing in the market. Of course they take more of the risk. If the trend continues as it has, LHS will no doubt will succumb to these mega players.

As many of you know, many 'department' stores have also dropped many categories from their inventories (models & paints included) for a more profitable line of merchandise requiring less time spend managing them.

Small manufacturers have an uphill battle establishing themselves into the mainstream market. The start up costs can be overwhelming and those who think it is easy will be in for a rude awakening. It takes a year or more to begin to become profitable.

Even internet businesses have overhead. Many tasks must be outsourced to be done correctly and efficiently. A poorly designed website costs more than it produces. Advertising costs are at a premium. Word of mouth just does cut it in this digital age.

LHS that price items (IMO) above MSRP are not interested in stocking that category or are attempting to use it to cover their less profitable items. Some states have a price gouging law, but in most cases it is not enforced unless brought the attention of the authorities. It is a no brainer that if you are selling a kit over MSRP and someone down the street is selling it at MSRP or below, they certainly will not buy from you. 20% on a $100 kit buys a modest amount of supplies or accessories. Not to mention the gas it takes to get there.

If you want to see your LHS survive, then encourage them by sharing your time to promote your hobby (demos/displays/seminars) and purchase products from them. Some day the LHS you rely on may not be there when you are most in need of something as simple as a bottle of black paint.

Oh no. Your theory is not flawed, Brent. Businessmen have been doing that for years.

Lower prices, narrower margin...tough to do unless your sales volume can support it. It is a matter of choice, buy a huge amount and sell them cheap to cover their initial costs plus a small percentage for yourself, or order fewer and collect a larger percentage. Many retailers buy products on credit programs. Some plans require the retailer to pay for the merchandise in 30, 60, 90 or 180 days from time of shipment. Some companies offer longer periods but the costs go up the longer you wait to pay. I believe the current trend is shorter, due to the failure of retailers to remain in business these days. Just like buying a car. If an item hasn't sold before the bill is due, it now starts to cost the retailer money. Inventory sitting on shelves that was paid for using credit, starts to acquire interest. When this occurs the profit margin goes down, and in some cases rapidly. Each retailer establishes their own rule to determine 'dead' merchandise. A product that must be discounted heavily to clear the shelves for those that will sell. Stores do it all the time...end of year sale, inventory reduction sale, closeouts. For a consumer this is the ideal time to buy, for the retailer it usually is a means to increase cash flow but usually doesn't offset the loss.

LHS have a hard time stocking all of the latest releases, the higher costs and slower sales usually means a LHS just can not afford to.

The LHS and the on-line monsters have very different business models. Most LHS I suspect would quickly go under if they tried to match prices with outfits like Greatmodels or even Squadron. Their volume is just so much less and their overhead per unit is so much more. Plus, the LHS is probably getting their stock from wholesalers while I would bet the bigger on-line places can buy direct.

In my own industry for example I have seen tires on www.tirerack.com being sold to the public for $20 or more less per unit than what my store can buy them from direct from the tire manufacturer! Clearly there is something special going on there. So I understand the situation the LHS's are in.

Unforuntately the LHS might be a dying breed these days. The LHS that I work at has hired everyone for a specific thing. That is customer service and a specialization in a certain hobby. Yes we are a full brick and mortar store that does an extensive internet business as well. We do the best we can to stock the new items but sometimes cannot compete with the net, and the lower prices offered. All we can do is continue to support the LHS in terms of supplies and buy those occasional kits.

The local hobby store that I go to offers 25% off on its plastic. I can get what I want, in store or special order and I get 25% off. I also go to Milwaukee and they have quite a few shops that have what I want be it books paints or kits.
Mike

Here in Houston we had probably the best model shop anywhere, all the latest kits and after market, prices the same as squadron a realy good place to hang out and buy a gazillion kits. now that hes closed [too much rent and taxes i think] i have hardly purchased anything on the net. i guess im one of those modelers who likes to look and feel not to mention the smell of plastic when you first open the box [just got to have it] im sure there are others out there just like me[ come on own up, you know who you are ] there nothing to beat walking into a model shop. so if you have one support your local hobby shop. rant over.

Considering I don't have a LHS, i am forced to do all of my shopping on line. I do have a Wal-Mart to get some tings I need, but they have a very limited supply. I do spend a good deal of time looking from one on line dealer to another to find my best deal.

When I did live in an area that had a LHS I would spend my time there looking over each model to pick the one that fit my mood. They pretty much would work with me and others who came in looking for this or that kit. Their selection was top notch. Even when the big chain sotres came to town I still would go to the local guys. It was just nicer to go there and spend a couple hours.

Now my time is spent looking at web pages, figurung shipping charges, and converting curency.

I would love to have a hobby shop close to my house. I would love to be abe to spend a couple hours each saturday looking voer all the kits they have to offer. But, I also fall into line with so many of you, I have a limited modeling budget. If I could find things cheaper on line as opposed to my LHS, I would get it on line.

Online and catalog retailers like [ blank ] which are also distributors to LHS's. They have the ability to control the whole market and set cost. These major players are squeezing out the LHS to control access of the products from front to back (manufacturing to your door). Eliminating the middleman in this case the LHS puts all of our money into their pockets at a better percentage point. Unless our shopping habits return to way they were twenty years ago, the LHS (which is already and endangered species) will cease to exist.

I hated to do it but after emailing my LHS and not getting a reply back well I had to order the SEP from Great Models.

I make it to Milwaukee a couple of times a year and yes, they have managed to have a number of really good shops survive.

Being new to the business, and knowing people in the business, I can tell you without a doubt that the LHS is a dying breed.

In my town, there is one hobby shop, and after years of telling him what is new, and what people are looking for, telling him that buying from US suppliers instead of the Canadian ones that don't have anything in is ok, and that the difference with the exchange on the US $ is minimal as the kit is usually cheaper to start with, shipping is about the same, but alas, for years, he failed to listen to me or anyone else. There is one other decent hobby shop that is about 90mins away, but after that you are looking at a 4hr drive.

So, Feb. of this year, armed with only $2500, I started my own LHS out of my home.
At first just catering to the local guys and club, word of mouth advertising, selling a little on Ebay, etc, etc.

Along the way, I set up tables at various shows, basically just to get my name out there and recognized, now here we are just starting August, and with the original $2500 I started with, as well as the buying and selling, buying and selling, etc, etc, I am now to the point that I am in the Black with the buying and selling, which basically means that I have the money to pay the credit card I use for purchasing as soon as the charge is on there.....not bad for 6 months of work. For the most part, my prices are cheaper or on par with one of the bigger Mail order shops up here in Canada, and as an added bonus, as long as I don't make more than $30000 in sales in 4 quarters, I don't have to charge tax on the stuff.

I have 2 major suppliers in the US that I buy alot from, as well as 2 major suppliers in Europe. Between those 4, I can get pretty much what ever I want, and one supplier in the US has pretty much bent over backwards to help me out, even though to them I am sure I am a small customer to them.

Now I don't know about other LHS, and why they have so much problem getting stock, I haven't had a problem getting what I wanted at all....nor to I have any minimums that I have to buy.

Sure.....if I buy over $500 worth, they will cover half my shipping, but that doesn't mean that I can't call them up for a $100 order, as long as I want to pay the shipping, they don't care. Now having said that, since they will cover half the shipping if I wait and order $500 or more, then yes I take advantage of that as much as I can, and because of that, I may miss out on a popular kit the first go around, but they usually have replacement stock within 2-3 weeks, and I get it then. And really in the end, if I ask nicely, when the first batch comes in, my saleslady has told me just to give her a call and she will put some on hold for me, or make sure I get some out of the second batch that comes in.....Like I have said, the customer service I have received has been phenominal...and I hope one day to actually get down to see their operation.....I won't name names, but suffice it to say they are one of the biggest suppliers in the US, and are located in Texas.....I am sure you can figure out the rest.

Now since I am selling all of this out of the house, my overhead is cut down dramatically, rent, heat, lights, etc, etc, are all the same whether I was doing this or not, so that part doesn't increase, and I make a healthy markup, while at the same time keeping my prices cheaper or the same as other places, plus with no tax on top of that, even if its the same price, without the tax, you are still saving a few bucks.

I do plan on a website, which is being worked on as we speak, but I lucked into a deal that the developers are going to build and host it for free, I just have to pay for my domain name and SSL, so I don't want to be too pushy on them getting it done.

Now having said that, if I was to get a store front, for a decently placed spot, of about 1000 sq ft, I would be looking at approx $2000 a month, or $2 a sq ft. This is for a downtown shop, lots of traffic, etc, etc. If I wanted to be in a strip mall near the other shopping malls, I would be looking at $5 per sq ft, and actually in a mall, I would be looking at $10-$15 per sq ft. of space.

Now if I wanted to sacrifice on location, I could get an out of the way place, for about $1000 a month, or $1 per sq ft, but then people have to come to you, and you loose most of your walk in crowd that stops in because you are there, and alot of times this walk in crowd may not buy much, but is what can keep your head above water.

Then on top of the rent, you have heat and lights, Insurance, advertising, and unless I want to work 24/7, I would have to have at least one part time help, so in the end, if I was to go with that $2000 for rent, probably another $100-$200 a month for heat and lights, probably $100 a month for insurance, right there I am at $2400 a month in the hole, without selling a thing......got to sell a crap load of stock, just to make up the $2400 and break even, never mind any part time help.

So needless to say, a storefront is not in my future anytime soon, just for the shear fact that it is a ton of overhead, plus my markup margin would have to increase beyond what it is now, which means higher prices, which in turn would turn some people off from buying, which leads to less sales, which leads to higher margins, etc, etc, just a big vicious circle!!!!

If it ever comes down to the point that the LHS closes, then I would have to seriously consider opening a store front at that point, but until then, I will continue to run it out of my house.

Good luck to you Scott.

Hope you do good.