Does anyone know what discount the “Store Front” dealers are receiving from the Wholesalers on average. Ive been thinking of openning my own shop and just wanted some insight. Thanks in advance
I guess I woudn’t call it a discount, but the “Store Front” probably marks up the kits 100%. In other words, they pay $20 for a kit they sell for $40.
I don’t base the above on hard facts, just speculation.
AFAIK, often the price depends on the quatity of kits & stuff you take of their hands.
Some even require that you place a regular order that exceeds xxxxx value or similar.
Rules and prices will vary from wholesaler to wholesaler.
Rule of thumnb, the best wholesalers are those closest to the manufacturer in the chain, fewer hands that want a share of the money. [;)]
Grandpa Dan’s simple business economics 101
Please do not get me wrong, I wish you the best of luck and hope for your success if you decide to open your own Hobby Shop. It will be tough however!
I can guarantee you that any Hobby Shop would love to be able to keystone* product purchased from a distributor but in real life it rarely happens. While the manufacturers suggested retail price may be a 50%** mark up (you can only have 100% mark up if you get the merchandise for free.) to actually sell say a model kit for that may prove to be difficult, especially in the days of 50 to $100+ kits. Then there’s competition from mail order/online/discount super stores etc. 10% to 40% is much more the rule.
You may want to find some material on small business start-up. There are formulas to help you determine how much margin you will have to average on your merchandise that figures in wages, rent, insurance, stock, utilities, etc. I can tell you a few tenth of a percent above or below that figure can mean the difference between success, taking home a pay check or failure.
Hope this helps.
*Keystone means to buy an item for say $5 and re-sell for $10
**Divide a hypothetical cost of an item by .50 for keystone or by.60 for a 40% mark.
Well, what do you know? I learned something new today (keystone). [;)]
If you’re interested in opening up your own hobby store, let me direct you to our Model Retailer website. Model Retailer is a trade publication (published by Kalmbach ) for hobby shops / retailers. In fact, there is a page on their website where you can request information about opening up a hobby shop / store.
Model Retailer
Model Retailer - Want to Open a Hobby Store?
A resource they also recommend is the National Retail Hobby Stores Association.
For what it’s worth, if you’re really serious about it, it may be worthwhile to send off an email to the editorial staff of Model Retailer. A former staff member, friend of mine told me that she knew of a number of shop owners who don’t mind sharing advice – as long as you’re not going to be competing in the same location. [;)] So it might be worth a shot. But like I said, please do this only if you’re really, really serious. It’s a small, but knowledgeable, staff.
David, glad I could teach someone something. Don’t know if it’s a real term or one a few others and I made up, business blurs my memory sometimes.[%-)]
I also agree with David, Model Retailer is a great trade publication with a lot of valuable info.
The standard mark-up for kits is about 40%. Mark-up is a measure of the retail sales price (MSRP), so that a $100.00 kit would cost the retail store owner $60.00. The mark-up on other items can vary fron 25% to 60%, eg paint, brushes, air compressors, glue.
However, none of this is carved in stone either. There will be special promotional items, volume discounts, clearance items, etc. You can safely figure on a gross profit of 30% (sales less cost of goods sold = gross profit).
From your gross profit you will expend amounts for rent or the cost of space, utilities, insurance, employee related expenses, local taxes, license fees, accounting and some legal fees, advertising, shipping and delivery fees, transportation cost for going to the wholesaler every week , etc.
With the advent of the on-line sales companies it is a very competitive business. Have you done any demographic research. For example are you the only one around in a 50 mile radius interested in models?
Go to the web site for the U.S. Census and get some idea what the population is like in your area. Are there any IPMS clubs in your area? If there are it would indicate an interest in the hobby. How many members are there? Are there hundreds of members or more than one club? Or are there 10 members?
What is the interest of the model builders in your area. Are they model car builders, or are they into rail road, or RC flying models? How many other hobby shops are within a 25 mile radius? Do your research before you start spending money, or you may learn a very expensive lesson. Cheers and best of luck, rangerj
Then there’s the franchise (ie. HobbyTown USA) vs. independent. The whole HobbyTown franchise thing is pretty interesting.
My memory is a bit fuzzy on this, but I’ve heard something that it can be difficult dealing with distributors if you don’t have something. I remember talking with someone who was trying to line up distributors before he started but they wouldn’t talk to him until he was (or something). It seemed like a catch-22 situation.
Anyways…rangerj had some excellent advice. There’s a lot involved with starting your own business period. However hobby stores have some unique challenges. Have you considered opening a Subway? I heard they’re the best franchise atm. [;)] Anyways, not trying to scare you off. Just make sure you do your homework. [:)]