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What keeps retailers up at night?

We asked and you responded: Here are hobby retailers’ biggest concerns, from manufacturers selling direct to declining sales and Internet competition

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By Elizabeth Nash
Published: September 14, 2016
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Model Retailer recently sent out a survey asking readers, most of whom are brick-and-mortar hobby retailers, to sound off on the industry-related issues that trouble them the most.

Participants were asked to rank 18 issues by level of concern: “not at all concerned,” “not very concerned,” “neutral,” “somewhat concerned” and “very concerned.”

The chart below shows the results. The five issues that received the most “very concerned” and “somewhat concerned” votes from survey participants were:

1. Manufacturers and distributors selling direct to consumers
2. Declining sales
3. Internet competition
4. Lack of interest from youth
5. Declining consumer interest

The three issues that received the least amount of concern were big-box competition, employee turnover and limited store size. The remaining 10 issues ranked somewhere in-between the highs and lows. And although not specifically included in the survey, product quality was barely mentioned in the extensive comments submitted by participating readers.

But concerns with the ability to sell competitively certainly did show up. Most respondents indicated that even if they have the merchandise to sell and a knowledgeable staff to sell it, consumers are either not buying or, if they are, not buying from them.

Reaction from vendors
Model Retailer went to several hobby manufacturers and industry sources, some of whom wished to remain anonymous, for reaction to the survey.
 
In the process, they discussed the controversial direct distribution process and offered advice for retailers on how best to sell hobby merchandise.
 
Former HMA president Fred Hill is the owner of The Coach Yard, a manufacturer specializing in HO scale. He sells exclusively to hobby shops and has no system for distributing to customers directly. However, Hill is still an advocate for manufacturers selling direct because, he said, “They are providing a service to the consumer. It’s important to know that it’s not about the money; it’s about taking care of the customer.”
 
Other manufacturers repeated this idea, saying that selling direct through their online stores is sometimes the only way to get customers what they want. “Some modelers live so far away from a hobby shop that they might lose interest in the hobby altogether if it wasn’t for the ability to buy direct,” explained one manufacturer. “People in rural environments are big proponents of buying direct.”

Despite the presence of online stores, manufacturers we spoke with say they prefer consumers to purchase through brick-and-mortar retailers. “When a customer purchases online, there’s no room for the upsell,” said a sales manager. “In a store, they can see how products go together and may purchase in a bundle. Without the retailer, people don’t see our products.”

Are pricing agreements unfair?
A number of survey respondents complained about manufacturers that make retailers sign MAP (minimum advertised price) agreements and then sell to large chain stores without that same stipulation. Sales managers at several companies agreed that this practice is unfair and leaves hobby shops at an inherent disadvantage to big-box stores. One admitted that if they were in the retailers’ position, they would avoid doing business with dealers or manufacturers who undercut them in that way.

Others disagreed. Dave Swanson, manager of the 2016 iHobby Expo, doesn’t think pulling business away from these manufacturers and vendors is a good idea. “Rather than focusing on the negative, the industry would be better served by trying to create options for the consumer that also benefit the retailers,” he said. “For example, if those manufacturers offered an option for a product to be shipped to a hobby shop instead of just to the consumer’s home, that might provide an opportunity for add-on sales and building a consumer relationship.”

Hill said that he tries to make his business useful to big-box stores. “I’ll give them my card and tell them to send their customers with questions or in need of repairs to me.” He also said that not all manufacturers and vendors try to undercut retailers. “Those manufacturers who sell at MSRP (manufacturer’s suggested retail price) plus shipping direct to the consumer should not be seen as a threat.”

Other solutions for retailers
What can retailers do to remain viable options in the consumer’s mind? Every industry representative we spoke with gave the same advice: Get online!

“Because manufacturers are going to continue selling direct, retailers need to establish an Internet presence,” said Hill. “I suggest getting on Facebook, YouTube and Yelp for starters. And make sure you maintain these accounts. Respond right away to comments, both positive and, especially, negative. The Internet is here to stay, and all businesses need to get online if they are going to survive.”

“We need, as an industry, to use all the tools at our disposal to market the hobby industry as the best use of a consumer’s time and money, against all the competition,” said Swanson. “Use the Internet and social media to maintain relevance to your customer.”

“Retailers have to remember what business they are in, which should be serving the customer,” says Hill. “This may mean going the extra step for them to provide great service, but it’s what you have to do to compete.”

To see some of the comments we received from retailers who answered the survey,
click here.


Elizabeth Nash is associate editor of Model Retailer. If you’d like to sound off on these or other industry-related issues, email her at issues@ModelRetailer.com.