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Beyond the 'hobbyist'

Radio-control manufacturers and retailers are adapting to a changing sales landscape
By Tim Kidwell
Published: April 14, 2009
There's no denying that times are tough right now for consumers, which can be hard for entire industries. However, in hobbies, the gloom may not be as thick as some might think.

As early as last spring, Mike Gillette, former president of Horizon Hobby, warned that R/C was headed into a "soft market." However, he also spoke of the near proverbial saying that the hobby market is countercyclical, meaning that when there is a downturn in the overall economy, the hobby industry tends to trend upward.

For Jake Rosen of Jake's Performance Hobbies in Rohnert Park, Calif., the market has always been countercyclical, to a point.

"I notice … every time [the economy] does this kind of stuff, guys … look at the toy hauler and taking their quad down to Pismo for an 8-hour drive and all the gas and the food, and they say screw it, we're going to go R/C car racing instead," he said.

He cautions that just because the industry is countercyclical, doesn't mean that sales are going to see a huge boost simply because the economy is struggling. Rosen's store sales have been in line with sales from this time a year ago, some six months after the economic slowdown went into high gear. Rather than boom or bust, Rosen says that hobby stores "just don't take it as hard as other businesses."

Still, he and other retailers have reported they've seen customers disappear because of job losses or tightening budgets. Rather than a lot of new products going out the door, stores with repair centers have seen an uptick in customers bringing in their older R/C cars and trucks for help getting them to run. Customers' turning from purchasing new products and focusing on what they already have hasn't gone unnoticed by manufacturers.

"We expect sales to trend flat or minimally down throughout 2009," a spokesperson for Venom Group International acknowledged, at the same time adding that the company's business plan allowed for such eventualities.
"I see sales volume to continually decline for most, if not all, hobby manufacturers in the next 12-18 months unless a drastic shift in product planning is adopted to adapt to these conditions," said Fred Medel, marketing manager for Tamiya America. He doesn't expect to see a rebound in the market before 2010's fourth quarter, citing continued turmoil in the banking industry, on top of a U.S. housing crash and the recession itself.

"People can only read about how bad things are for so long before they begin buying products that provide fun and entertainment," said Horizon Hobby's Bob Jacobsen. "Since our industry's products are inexpensive (requiring no financing), we are well positioned to be one of the industries that rebounds first when spending does come back."

To that end, R/C companies are refocusing their marketing dollars toward advertising opportunities outside of typical hobby channels. Companies like Traxxas, Associated Electric, Tamiya, Kyosho and HPI are looking to venues that widen the audience and market for their products.

Recently, Traxxas has penned a sponsorship deal with The Off-Road Championship Series, and likewise, Associated Electric and are now sponsoring the Lucas Oil Off-Road Racing Series.

In a dramatic move, fierce R/C rivals Tamiya America, Kyosho of America and HPI Racing entered into a partnership to participate in the Toyota Grand Prix of Long Beach, April 16-19. The partnership, called the R/C Motorsport Experience, is aimed at exposing the companies' products to a much wider audience than is normally be reached through hobby-oriented events; a difference, according to Fred Medel, between roughly 13,500 attendees at a show like RCX and 180,000 visitors at the Grand Prix over three days.

"We are also involving select hobby stores to join us, so we can direct those new consumers to the types of stores that carry quality 'hobby products,'" Medel said. "This type of event marketing is what is needed in this era and for our industry."

Medel emphasizes Tamiya and its partners believe the hobby retailers are the backbone of the industry, and depending on industry events isn't enough anymore.

"We're trying to expose our brand to a wider audience and we want them to go to the traditional hobby store to get their fix," he said.

In late 2008, Traxxas products began to appear in Pep Boys auto parts stores; another move to broaden R/C's accessibility to consumers outside the typical hobby market. Although not new to R/C, as Tamiya products have been carried by Fry's Electronics stores since 1995, it has been a very visible push.

Not unexpectedly, responses from retailers to this development have been mixed. Dreamboat Hobbies' Louis Dussia says that the move won't directly influence his store. Based in Warren, Pa., the nearest Pep Boys is 160 miles away. That doesn't mean that he approves of the move, however.

In his experience, very few customers who buy R/C products through channels other than a hobby shop actually go to a hobby shop for parts or accessories. "I would say the person who is going to Pep Boys … would probably go to a discounter to find their parts - that means online."

Internet-only retailers have been a source of resentment and concern for brick-and-mortar hobby shops - particularly in the R/C arena. The common refrain is customers come into a hobby shop for the expertise and service the shop offers. Dussia's not buying it.

"That's total B.S.!" he said. Customers "want the best buy they can get," and pricing plays a big role in how consumers purchase, especially in an economic downturn.

Pricing is on the minds of manufacturers and distributors, trying to balance product cost with dealer and consumer expectations.

"Horizon definitely considers retailer margins when developing products," said the company's Eric Bartsch "Our goal is to set pricing that works both for our consumers and our retailers."

"We look at all aspects of properly pricing our products to be competitive in all markets that our products transcend into, at the same time making sure our business partners have a healthy margin to work with," the spokesperson for Venom said.

R/C companies are repurposing older products and rereleasing them with minor twists or modest upgrades. That keeps down development costs on completely new products, which could prove risky in an uncertain economy. This approach has the added benefit of putting different product on the shelves to continue to attract customers.

"I think what you're seeing now is a more conscious effort by the industry to offer as cheap of a product as possible to get people involved in the hobby," Medel said. "Once things turn around, you will see people that got into [R/C] cheap look to see what else that particular manufacturer makes and … will be looking for a step up in performance and quality."

"In most cases, consumers dictate the price and value of the products," Venom's spokesperson said. "Trying to compete on price is a loser for all who play in that game."

Bill Jeric of Horizon Hobby echoes that sentiment. "There will always be someone willing to sell a product cheaper than the next guy. Horizon believes that innovation and value are what drives buying decisions, not just the lowest price."

For Maureen Dunphy, owner of PAC R/C Hobbies in Smyrna, Tenn., the amount a customer is willing to spend on R/C depends upon their level of involvement.

"Somebody brand new isn't going to want to pay," she said. "If they have to pay $100, that's about the limit. Somebody who is already in the hobby, it's kind of unlimited. They get hooked and just keep spending."

"If it's $300 or less, it's selling well," Jake Rosen said. "If it's $500 or more, it's not selling near as well as it was."

Rosen also says that he's changed the way he makes purchases for his store.
"We're definitely playing it closer to the vest," he said. "Instead of ordering cases at a time, we're ordering what we need."

Louis Dussia says that his store is a full-line hobby shop, so while he hasn't changed his purchasing for R/C, he has mixed up what he's bringing into other parts of the store.

"I've added different lines to bring different people in, and that in turn brings me more people," he said. "They see the R/C stuff and they buy that too."

As always, remaining proactive is the name of the game in retail. Successful stores are constantly looking for ways to enhance their visibility among current and potential clientele.

"We're going to start some classes," Maureen Dunphy said.

"We are very active with our local clubs in all respects: flying, cars, you name it," Rosen said. "Anything to keep our name out there, keep people aware that we're alive, thriving, doing well."

Great Planes and Traxxas were contacted for comment in this story but did not respond to our invitation.

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