LHS charging Full MSRP for Loco

Well, you’ve probably taken an accounting class much more recently than I have, and I haven’t worked in retail for about as long (Ronald Reagan was president in both cases).

I may have mixed up the terminology (although at work, we DO depreciate our inventory, but it’s not inventory for sale, but for ship construction and repair), but the concept is really the same. Whatever value the inventory is carried at helps determine what the store will sell it for.

Doesn’t that lead to some interesting quandries, though? “Market value” isn’t an absolute, nor is it an easily measurable quantity, and I’m sure your LHS doesn’t do market surveys to determine what other retailers are selling the product for.

oh, for the good old days before the marketplace got all “whored up” for lack of a more kind and gentle term.

as a youngster, i worked part time in the hobby business and as i recall there were only three levels in the food chain. the manufacturer who sold an item for 40 cents to the wholesale distributor who then sold it to the retailer for 60 cents who finally sold it to the end user for a buck.

then came the big discount mail order outfits who could buy like a w/d and sell everything for 20% off and still double their money. meanwhile, back in the jungle, the MBA bean counters came up with the idea that manufacturing cost should be 10% of the final retail price and as international shipping rates went down production moved off shore.

this confusion is not limited to hobby stuff but has permeated the entire marketplace. for instance i will offer two examples. some years back if you needed a new fuel injector for your GM car the dealer would charge you about a hundred bucks a pop. Bosch had sold the technology and manufacturing rights to GM and thier manufacturing costs were down to ten dollars and they were shooting for 8.50. my local hardware store charges something like 89 cents each for the little chinese made foam paint brushes while i can get a 4 pack of them at wally world for 99 cents. go figure.

one of my favorite cartoons shows two hoboes sitting under a bridge and one tells the other, “when i was in business, i always sold the cheapest”

not a rant, just an observation,

grizlump

That’s why the IRS does not allow you to use market value when computing your taxes, you have to use cost. Lower of cost or market is used for financial reporting not taxes. Depreciation works for assets used in your business not inventory held for resale.

Pricing retail items is like selling your house. You have to balance your selling price with you holding costs----- property taxes, interest, insurance, maintenance----in order to get maximum profit. .Price it too high and it sits on the market with the holding cost eating into your profit; price it too low and you don’t cover your costs.

The hobby shop owner lowers his price because he wants t

Ronald Regan had just entered his first term as California Governor when I took accounting classes forty-three years ago.

Mark

Yet every couple weeks there’s a thread bemoaning the fact that LHS’s are disappearing.

You’re doing it to yourselves and this is a perfect example of how and why.

For me an LHS offers a premium service compared to internet stores and it makes sense to be expected to pay a premium for that. How many internet stores can you just walk into and browse? Can you touch the merchandise before buyiing? Or better yet open it and make some measurements to ensure you can use it. Can you talk to the owner or another modeler who may have used that product? What if there is something wrong with the product who repairs or exchanges it?

Internet stores can do some of this but not all.

I admit that for some commodity items (Atlas flex track, Kadee #5) I’ll check the net. But these are known items, no variation from store to store.

Then you get into the actual business end of it. the LHS has a lot of overhead expenses that internet stores can avoid: rent/mortgage for the storefront, property taxes, utilities the list goes on. Many, not all, internet stores are run from a basement or garage and the same expenses are written to the home that provides these things. The owners of the internet business’s aren’t correctly calculating the real cost of thier business/goods, hence lower prices.

In the end I don’t like paying MSRP but I understand why they do it and I feel it’s a good tradeoff for the benefits I get.

That was back when railroad accounting was done on comptometers… I remember a Southern Pacific Bullietin from about the mid 1960’s showing a roomful of people (mostly women) operating these machines.

http://en.wikipedia.org/wiki/Comptometer

Hmm. Maybe this thread can be turned into a rant about how many people were thrown out of work by the computer and such peripheral data entry improvements such as OCR and bar codes.

Andre

Hi again!

Just because someone has a retail store does not mean that they (or their people) know what they are doing - either moneywise, productwise, or customerwise.

There is an old saying about having a business. To succeed, you must have technical expertise (know the products), people expertise (deal properly with the suppliers and customers), and money expertise - which covers the whole range of accounting functions - including pricing stratedgy. While a small business may be run by a person that has one or even two of these functions down pat, it is extremely rare that one person (owner/manager) has all three.

Many small businesses lack the expertise in the financial area. While they know their train stuff inside and out, and may have folks behind the counter that could charm anyone, they may have little knowledge in how the money process works. This is the basis for the majority of small business failures, and frankly many are obvious to the financially astute from the day the store is opened.

Remember the “Scotch Tape Store” skits on Saturday Night Live many years ago? That’s an exageration (?) of course, but it tells the story.

Mobilman44

ruderunner:For me an LHS offers a premium service compared to internet stores and it makes sense to be expected to pay a premium for that…


Do they? I ask my LHS if he could order some N Scale cars from Fox Valley Models and ExactRail.

His answer to my protenial business was “they’re to hard to get and it would be better for you to order them”.Ok.I agree with ExactRail cars being hard for small shops to order…However,Walthers and Horizon showed the FVM cars I wanted in stock.He didn’t even bother to check Walthers or Horizon.

Am I to presume that’s “premium service” that many claim LHS offer?

Perhaps he has more business then most shops and don’t need my bi-monthly business?

Oddly I want to buy locally since there’s not much savings when ordering 2-3 cars after adding shipping

The priced higher than MSRP but on sale thing made me laugh as I recalled on Christmas time a couple years ago. While shopping at a store called Shop-Ko, I ran across a sign above the chocolate covered cherries. That read, and I kid you not, " Queen Anne Chocolate Covered Cherries $1.99 ea. SALE 2 for $5.00." People were buying them on sale. Myself, at the checkout I asked to pay full price in the Christmas spirit of helping Shop-Ko to have a good year in profits.

Well, as I’ve said many times before, I’m lucky in that my LHS’s are discount shops at 20%. So the pricing difference compared to the internet is shipping versus sales tax. I’ve no problem with sales tax. And I do like the face to face service.

If I go to Lowe’s and see something priced higher than at Menards, I make my decision based on this question. Is the price these people want, high enough above what the others want to warrant the time and travel to save “X” amount of money. Some will drive for pennies, some will drive for dollars. Others just get it where they are and say “I’m here”

I would use the same question at a LHS. Is the time to wait, shipping and potential problems involved, worth the tradeoff for the benefit of my LHS. That is my choice. What I don’t do is fret about what someone is charging for an item. If they want to charge that much, and they do know about the internet, they are not going to change their pricing policy because you feel they need to sell to you at your price. Maybe financially they can’t I don’t know. Internet knows no limitations on a customer base where as a LHS in downtown Philly does.

One must be vigilant. Just because one sees “sale” or is in a discount store, does not mean everything is less expensive. I often accompany my wife to the Dollar General so after we wander past the token cheap items I exclaim "

There are many shops like this that charge full price. Nothing unusual from what I can see.

“Let the buyer beware” has been around for many years.

With the Internet, you can find a lot of stuff at good prices. Just learn on how to search.

Rich

Hi once again!

Some of the LHS I have been to gave “premium” service, others gave less than acceptable service.

On the other hand, some of my internet suppliers have given me outstanding service! The good folks at Caboose Hobbies, Tony’s Trains, and Toy Train Heaven were especially helpful, and that goes a long way in bringing me back to them.

ENJOY,

Mobilman44

Mostly good points here. Another thing that I think an LHS or any business should consider is to Listen to the customer.

I haven’t run a business but I believe that if I was and someone approached me with a similar question, I would do anything to get the sale. You have a person in front of you with a handful of money that is simply asking to reduce the price the same percentage as similar products from the same manufacturer. You say no and the customer turns around and walks out. You now have no sale and you have a dis-satisfied customer who may find another source. In modeling, the chances are that the average customer is a repeat one. I’ve spent a few thousand there in the last 3 years and have never posed this type of question. I don’t know how much they lost in the sale but they will probably lose more in the future as a result. I’m sure they know more about the subject than I do since they’ve literally been in business 100 years, but IMO they won’t be for another 100 if they continue to operate that way.

here is something that i bet few retailers in this hobby give much thought to.

A - customer goes to source number 1 and comes away feeling mistreated.

B - customer goes to source number 2 and he gets treated even worse that he was by source number 1.

C - customer will not swallow his pride and go back to number 1 but seeks out number 3 for his needs in the future.

bottom line=once they are gone, they are usually gone for good.

grizlump

In this particular case, I’m having trouble arriving at the conclusion that the customer was mistreated. In my opinion I think disappointed might be a better word. From what I read, the clerk listened to what the potential customer asked but did not reply with a direct “no”. He went to the manager and relayed the question. The manager decided not to drop the price and the clerk was left with the task of giving that answer to the customer. While I’m sure that the manager might have some leeway in dealing with customers, unless he is also the owner there might be a limit to what he can do.

What the OP tried to do would be called “haggling over price” if it had been done in a train show environment. A lot of the consumer magazine articles seem to encourage that lately, especially when dealing with appliances and cars. But I wonder how much that is really appreciated by the normal retail shop. I haven’t run a retail business, but I can envision that a customer would be inclined to haggle over every price after being successful with the first negotiation. I think that would become trying after awhile.

So far as not swallowing ones pride goes, I think that is more a personal issue.

That is correct. Not mis-treated but dis-satisfied in the end. They’ve been a reliable source for equpment but like I said, after that visit I won’t be impulse buying there which is good for me [:)] If I like something there I’ll check the other local LHS and if it can be had for less, they get the business. Not for small stuff, but for things like loco’s etc. In this case 75 bucks after tax is worth it to me.

I guess this one is beat to death at this point though.

Well, not quite. I forgot to ask you how what their selection of car kits and prices are. Did you happen to notice if they have any of those original P2K gons and grain hopper kits and if they are selling at full or discounted price?

Thanks

Brakie, I wouldn’t be quick to assume that your experience with the FVM cars is bad service. On the contrary it sounds like the LHS was simply being honest about the time and expense involved in getting those cars for you.

In my world of auto repair there are many situations where I have sent customers to other shops for certain work, to save them time and money. Usually it’s for work covered under warranty or recalls by the dealer but then there are things like broken springs. There’s a spring shop a few miles away that can make new springs and instal them for less than it would cost me to get springs.

My customers seem to appreciate the honesty of pointing those things out to them. Some have even said “I don’t care if it’s under warranty, I want you to do it.”

But your LHS experience doesn’t fit what I call premium service anyway. The LHS can order a product for you just like an net business can. BUT you don’t get to touch the product from the net business untill you have purchased it. If it’s a known quantity to you, i.e. you have the product already and need more then no big deal. But if it’s something new and you want to examine it before dropping cold hard cash…

Rude Runner,I understand what you are saying except the cost thing since he orders from Walthers or Horizon weekly and I already have FVM and ER models so,I already knew quantity of those manufacturers…

Here’s the rub…He has order several items for me to include my recent order of 2 Pikestuff buildings which I picked up when he called…

BTW.Its not like I am a “new” customer…I been dealing with that shop for 20 years.

All I want to do is start buying locally instead of massing a order together every 2 weeks and buying enough to off set shipping and there’s insufficent savings after shipping for 2-3 car order and there’s o

If I can’t find what I want at the LHS at a good price I’ll hunt for it online. About half of my locos were purchased online either by me directly or in my name by other parties.

Call me old fashioned (even though I’m only 25), but there’s something a little magical to me about trolling the aisles of my local hobby store (Tacomatrains.com). I also enjoy “chewing the fat” with whomever is working, and having them their to answer any questions I have, or even just referencing a catalog. I’m fortunate that my LHS is just a few blocks a way, and I understand that some don’t have this luxury. Going to the hobby shop takes me back to walking hand in hand with my grandpa at “Caboose Hobbies” (long gone) back home. Plus, I’d much rather support my local retailer, and the local economy, than some big seller’s somewhere else. I take pride in Tacoma, and would rather pay a little more to shop here, than with a mouse click!