Model Railroading Co-Op...

[TinGoat]

This comes from the Another hobby shop bites the dust Thread...

Every one is welcome to add their $0.02CAD to this thread... But I am mainly concerned with folks in the GTA (Greater Toronto, Ontario, Canada, area.)

Originally posted by tingoat
Here's a radical idea....

What if local hobbiest's started a co-op?

Volunteer to work a couple of evenings or weekends a month....

Hmmmmmmm......

Originally posted by spitfire
I like your co-op idea although I think trying to mimic a retail operation is not the way to go. Too much work, paperwork, money up front, and financial risk.

But if the main point of the co-op were to get its members wholesale prices then you could do it this way. The co-op becomes a licensed Walthers dealer and each month puts in its members' order. The members pay up front, so that no one gets stuck paying for something someone has "changed their mind" about. It could work. Just need to figure out where the merchandise would come to.

cheers
Val

A couple of ideas come to mind on how a Co-Op might work.

- Need a website with catalogue/database. Requiring password/registration.

- Annual, or lifetime membership fee. (was thinking $30/year or $100 for life)

- Minimal essential stock: i.e. flex-track, some turnouts, rail joiners, roadbed, etc.... Stuff that you can't do without. Stuff that can be bought in bulk direct from manufacturer or wholesaler.

- Small store. Or secure storage area at local club. (Gotta keep overhead as low as possible.) Or member's home...

- Cash, money order or cheque, no credit cards.

- Orders go in to suppliers/manufacturers once a month. Must make minimum order to get wholesale/dealer's prices or order does not go in until following month when mimimum is met.

- Annual membership is waived for members who sign up one or two new members during year...

- Annual membership fee may be dropped if group becomes self sustaining... Only a new member fee...

- Members can sell items to each-other on consignment...

- Board made up of founding members.

- Board to stand for first 5 years.

- Board to face general elections after first 5 years and then for only 2-year terms...

- Members could get together for social events, operating sessions, and seminars/how-tos.

- Members homes, and or local meeting halls would be used.

- Meet once/month to place/pick-up orders.

- A small store front run by volunteers would be ideal for convenience and attracting new members, but not essential.

- Create a network of members that could give value added retailing, like kit assembly, repairs, advice and chitchat.

That's all I can think of at the moment...

 

[rsn48]

For me, I won't join anything that charges money to buy something I can already get. The one exception in my life is Mountain Equipment Co-op because membership is only $5.00.

Also for a Co-op you need a degree of volume to have distributors, etc interested in you. Volume of business is more important than membership fees. Keeping costs down and volume up is the name of the game, initially at least. If I were doing it, it would be money up front and an injunction that if you buy it, you bought it. What if three people had put an order in for the N scale MP Pacific, then with all the issues the model had, many didn't want it. You would have money tied up in unwanted product.

You would also want a minimum order size. And you might add one dollar to every fifty dollars ordered to give the poor guy maintaining the co-op some incentive to keep doing it. At least he might be able to get some goodies nearly free. Since we are assuming a reasonable discount since it is a co-op and volunteer, this extra charge would be nothing. Or it could be $2.00 (whatever).

I wouldn't even think web site until you really have something going. Also how you are going to advertise, even if a home made brochure - or whatever - would be an issue as of course the LHS's in your area aren't going to want it in their store. So maybe getting a table at a train show and starting during the train show might be a way to go.

 

[TinGoat]

Originally posted by rsn48
For me, I won't join anything that charges money to buy something I can already get. The one exception in my life is Mountain Equipment Co-op because membership is only $5.00.

Joining MEC or Price Club/Costco both cost money. You have to weigh the price of the membership against the value you get in return.

In the case of Price Club/Costco, you may be able to buy the same products elsewhere, but at a higher price. So I always look at what I am buying and say to myself, "am I saving enough money on my purchases to offset the annual membership fee". In my case, I usually save enough at Price Club/Costco to not only offset the annual fee, but I also manage to come out ahead.

In the case of MEC, it is more a matter of having a membership to a place that supplies specialized items that I can't always get somewhere else. For certain items, MEC is the only place to get them.

Originally posted by rsn48
Also for a Co-op you need a degree of volume to have distributors, etc interested in you. Volume of business is more important than membership fees. Keeping costs down and volume up is the name of the game, initially at least. If I were doing it, it would be money up front and an injunction that if you buy it, you bought it. What if three people had put an order in for the N scale MP Pacific, then with all the issues the model had, many didn't want it. You would have money tied up in unwanted product.[\B]

Absolutly! Many distributors charge a restocking fee for returned merchandise, so you want to make sure that there are no returns.

Originally posted by rsn48
You would also want a minimum order size. And you might add one dollar to every fifty dollars ordered to give the poor guy maintaining the co-op some incentive to keep doing it. At least he might be able to get some goodies nearly free. Since we are assuming a reasonable discount since it is a co-op and volunteer, this extra charge would be nothing. Or it could be $2.00 (whatever).

Volume is very important too... One of my points was that an order wouldn't go in to a supplier unless a minimum order was generated. That is to ensure that the lowest price can be got.

Originally posted by rsn48
I wouldn't even think web site until you really have something going. Also how you are going to advertise, even if a home made brochure - or whatever - would be an issue as of course the LHS's in your area aren't going to want it in their store. So maybe getting a table at a train show and starting during the train show might be a way to go.

Advertising would be through word of mouth to start.

Of course advertising at the LHS wouldn't work.. You would be in direct competition with them! It would be like Mac D's advertising at Burgur Schmitt's. LOL!

My point is, there isn't a decent Model Railroading LHS in the area... So we would have to go it alone anyhow.

The website is important for communicating to the members. Especially if there is no physical store.

The webhosting could be done on MSN or Yahoo to save money...

The membership fee would go toward overhead. The website and also for renting space for meetings.

All sales would be final, as you suggest. And everything would be sold at cost. So it is a matter of volume. Will you save enough money on your purchases to offset the membership fee like Price Club / Costco? Maybe come out ahead?

Are the added value of having access to repair services and a wider knowledge base worth the price of admission?

I belong to a group that meets every few months. The organizers rent a meeting room at the public library for a few hours. We have chats and show and tell, to see what people have been up to. As well as having a seminar/how-to/demontration. Coffee, donuts and sandwiches too... All this for a few bucks per meeting to pay for the room rental and refreshments.

The bottom line is that it is about more than just getting good deals on model railroading supplies...

The membership fee of $30CAD was just off the top of my head. The founding members would have to figure out costs and go from there...

I was just suggesting what I would be willing to pay to get this off the ground...

 

[rockislandmike]

Originally posted by rsn48
For me, I won't join anything that charges money to buy something I can already get. The one exception in my life is Mountain Equipment Co-op because membership is only $5.00.

MEC ROCKS !!!!!

 

[rsn48]

My wife did a random list of items in the house but mostly grocery and cleaning and hygiene items. Then we went to every "discount" store in Vancouver, BC. We went to ones that charged membership and those that didn't. Turned out on most items Superstore (which isn't exactly our favourite) turned out to be cheaper. I have buddy who practically lives at Cost co and I go with him frequently. I asked him to choose 6 items at random and I would see if I could get it cheaper elsewhere without the membership fee - and of course I could.

In areas where the population is at a minimum, places like Cost co have a place. But here in Vancouver, where competition is high and fierce, it doesn't make as much sense.

It sounds like I'm discouraging co-op for trains... I'm not... but why start with a higher membership when people are initially thinking about joining...

 

[TinGoat]

Paying for convenience...

You are right.

If you shop around, you can always find a better deal somewhere else.

But time is money, so you go to where it is convenient.

My wife, Ruby, has the ability to memorize prices for various products, and is able to tell if the price at Costco is cheaper or not.

We usually shop at No Frills, Food Basics, and Price Chopper for groceries.

She knows that for certian items it is cheaper at Costco and for other items, it is cheaper at the other stores.

Costco is best for frozen foods and non-perishables. And sometimes meat. So we only go once/month or every other month and stock up.

For regular shopping we still use the other places.

We manage to get our membership fee back, because she is such a careful shopper.

Just because things are in bulk packs doesn't always mean that it is cheaper, that's for sure.

She is able to figure out the unit price and passes up things that can be got at discount stores cheaper per unit. A six pack of stuff at Costco can still cost more than six of the same thing at some place else.

Some people think that bulk is always better... Not!

Originally posted by rsn48
It sounds like I'm discouraging co-op for trains... I'm not... but why start with a higher membership when people are initially thinking about joining...

Like I said, $30CAD was what I was willing to pay. I realize that this amount is open for debate.

It's a tough marketing situation.... A lower membership fee would attract more people, but if you end up having to raise it, then you may lose people. If you start with a higher fee, then you may not attract as many people to start, but there is the incentive that the fee could go down and/or be eliminated later...

The other alternative is to pay as you go. Only pay for the activities that you attend and services that you use...

One business model that I was just thinking about is the Sears Catalogue Store.

There is a drycleaner in the mall where I work who acts as a Sears Catalogue Outlet. You walk in, select something from the catalogue and place your order. A few days later, you go back to pick your purchase up. No stock is kept so there isn't any additional overhead for the drycleaner.

In our case, we would be a Walther's Catalogue Outlet.

In the case of the drycleaner, there is already a business in place to take care of the overhead and the Catalogue shopping is on the side..... There is a shop near my house that does this with Sears too...

For a storefront operation, a booth at a fleamarket, or a stall/boutique at a mall where you have less than 100 square feet to keep a minimum of stock and the rest is done through the catalogue...

I think that Val said it best:

Originally posted by spitfire
I like your co-op dea although I think trying to mimic a retail operation is not the way to go. Too much work, paperwork, money up front, and financial risk.

But if the main point of the co-op were to get its members wholesale prices then you could do it this way. The co-op becomes a licensed Walthers dealer and each month puts in its members' order. The members pay up front, so that no one gets stuck paying for something someone has "changed their mind" about. It could work. Just need to figure out where the merchandise would come to.

cheers
Val

So it is the location which equals overhead. And the membership fee that covers the overhead. A storefront gives you greater exposure and therefore more customers/members. Working from home is cheaper, but you lose the exposure.

With a storefront, it is the problem of man-power. Volunteers would be impossible to co-ordinate, so you would have to pay a staff which adds to the overhead. Unless you are only open evenings and weekends. But that cuts into your exposure too...

This is a real challenge to figure out...

How do you get the biggest bang for your buck?!

Is there anyone else out there with any ideas????

 

[N Gauger]

Not a bad idea!! MY friends and I have already been doing this with Comic books.

It's by Order ONLY - no stock - no overhead

-- pay in advance only

-- We order & pay him the exact amount with shipping

-- then he either delievers them - or ships them to us

it takes about 2 - 3 weeks depending on the time it takes the distributer to get him the items.

 

[brakie]

As far as a store front you really don't need a store..You can use your basement,spare room or a small out building..

Now there are other things to consider as well.You will need a small business license to buy from the distributor(s).You may have to have a State Tax ID as well..Depending on your state laws "All sales are final" may not get it..What do you do with a bad locomotive that doesn't run? I am sure the buyer will want a refund or a replacement engine which in most cases he/she is entitled to by law..A dealer must stand behind his products that he sells or lose customers..Don't forget your completion you must meet their price or be a tad lower...And as Val stated and I fully agree you would not believe the amount of paper work needed..

Will this co-op work? Perhaps..I will give you this hint buy in volume and pay with cash up front to get the better discount from your local distributor(s).You will need more then one distributor in order to get what you need.You see one distributor may be out while another has a given item in stock..Walthers is not the best place to buy wholesale from either...And yes I have worked at a hobby shop...

 

[TinGoat]

Hi Brakie, thanks for the input...

At the moment, this is more of an excersize in brain storming and information gathering.

Originally posted by brakie
As far as a store front you really don't need a store..You can use your basement,spare room or a small out building..

You are right. This is one option that I am looking at.

Originally posted by brakie
Now there are other things to consider as well.You will need a small business license to buy from the distributor(s).You may have to have a State Tax ID as well..

I forgot about the business license, but I figured that a GST/PST (Canadian Goods and Services Tax and Provincial Sales Tax.) registration would be required.

Originally posted by brakie
Depending on your state laws "All sales are final" may not get it..

This wouldn't/couldn't be enforced by law but it would be part of the membership agreement. If you don't agree with this policy, then don't join the Co-op.

Originally posted by brakie
What do you do with a bad locomotive that doesn't run? I am sure the buyer will want a refund or a replacement engine which in most cases he/she is entitled to by law..A dealer must stand behind his products that he sells or lose customers..

A defective locomotive or other items should/would be covered by warantee by the manufacturer in most cases and repair and/or replacement done by them. Refunds would be a separate issue... It would either come from the manufacturer of the item or not at all. (See previous point.)

Originally posted by brakie
Don't forget your completion you must meet their price or be a tad lower...

That's one of the main reasons for setting up a Co-op in the first place.

Originally posted by brakie
And as Val stated and I fully agree you would not believe the amount of paper work needed..

Yes, this is going to be very labour intensive (Possibly a full time job) for the founding members.

Originally posted by brakie
Will this co-op work? Perhaps..I will give you this hint buy in volume and pay with cash up front to get the better discount from your local distributor(s).

Yes, I figured as much...

Originally posted by brakie
You will need more then one distributor in order to get what you need.You see one distributor may be out while another has a given item in stock..Walthers is not the best place to buy wholesale from either...And yes I have worked at a hobby shop...

Yes, Walther's may carry items from Details West or Miniatures by Eric, but it may make more sense to buy directly from Details West or Miniatures by Eric to get the best deals and or selection...

And although Walther's carries a lot of stuff, they don't carry everything...

 

[farmer ron]

If you check around through clubs you will be surprised how many "basment hobby shops" there are, They work on a min $ order system, usually have a book around the club and you put what you want down and when the min dollar is reached then the order goes in. Yes you can get some things at a substantially reduced prices (wholesale prices plus discounts ). I have not used any of these for a couple of reasons. I do not want to wait sometimes months for the order go in and I like to support the local hobby shops that I visit as they stock the things that I require and I like to look at the things that I purchase first, especially if it is a new steam engine. I find that the hobby shops that I visit in our area, and some are a good hour or so away, are very competitive, good up to date products, are marketed at a fair price and do offer discounts on some products.
As far as joining at a cost, sorry no, the local hobby shops around here do not charge me a price to go in and look around and buy their product,, It already costs me fuel to go there as well it will cost me postage if I ordered it from somewhere.
I agree with Rick, we gave our cost co membership up a long time ago, we are fortunate to have a Superstore in town and they are the same prices, sometimes lower than cost co and they offer the same merchandise.
Ron, I think you better take a long hard look at this before you jump in, it takes a lot of money to build up stock that you want to have on hand, you want to open a store front, sounds like a hobby shop to me. Just take a look around and see how many are going under and ask yourself why are they not around anymore?? As far as the statement of not having a decent hobby shop in your area, is there a hobby shop in your area? Why are they not decent?? Have you and others spoken to the owner about this and listened to his reasons? The can vary to he is not really into railroading but it is a sideline to the shop to see how it goes to they just can not afford the stock!!
If you are going to start this up also speak to as many of the hobby shops accross this country as well into the USA, how much do they do in mail order? what are some of the problems doing mail orders: non payments, bad cheques, stolen credit cards, returns for whatever reasons, customers who state products never got to them, and I think there are many mor that I can not think of.
Please do not get me wrong, I like others are not against you or your concept, I do not want to see you put a lot of money into something that you have not thought totally through and come out on the wrong end. Just one railroaders opinion, Ron..

 

[TinGoat]

This is such a great forum!!!

I'm an impulsive starter, and not much of a finisher.

What started out as a good idea, is starting to fizzle...

I've been thinking about this idea for a while, and trying to weigh the pros and cons.

I didn't say that LHS are not decent. Just that they don't carry any Model Railroading stuff. Or very minimal.

A lot of this has to do with the Another hobby shop bites the dustThread. The LHS Den of Trains just closed up and I was looking for an alternative that is as close to home as possible.

The basement/club hobby shop / Co-op seemed like a good alternative, but now I am having my doubts.

It's great that I can use you guys and gals as a sounding board for my ideas. Thanks...

If I could afford it, and could even afford to fail... I would open up my own Hobby Shop.

The best alternative in this case would be to support the next nearest LHS by patronizing it frequently and getting them to supply the things I want/need.

 

[spitfire]

Ron, it sounds like your original idea was mutating into a quasi-retail operation, which as many have pointed out is fraught with many pitfalls, known and unknown.

I think your original idea, a co-op group who have some sort of vendor's or authorized reseller's arrangement with a large supplier (like Walthers) is the least complicated and therefore the best.

Wholesale price should be 1/2 that of retail. That would be worth waiting for IMO. If not, don't order through the co-op.

Membership fee? Whatever for? Everyone pays cash up front for their orders. That way there's no overhead, members take turns running it etc.

What could go wrong? Plenty. Like the person whose turn it is to place the order forgets, or god forbid absconds. Like someone insists on getting their money back because they found the item elsewhere sooner and cheaper.

Anyway, this is probably why everyone doesn't do this LOL!

cheers
Val

 

[Mike R]

Hi folks.
Ron, I think that you did start a worthwhile topic, even if there are a number of major considerations to deal with, that may put the 'kibosh' on the concept.
If every small business start-up / retailer in specialized product, [like our hobby] did enough accurate research, there would be a lot less startups, [and a lot less failures & bankruptcies].
The Co-op concept is not without merit, but a number of concerns have already been expressed here.
Here's a few other points:
-would a wholesaler/distributor actually sell to a co-op, unless the name was somehow incongruous enough to look like a retailer ? Aren't they careful not to sell to MRR clubs at wholesale prices now ?
-when goods cross the border from the USA into Canada, only goods manufactured in the USA or Mexico are duty-free under NAFTA, even though duty was paid when the goods arrived into the USA from overseas. So products identified as being from China would be dutiable in Canada if shipped from Walthers here.
-GST and PST taxes will be applied based on the price paid, by Canada Post or the courier company, and charged to the recipient prior to physical delivery. So will any postage surcharges.
-no GST license is required for enterprises grossing less than CDN$30,000 annually.
-a PST permit is easy to get, but may cause difficulty down the road if they decide to random audit the account...better to pay this tax at the border since there's no profit being taken.

Cost can exceed expectations. Here is a very small example:
I build a few bridges & trestles for resale, so I contacted Grandt Line, [ a fine company] about buying NBW castings direct, as a 'manufacturer'...no problem, even though I could only meet one wholesale criteria out of the three they asked for....I could buy at 40% off list MSP price.
So to try it, I ordered 10 misc pkg of NBW castings last year, they had a list of US$3.00 each, total $30.00, less my 40%, for a total of US$18.00.
a]My Mastercard bill was for US$22.95, due to Grandt's $4.95 shipping charge[ their actual postage cost was less than 2 bucks].
Anyway, my CDN$ Mastercard charge was therefore $36.84.
b]Canada post charged me a $5.00 'handling fee', plus the GST and PST on a '$28.33' value, so total Canada post fee was $9.25.
c] So my total cost for the 10 packs of castings was $46.09 ...and it would be hard to sell them for much more than that if I wanted to.
best regards / Mike