Learn me: Starting a small business (retail)

So I've been unemployed against my will for 3 months now and the outlook isn't promising. I've always wanted to run my own business again as I had a small Sole Proprietorship that sold car parts online 20 years ago and I've gotten two degrees in Business Administration since then (AA and BA). 

I love hobbies. Always have, always will. I'm into just about all of them and have basically a hobby store in my house right now, including a complete Tamiya paint rack. I have sold hobby stuff on ebay since 1998 and am a PowerSeller. I have bought out closing hobby stores multiple times and many many lots of items from individuals that I then cataloged and re-sold.

I want to open my own hobby store with a retail presence and online sales. I'm scared and I don't know where to get start up capital. I am medically retired from the USCG, so I have full health/vision/dental for me and the family for life. I think I'm ideally suited to small business ownership, I just need advice on making the plunge. 

I would love any and all advice from the hive mind. 

As a long time small business owner (in 4 different industries), my only advise is always take the calculated risk. It pays off. Good luck. Text me if you need anything.

Shopify. Unless you want massive debt right off the bat with a brick and mortar, go shopify.

You can get going for like $100 to get s website setup and tied in with shopify sales stuff. 

Sell online - I agree with above comment.

Pretty sure that's how Toyman got his name. I'm sure once he sees this he can tell you all about it.

Location is key.  Do you live near some fairly old (and therefore cheap) strip shopping centers? 

Random thoughts from someone who has worked in two hobby type stores as well as living near a newer one.

My first job at 16 in the mid-80's was at a hobby store in a local mall. Typical stuff: plastic models, early radio control stuff and skate boards.   I left after a year or so and the store closed some years afterwards along with the gradual collapse of the traditional shopping mall.  The sister store would eventually close after the owner's passing around 20 years ago. 

Later, I worked a comic book store in my early 20's located in a strip shopping center.  I made my way up to manager there.  This store started out as a part time side-gig by a couple of friends in a flea market in a blue collar area of the Philly suburbs and at it's high point during the early 90's had grown to 6 stores across eastern PA and NJ.  Through various mistakes and market forces, the chain now consists of two stores in NJ with a different owner. 

Profits are low and hours are long. You probably won't be able to afford any employees for at least a year.   

It'll be hard, but I'm sure you know that.  But it can be done. A new R/C store opened up near me and he's still there after almost 5 years.  He started it out as part-time, and I think he still has a regular F/T job, opening in the afternoon (4 PM) and staying open really late hours (Google says (9:30, but I've seen it open as late as 11PM). He does a lot of R/C car repairs, so that is probably why. The store seems to support itself. Whether or not it provides him with an income is hard to tell.  As far as I can tell, he doesn't have a website other than Facebook and sales are mainly in-store.  He does have a trailer to sell out of when he goes to R/C car races. 

Be comfortable on social media. The R/C guy is on it a lot. Runs car shows in the parking lot. Races in various forms. Etc... He does a good job of getting store name in front of as many eyeballs as possible. 

My general take (having had similar thoughts over the years of opening a comic book store in the same shopping center as the R/C store): You'll want to have at least a year's worth of rent in reserve before you open.  If you have the room at home, start looking at store furniture and fixtures now and have as much as possible before you move in.  Simply put - try to start with as little debt as possible. 

Is there another small hobby store in your area? 

I worked in and managed a hobby shop for 12 years. My username comes from that era. Kids would see me around town and whisper to mom or dad, "That's the Toyman." That job was my favorite job. I honestly loved everything about it. My plan was to buy out the owner when he retired but the industry changed and I couldn't make the numbers work. I would have been trading nickels for nickels. The only reason Randy's was able to stay in business for as long as he did is he owned the building he was in, it was a corner lot in a very touristy area, and he was a bit of an icon in the area after 30 years. 

He ended up with cancer and closed the store not long after that. This was shot just before the building was torn down. 

At that time, magazine companies were selling for 2%-3% more than we could buy products for and everyone wanted you to match their pricing. You can't keep the doors open for 3%. 

The distributors you buy products from are the online companies you have to compete against. Great Planes is Tower Hobbies. Horizon Hobbies didn't even bother to change their name. Hobby Town will sell you a franchise and then turn around and compete with you online. That makes for very thin margins. 

It's a pretty cutthroat business. You will be hard-pressed to make it on just RC hobbies or trains. You are going to have to sell everything. We sold kites, beach toys, plastic models, lottery tickets, paint, trains, planes, boats, cars, wooden models, rockets, yo-yos, pretty much you name it. Randy had a saying, "If 3 people come in and ask if we carry dog E36 M3, the 4th person will find it on the shelf." Which leads to the next problem. You are going to have to stock everything. At any time we had $175k-$300k in merchandise in stock. The instant you tell someone you can order it, they are gone because they can order it too, and probably for less than you are able to sell.

Lastly, it's retail and all that goes with it. Plan on working every weekend, most holidays, and Black Friday. Don't forget Christmas Eve and the day after Christmas. That was the one part of the job I hated. Unfortunately, all of those days are the ones that pay the most. 

So, can it be done? Absolutely. Can you get rich at it? I didn't think so. Would I go into debt to open a hobby shop? No way. Not in these days of cheap online sales. I wasn't sure I was going to be able to feed my family when I was running the numbers much less service the debt. 

All that said, do some research. The industry has probably changed a good bit in the last 20 years. It may be more feasible now than it was when I was going to do it. 

Could you do it online only without the brick and mortar presence? Just about everybody buys this stuff online now. Build the best website you can and keep upgrading it. Sell on e-bay and other places as well as your website. Drag your stuff to swap meets and flea markets. Have a memorable logo and business cards designed. Be everywhere but a brick and mortar store.

The local game shop seems to be pretty heavily reliant on supplemental goods. They have all the craft and paint stuff, a huge selection of games of all sorts, books, toys, puzzles, etc... but they've also had to jump locations 3 times in the last 6 years. They sell drinks and snacks to the regulars, the folks playing MTG or D&D or 40k every other night, and they stock and turn a LOT of each. I know the margin on that stuff is much higher than their "usual wares" and they have about 10% of the floor space devoted to it.
 

There are two "hobby" shops here as well, but both are known for high prices and both keep pretty sporadic hours. I don't know much else. 

Snowdoggie (Forum Supporter) said:

Could you do it online only without the brick and mortar presence? Just about everybody buys this stuff online now. Build the best website you can and keep upgrading it. Sell on e-bay and other places as well as your website. Drag your stuff to swap meets and flea markets. Have a memorable logo and business cards designed. Be everywhere but a brick and mortar store.

All of this.  Rent is a huuuuge millstone around the business's neck.  Far better to invest in a trailer and tour the hobby shows.  Probably less work in the long run, too, though it will be all weekends.  Fill online orders and update your website during the week.

Best of luck!

Following this out of pure curiosity.

It does seem like its futile to compete with something like Amazon where they can undercut you on price and get product to the customers door without them ever leaving the house.  Probably has to be similar to the bookstore situation, only less (?) customers.

If you want a brick and mortar storefront, I think you'd need to host events and specialize in repairs to make it work. Otherwise you'll never be able to beat Amazon. 

Friend of mine did this - he'd host MTG events, DnD events, etc. at his store, and he did custom paint jobs on figurines. 

He was only in business for about 4 years, which was about 3 years and 6 months longer than any of us expected him to last. 

Duke said:

.  Rent is a huuuuge millstone around the business's neck.  

 

 

Rent and lease is the key for sure.. in areas where RE is too expensive. For me almost mid 6 figures in rent a month, but that is the cost of business in this area.. but all my leases are 25+ years. With so much capital investment, if I don't have long term leases in place, I can't sell them.

Thank you for all of the advice so far!

The main focus would be tabletop war gaming (Warhammer), with secondary lines of paint and building consumables, and a small selection of slot cars, models, and diecast. The tabletop games require in person playing and that's what will get butts in the door by having a play space.

Games Workshop (who manufacture Warhammer) only sell to vendors with a brick and mortar location, though you are allowed to sell online. The idea would be to establish a toehold business to get that account set up, and then work the online sales like crazy. Amazon is very weak in that particular market and GW's direct sales are full retail, allowing vendors to discount and compete. 

Lots of consumables (spray paint, thinner, glue) are hard to order online and/or have shipping issues, so even if people buy a majority of their products online, they will come in for that stuff. If they see that I am meeting or beating online prices, they'll start buying the goods as well.

We have a really crappy Hobbytown, a couple of traditional card/comic shops, and 3 gaming stores in the county. One does used items only, one is literally next to a razorwired homeless camp, and the third is super tiny. The market is ripe for a clean place in a good part.of town with space that can host events.

In reply to Javelin :

There is a local gaming / fantasy store that has managed to survive - maybe even thrive - much longer than I ever would have expected, though I'm sure that's partly due to being on a pedestrian-friendly commercial street in a college town..

They stock a big range of inventory for a narrow hobby:  of course games of all varieties (from family game night to really esoteric war games), all the popular RPGs, dice, figs, paints and model supplies, etc.  But they also stock books, crystals, T-shirts, fantasy art, sculpture, pop culture toys, etc.  Effectively anything that can make them a one-stop nerd shop (yes, I'm a nerd).

The other thing they do is host a lot of gaming nights, like most nights a week, and days over the weekend, and not just for the RPGs and fantasy stuff.

In reply to Javelin :

Pokemon.  Also do Pokemon cards.  Trading events, tournaments, release parties.   Have a fridge with drinks for sale and snacks.  Do a few giveaways. 

And apparently the new one is Lorcana.  

I have a local gaming place that has retail board games, Warhammer supplies, and hosting space for gaming.  He seems to do good business, but he started with a little pokemon and now he says about half of his retail $$ is in Pokemon.  

Javelin said:

One does used items only, one is literally next to a razorwired homeless camp, and the third is super tiny. The market is ripe for a clean place in a good part.of town with space that can host events.

So how are they staying in business? If I had to guess, it is because one is a specialized pawn shop without the pawning aspect, one has cheap rent because it is in a bad location, and one that has cheap rent because it is tiny. 

This is not being a wet blanket, just bringing up what my brain immediately went to. I doubt they want to be in a tiny spot or next to razorwire, but it is probably their only affordable options. So consider how you'd do it better in a manner that can still break even. 

Anecdotal evidence-

There are a couple brick and mortar nerd stores by me. For whatever reason, Seminole county florida trades heavily in tabletop culture. That seems to revolve HEAVILY around MTG, Pokemon, Warhammer, and something called Blood Bowl? (IDK what it is). What i notice is they do a lot of their business around events. pack drafts, tournaments, etc. Most of the time, the stores are pretty dead. They have the pretty standard assortment of DND, comics, etc- your usual assortment of game stuff- but when it's a game weekend, they are absolutely SLAMMED. This seems to be congruent with every other store of its ilk. Events seem to be the driving force behind a large portion of the business model for these places. 

I wholeheartedly encourage the idea, personally. While it's not a culture I understand or want to engage in ( I tried to get into MTG. I tried DND. I just didn't vibe with it) I see these kids gathering and doing stuff that I'm guessing wouldn't get out too often otherwise, with a ton of other like minded dudes. I would first though, consider what the tournament and local scene is like for multiple genres. One cannot survive on warhammer alone. Youre gonna need the pokemon kids. Youre gonna need the mtg kids. You would do well to be one of the first accredited lorcana shops in the area. The more times you can pack the tables- the more $$$ walks in. 

I w

Hobbies can mean a lot of things.  It seems like in here it's tabletop games, Pokémon/magic, models, etc.  when I hear it, RC cars are what I immediately think of.  
 

Another thing that comes to mind is:  3d printers, home level laser cutters, vinyl cutters, basically DIY grade fab tools.  There is a decent overlap between them and other hobby people as well... one of the common usages for them is to create figurines/etc.  It could be an interesting market to serve - most of those items have no physical storefront but could benefit from one.

I don't understand fantasy gaming, so I'm speaking of more traditional hobby shops (toy trains, model kits). None of the hobby shops in my area except one still exists that were here ten years ago. My one local shop I refer to as a 'hobby shop' because the owner generally treats it as a hobby. He's only open 3-4 days a week and has printed monthly schedules so you know when he's actually open, because he closes seemingly randomly. His original focus was on trains, but he expanded into a pretty significant model kit business. In speaking with him, the kit builders (well, the train guys too) are almost universally older guys like me (50s and older) who are returning to the hobby of their youth. Very few young people. So, an aging demographic.

One smart thing he does is buys collections of kits from estates or people who just will never get around to them. He makes a good markup on them, particularly if they are kits that have not be reissued.

I buy paints and supplies from him because I can't get Tamiya paints anywhere else around here. I do buy new kit releases from him as the price is the same as online but without the shipping costs (Amazon sucks for kit selection) but the hours and supply are often frustrating. 

I would not recommend a physical store if I were going into hobby retail. I don't see it as sustainable.

In reply to ProDarwin :

From his OP, I agree, he's also talking about model making. But really it's all the same thing - it's about getting people into a somewhat niche store.  And that often takes regular events that draw a crowd.

ProDarwin said:

 

Another thing that comes to mind is:  3d printers, home level laser cutters, vinyl cutters, basically DIY grade fab tools.  There is a decent overlap between them and other hobby people as well... one of the common usages for them is to create figurines/etc.  It could be an interesting market to serve - most of those items have no physical storefront but could benefit from one.

Makerspaces tend to cover that niche, but as far as actually retail selling them? Good luck getting lower prices than already exist online and still turning a profit. 

The chain craft store near me sells cricket vinyl stuff, at double the online prices with half the selection of crikuts own website. Everything is covered in dust because it doesn't move. 

There's a standalone 3d printer shop, the vast majority of his traffic is repairs, the rest is buying old systems and reselling them. It's not even civilian repairs, it's contracted repairs for school districts that have maker spaces. Which is a niche itself but very different from the hobby store ask in the first post.

If I were to want to get into the R/C business I'd offer, as my main component indoor and outdoor R/C race courses. Get leagues going and sell repairs and mods in the Pro Shop to support the guys breaking stuff, or losing to that other guy by a wheel.  If you gave get a tall enough building, maybe indoor drone racing as well. Again, offering parts and such on premises. 
There was a place by me when I was in Michigan that did this. I was hooked. I think, 20 years ago he charged $6 for basically "test and tune". You had all the time you wanted on the track, unless there was a league that night. Have a vending machine or 6 set up, and during events contact a local food truck and invite them.....for a percentage of the take of course. That way you don't have to worry about selling food and the headache that goes with it.

Since you're doing a brick-and-mortar store, I'd focus on the experience. Retail has been suffering as of late because they forgot this key element. They turned their stores into basically warehouses for things you can get now. Who wants to shop in a warehouse? You want to shop because it is fun. And, as a hobby store, it should be a blast to walk through your doors and enjoy your pastime.

When you do start going, be careful of accumulating too much inventory. Focus on top sellers at first, and then expand carefully. Inventory can quickly sink a retail store.

Don't forget marketing, either. Since you're going to be the neighborhood hobby store, be sure to get the neighborhood involved. Do events. Promote them. Get out in the community.

Ultimately, I'll say it again, have fun. Because if you're having fun, others will, too, and when people are having fun, they typically spend money more readily.

Can you sell beer and beverages?  5 dollar beers will have a lot better margins than anything else.