How do dealers survive ??

Very good question.
There are many different answers to this and in some ways, there are no answers at all.
There are 2 different types of collectors, Those who have internet acess and who will buy on ebay and those who do not.
I am not sure about today but as recently as 2002-2003 there were more buyers without the internet.
This is the collector that keeps hobby shops alive. There is also another type of person that shops at the full price dealer, the person that buys a diecast or 2 a year or is buying their first one only because of the subject matter. In my work I am in hundreds of different homes a year and you would be surprised how many people have a few diecast cars but are not collectors, nor do they have any interest in becoming one.

The ebay issue has everyone in the industry concerned from the manufacturers to the wholesalers to the dealers. They do not have a real plan on how to deal with ebay and I don't really think there is a way to do it.
You have seen ill-fated plans by various Mfg's to try to reel in what the dealers are charging to an same price across the board policy (including the most recent by AUTOart) but these plans will always fail. You simply cannot sell something to another party and then tell them what they have to charge for it.
All it will take is for containers of cars to start backing up in warehouses and those huge price increases will disappear.
Plus, some of the Mfg's have really screwed over the dealers by drasticly dropping the price on selected models way below what the previous cost was.
How would you like to have bought 2 cases of cars at $35 per only to have the Mfg. wholesale them at $20 a month later and see other dealers selling the same car for $30 retail? You would take a huge hit and this has happend many, many times.

Yet, this does not only happen in the diecast world. Just ask yourself how does a bookstore survive? Music store? My wife collects Madam Alexander dolls and she went to a local doll shop and the prices were almost twice as high as she could get them online. The list is endless.

Untill the day comes where everyone is willing to shop online, the local shops will always have a place.

Sorry this got so long winded :giggle

The guy whom I buy from is the importer, wholesaler, stockist, distributor, retailer for AUTOart and Kyosho and hopefully in the coming months for Minichamps. He makes a clean 30-40% profit on each model even after deducting costs of all overheads. Even the other retailers make a profit of nothing less than 20%.
I cant be saying that I will not buy from him cause I know he makes profits. I need him as much he needs me. I cant buy from the net (the risks are too great and the custom duty will be killing) so I have to turn to my hobby shop for my diecast fix. Like Jeff says (and he is one of the best people here to answer your query), there will be dealers as long as there are collectors like me.

P.S. The rates here are almost on par or maybe 4-5$ more per model when you compare them to online stores like Scale18 or such or modellisimo. That premium is ok cause I get to inspect the models before I lay my money down. More peace of mind that ways than hoping the model I order from ebay is in good shape when it gets to me.

This may come from my economics knowledge.

But the simple reason is the "knowledge of the market". I myself was stuck to a few local dealers before joining DX. Now I know about all those internet listed sites and know the best deals. They normally come from the net.

Most of the people who buy diecasts are not essentially collectors. They just like how they look, probably do not even take car of dog leg hinges and other imperfections. Others want to see the model before they buy it, so, they will not buy from the internet.

However, dealers very well know the treath of internet. I once heard two local dealers talking about this treat. They where very concerned. So, I, pointed out that I very well know about the deals I can get from the net on certain cars.... And guess what, I get special discounts :giggle

I am sure that local dealers come across more costs than internet websites sellers, but still, I think most of the prices are a bit inflated because most of the community does not know.

Still, one day, local hobby shops will have to reduce their prices or else most of them will have to close down as most of the people are now very well internet users.

Winstoncds and Max Power have already said what I want to say. But I'll just add my own experience.

I live in Canada, and most of the Ebay items are based in US, which means shipping costs are much higher than the listed ones. But most of the time, even with the shipping costs, it's still a bit (a few dollars CDN) than buying here. However, I have to contend with duties, taxes through the Canadian Customs, and I can't guarantee that the product isn't busted.

Looking at a lot of the eBay sellers, they list a clause where they basically say "screw you if the item's busted. It ain't our fault, since it left our warehouse fine". It may be true for some, but I personally didn't see the item in perfect condition being put into the box, and shipped. How do I know which dealers are shady ones where once in a while, they'll pass off a busted model as a perfect one, only to blame the postal office?

Also, at the store where I buy my models, the prices, as I said, are only a few dollars higher, AND I get to inspect the models. The owner is a really nice guy who always opens up the boxes (the styrofoam boxes from the AUTOart millenium models are ALWAYS sealed, yet he opens them for me) for me to inspect before I purchase. Since he's a collector himself, he knows that he should let someone inspect the product, to make sure no arguments come up later. He's so picky that he says he doesn't buy models if the cardboard box outside is bent/broken ANYWHERE!

for example, I can buy an AUTOart Millenium from him for $100CDN, which is around 76USD, and on ebay, you're looking at around 50-60USD + shipping for the item. Shipping for a 1:18 to Canada usually sets me back about 15-20USD, which makes it range from 65-80USD total (85-104CDN). So max I save is around $15cdn, which isn't really worth it, in my opinion.

I feel that the situation in the UK is that Model retailers are losing out big time to internet sales .
We used to have a large Model chain by the name of Beatties , who had 2 very big and well stocked shops in Newcastle and another in the Metrocentre shopping complex in Gateshead . Due to whatever reasons , falling sales and spiralling costs no doubt , all the shops were closed down years ago . and for a short time there were no big high street retailers in my area .
They were taken over eventually by Modelzone , but even now their stocks are nothing compared to the previous company , and they always seem to have a year long sale to try and move their stocks .
A friend of mine runs his own model shop , and I can remember, not too long ago , his shelves overflowing with UT`s , AUTOart`s , Kyoshos and literally rows and rows of 43rd scale Minichamps . Visit the shop today and most of them are gone , replaced with Hornby railways , Corgi items and EFE buses . Anything desireable or new releases usually have to be specially ordered in , but he needs to do it this way as he cant justify stocking high numbers of expensive items as he just hasnt the customer base that he had , due , he assumes , to internet buying.

I myself am guilty to this , as I probably buy 98% of my cars online or through Ebay. Personally I dont see why People are put off with the Ebay thing , I have been buying (and selling) for almost 3 years with only 2 experiences of non delivered items in all that time . It is without doubt the best place to find that rare or discontinued item .
Unfortunately Ebay kills the true value of a model . I see sellers undercutting other sellers by £1 on an item , then someone else does the same in order to sell their item. Soon you have a situation where the model is available for just about trade price. How they make a profit is beyond me .
For instance , the Minichamps Aston Martins are available to me for £11.33 + vat @17.5% = £13.23 .
Look on Ebay and they are available for as little as £14.99 , so that means the seller makes £1.76 profit , minus listing , selling and paypal fees. Where is the profit ? How can they sell them like that ? It beats me .

Even online retailers are cutting each others throats to move stuff . I paid just £58 for 2 x 1/6 Minichamps Ducatis and an AUTOart Lotus Esprit earlier this week .Shipping was free as I spent over £25 . How can they sell them like this.......no wonder people are going out of business trying to compete with online prices like those.

So , as to your origional question.......you tell me , because I dont know how they do it here in the UK .

Just my .02:

For me, 1/18 models I HAVE to buy them in person, the size of them makes shipping extremely expensive, especially buying from the States. If it wasn't on sale at a significant amount, I'm not buying them. Buying from Germany has its perks, you can't beat flat rate shipping, but the strong Euro and taxes coming into Canada kill all the good deals.

I've had a long chat with my local dealer recently, and he was telling me there are simply too much competition in Toronto, and a lot of his customers are not diecast collectors, they buy models as gifts for others. There are some regular customers but most of his sales goes to people buying gifts for birthdays, father's day...etc. With this in mind, the kiosks and dealers downtown would have more walk-ins because most people would probably walk around those places more often. While they are expensive, they don't buy as many models as we do, and they probably want to buy it quickly because they might not have planned a month before hand to get a gift for someone.
Of course, there are also the informed and uninformed buyers, it all boils down to whether you think the model is worth it or not given at a specific price.

ahha! AUTOart is already doing its own selling online!
But a few problems:

1) prices are just MSRP, so unless you're looking for a specific model, usually physical stores will have them cheaper (especially during sales)

2) shipping is from HK. That's going to take a LONG time to arrive.

3) weirdly, sometimes it seems their site isn't as up-to-date as physical stores. I've seen some stores sell models that aren't even on sale on the site yet! This is a rare occasion though.

Some good points:

1) rarer models are purchasable, assuming they have them in stock (STi 22B, anyone?)

2) they're the manufacturer (or endorsed by the manufacturer), so they should be pretty safe to deal with.

3) Their shipping isn't TOO expensive. But duties, oh the duties!

I wish they'd show more pics of the models though, since 3 or 4 isn't enough. Most of the time thye don't even show the engine!

Great topic as well as input :cheers

From my personal dealings with retailers, both brick and mortar as well as online (without a store), this is a really tough market to make it in for many reasons, some more obvious than others.

As was mentioned earlier, some brick and mortar stores manage to stay in business because of new collectors and/or buyers who are not knowledgable. But these types of buyers will only buy so much, so this type of consumer is bot a guaranteed source of residual income.

I used to be one of these buyers. My first ever big purchase was a GMP Sunoco Camaro, I thought I was getting a great deal on it because the shop owner told he would give me 10% off, final cost with taxes $94...glad I found the internet :lol

For those brick and mortar stores that do offer online sales, they stand a much better chance of surviving because they can touch a broader market and they are better in touch with market prices. However, they face other challenges with overhead costs such as rent and insurance to name a few, they can say a prayer if they have employees as that too will contribute to their overhead.

For those that do not offer online sales, its like death sentence as they are missing out on so much. I cannot understand these types of stores, with all of the technology available, why not take a advantage of it. They are truly the dinosaurs of the retailers and I wish them the best as they will certainly be needing it.

For those online retailers who do not have a brick and mortar establishment, this gives them a significant advantage as they have less overhead and broader customer base. There are many reputable online retailers who do not have storefronts and are more recognizable than those retailers with storefronts.

But back to the original question, it is possible to remain in the hobby as a storefront owner. How well you do in terms of yearly income is the bigger question.

Personally, I have no problem supporting the local diecast establishment, but I am guilty of "wanting more for less" just as the next person, [articularly if the prices are drastically different as they can often be when buying from a storefront rather than online. If I am able to find an item online for a significantly lower price, then I make the purchase online providing the storefront cannot offer a competitive price. I do it with other goods I purchase that are not diecast related, so the consumer in me often has a hard time differentiating the diecats from any other goods I purchase.

From some of the things that I have been a witness to, I personally believe that SOME retailers (and even companies) lack business sense and savy. For those hobbyist/collectors turned businessman/businesswoman with storefronts and are able to forecast consumer market trends and traits, they will be fine and will continue to serve the diecast market to the end of time. Its those storefronts that are not in touch with the market trends and traits that will ultimately close up shop, which is always unfortunate for them as well as their immediate consumers.

Not to mention those great storefronts who have closed their doors due to not being able to compete in this competitive industry.

Tough, tough market this hobby can be.

In all of my writing, I forgot to mention Luciano making a good point. I think we will see more companies offering online sales. Will it extend across the board...I'm sure for those who have not committed to offering online sales, they are watching with great interest.

kkwhung said:

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I am sure he knows his business operations far better than I do and I make my living looking at business infrastructures/operations for a living.

There has always been risks associated with even the smallest business venture due to the expected ROI. Time management as it relates to logisitics, inventory and finances have always outweighed that of the retail front end, thats always been an issue with retail world, nothing new there. I spoke with an online retailer a few weeks ago and he was telling me it took him two years to to get his site in place, I presume that doesn't include the daily maintenance and continued marketing needed to drive the retail side.

I have a business model that shows the differences between business that offer online marketing & sales compared to those who rely on storefont sales only. The statistics are staggering, albeit, none of the companies are diecast related.

As far his concerns with the credit card companies, thats a new one on me as I don't know many if any businesses who don't accept plastic.

I can certainly understand the challenges this retailer has in front him, and as I mentioned I wish him and many others like him the best.