having worked in a sales environment before i know that the biggest margins come from the largest consumables.
in the case of RC racing its tires

The margins on tires must be huge! it cant possibly cost that much for a set of small thin rubber tires with bumps on.
and for the most popular tires there is no middle man to deal with as they are ordered direct from source and ordered in bulk.
Not saying its wrong that the margins on tires are so high, keeps people in jobs
but i don't have to like it.
because as a racer with a very small budget. £30(ish) every month to 2 months for new tires for 2 cars is effectively eating up my racing budget

Margin on tyres is the same as spares as I have detailed..... This is the largest margin.....

All resale/distribution businesses are basically all doing the same 3 things.

Buy it, Stock it and Sell it. Whatever the "it" is doesn't matter.

As Darren says profit is often seen as a dirty word because people concentrate on the mark up, or how much extra is being added to the price. They should look at the amount of money which is left when the related costs are taken from the sale.

The distribution business I work in, our SDA (sales, distribution and admin) costs run around 26%. I believe the industry average is around 25%, (Darren will need to tell me how he's got his down to 10% because I'm impressed if that's the case.)

So for us to make the return we want, 8%, we need to add 34% to the cost of an item. And lets say the cost is £10, the sum isn't +34% which makes the sales price £13.40, its £10 /0.66 which gives a gross profit of 34% and would make the price £15.15. Or in other words, 34% of the sales price is profit, from which we pay the costs and end with our 8% return.

Not massive is it? Using Darren's £9.99 example its means we've gone to the trouble to set up a business and all the work related to that to make 80p. Or scale it up to our actual 2013 number, we turned over £640 million and achieved a profit of £34 million. Great you might think but because larger deals happen at smaller margins we ended up with 5.4% return.

UK businesses face many challenges, mostly as someone said government imposed taxes and charges. Complaining at the shops isn't going to help because these guys aren't in it to get rich, of course they hope to make a living but we need to remember most shops have a hand in our clubs and keep the racing alive. Without them we don't have a hobby.

This has gone a little off topic but since it has let me ask a question with a view to making a point.

"How many RC clubs are setup WITHOUT significant input from somebody in the RC retail trade and/or a team driver?"

If you buy from abroad to the point that the shops decide not to concentrate on racing equipment and the distributors decided they can't justify assisting their sponsored drivers as the returns aren't there who will run the clubs?

Putting an order in abroad to get a few spares is little hassle these days with the internet ....

Getting that emergency spare / tire you need for a meeting in 1 / 2 days time is much more grief ....

Having to fly to another country to go racing will be somewhat more annoying I feel.

Just a thought :)

Melodramatic I hear you cry, afraid not ..... the reason I now have to travel 50+miles each way if I want to do any club racing of an evening (and yes that does involve entering a different country too)!

Having seen several REALLY GOOD model shops close there doors for the last time over the years, DC Racing, Microtech and many others too, I can assure you that their support to the local racing scene was greatly missed.

Well done Darren for keeping overheads to 10%, that is probably how you've hung on!

Very well said....

The only way we (and indeed any other model shop) can get down to around 10% running costs is in the following ways as a few examples...

• Smaller/cheaper premises than comparable business in other business sectors (Most model shops are small out of town affairs) very few (good ones) are in shopping centres or high profile high street locations compared to say sports shops and/or computer games stores fro instance
• Less staff - walk in a sports shop or GAME etc there will be 10-15 staff on average at all times, your average model shop with have just one or two on hand
• Less or no corporate advertising - you don't see many model shops advertising on TV or the national press, it is far more low key in this business

There are others, but these are all good examples....

I know exactly how it all works and the industry I work in is similar. I had a large Motocross shop with 5 full time members of staff until March last year. I had to find £150k a year just to open the doors. The lease on the building came up for renewal and I decided to Take a step backwards to move forwards. I moved to a smaller family owned premises, work on my own and concentrate solely on hard parts and the business is now stronger than it has been in years. The internet can be brilliant but there's always some idiot who wants to sell everything at cost price. Even with low overheads there's always something eating into your margins.

Couldn't have put it better myself Andy :)

With any RC brand or product brought into the UK as well as the duties imposed there is also the exchange rate to consider, and also the cost passed over by the manufacturer to ship the product to the distributor.

Most if not all businesses in the UK that retail RC products are owned and run by enthusiasts at the end of the day.

From my perspective any profits I make go towards putting fuel in the van to get to meetings and race fees, and towards my rent/rates/utilities/insurances etc. Anything I have left over goes towards our mortgage and household bills which would leave me enough for a pint and a packet of crisps - And with that said I'm more than a happy chap :)

Hi mike, didn't see you with crisps on Sunday, but you've not sent me that invoice yet, so now I feel bad :thumbsup:
Let me know what I owe for those wheels on sunday

Another long established shop is to close its doors announced this week, Morley models in Leeds....internet sales taking its toll.

Its sad but if they dont start using the internet its gonna happen

very true but its also quite expensive I belive to have a nice website with live stock level

Take away all the costs of premises and sorry to say staff.

It is sad - my first car 30 years ago was from morley models (when it was in morley!!) but I have to say their website was very poor and difficult to navigate so I'm not entirely surprised.
I've never run a website, but then I've never needed to, but it think that any shop that wants to supply "specialised" products will struggle without one.
I called approx 4 weeks ago as I needed a rattle can of white and a can of orange - they had neither so I had to buy elsewhere

That is really sad..:( Tony and Gary Marsden go way back...always used to be very friendly and knowledgeable....very nice guys...wish them luck for the future...