How do model shops make money on ebay

[daz75]

I find some of the prices baffling on eBay, I'm clearing out all my dad's old stuff, and check whats for sale before putting it up.

For example just sold a part for £3.99 as jemodels had it on at £4.26 with free posting
So take into account this has cost me nothing to buy, the cost to post was £2.80 plus Jiffy bag etc so call it £3 then minus 10% eBay and 3.6% paypal which leaves about 45p profit

So obviously the shop will have had to buy this at trade meaning surely they are loosing money by using ebay, all very strange

[bomber]

Main reasons they pay a lot less to post and also don't get charged 10% by eBay as there are a business, not sure how eBay charges businesses now but its definitely not 10%.

[Si Coe]

Places that do a lot of mail order pay much less for postage than you as a member of the public do.
Back when JE was in Bury I worked out that it was still cost effective for me to have them mail to me rather than collect from the store. Postage was way less than the petrol to get there.

Actually I remember the JE staff saying that Ebay brought in much of their business and was vitally important to them - so they must have been making some money on it!

[cutting42]

Key is postage charges. £2.80 sounds a lot for a £4 quid part. Shops/businesses will have a trade deal with postal services.

[daz75]

If the part is an odd shape it won't go as large letter so postage goes a lot higher

But yes I guess i see the point on postage costs

eBay is still 10% apparently for toys and games unless you a top rated seller then you get a 1.5% discount, still sounds a pricey way to do business but I guess the amount of people helps

The amount of shops that have gone out of business probably shows most people are deluding themselves and not checking the actual costs of using ebay

[Dudders]

Ecomomies of scale. Sell more for less.you can't run a shop on £10k a month turnover. You need £60k+

[Darren Boyle]

Originally Posted by daz75

If the part is an odd shape it won't go as large letter so postage goes a lot higher

But yes I guess i see the point on postage costs

eBay is still 10% apparently for toys and games unless you a top rated seller then you get a 1.5% discount, still sounds a pricey way to do business but I guess the amount of people helps

The amount of shops that have gone out of business probably shows most people are deluding themselves and not checking the actual costs of using ebay

Exactly why we are not on there and still open for business as a result. The costs just dont add up on Ebay...

I bet a LOT of shops out there wish (or dream more like) about a £720k annual turnover too LOL

[mattr]

The shop is probably buying the part for about 60%-75% of list (dependent on importer, manufacturer, volume deals, special offers).

There is minimal expenditure on actually selling it (they never need to put it on display, don't need to get it out of the box, hang it up on a rack, have someone there all day etc etc) It sits in a box in the warehouse. Postage is probably less than 1/3rd of what you are paying.

Also, another important thing for shops is to keep stock moving, selling stuff with minimal profit (as long as you clear all your overheads and costs) is simply a way to keep in business. The more stuff you sell/order, the better volume rates you get. So selling something at 75% of RRP and *barely* making a profit is good, as next time, you might get another 1% off your supplier order. Which is cash out the door.

Or you might piss the supplier/manufacturer off and get in trouble..........

[Essex2Visuvesi]

Better to sell 100 items and make a Pound on each than sell 20 and make 2

[Moss Models]

Originally Posted by mattr

The shop is probably buying the part for about 60%-75% of list (dependent on importer, manufacturer, volume deals, special offers).

There is minimal expenditure on actually selling it (they never need to put it on display, don't need to get it out of the box, hang it up on a rack, have someone there all day etc etc) It sits in a box in the warehouse. Postage is probably less than 1/3rd of what you are paying.

Also, another important thing for shops is to keep stock moving, selling stuff with minimal profit (as long as you clear all your overheads and costs) is simply a way to keep in business. The more stuff you sell/order, the better volume rates you get. So selling something at 75% of RRP and *barely* making a profit is good, as next time, you might get another 1% off your supplier order. Which is cash out the door.

Or you might piss the supplier/manufacturer off and get in trouble..........

60-75% off list

The simple fact is that ebay shops just don't make money.

I look at the prices they offer and know what the charges are. I can assure you there is no profit left.

We rely on bringing more customers in and then selling direct.

[daz75]

Finally some people who agree with me

People saying about 75% off retail that the shops are paying obviously missed my point about me not paying anything for the part and still only just making a profit, it just doesn't add up, basically people think ebay is this amazing place but most of the people on there are just lining ebays pockets

People ignore the fees and think they are doing well by sellin stuff on tree when actually in some cases they are actually loosing money

[daz75]

And of course I forgot to mention, I have no overheads like staffing costs shop costs vat/tax etc

My mum and dad used to run a shop so I know some of the mark ups and the price some are selling kits for in there is a joke unless things have changed drastically in the price the middlemen sell them to the shops for

[mattr]

Originally Posted by Moss Models

60-75% off list

Of list. Which is 25-40% OFF list. (List being R.R.P)
Time to check your glasses. See if you can get them on eBay.

[milesallen]

A longish answer to the question of making money online and of how do they make money online or not, but is gospel so read on if you've got 5 mins.

The internet is the biggest trading post for nearly any business (not all, you aren't going get your hair cut online), But anyone who says it isn't the place to do retail busines is in denial. We host over 5000 companies in my data centres all doing business online, one customer does sell model train parts right here in the UK but to all over the world with over 50,000+ line items, this business took off when they got sorted online, selling stuff back to where it's made! mad I know.

British manufactures and suppliers are trusted and respected all over the world. Think way beyond your postcode county or country, think global. We've all bought stuff from China on eBay Amazon, Alibaba etc and guess what they all buy stuff to over there too, its a world market place. Yes there is a numbers game in most retailing and being online is the only way to survive. Amazon will do an e-commerce site for around £25 a month. eBay fees are dependent on volume etc. but nowhere near what joe public pays and reduced Paypal fees etc. All about the numbers again.

The more clued up retailers have embraced the internet and online selling, sadly some have not and will soon disappear. The likes of Hobbyking are moving in, 1000's of line items some in the UK most in China for now but the Chinese government subsidises exporting so they will take over unless Bigger brands emerge in the UK.

Maybe theres a lack of understanding just how powerful the internet is for retailing. Maybe theres a scary element to the web for what were and are shopkeepers and the investment to get online properly looks potentially expensive, and not getting the real advice from web developers or not knowing who to ask. (guess what all the answers are online too)

Trust me asking the school kid who can knock up a quick website is not the way to go either. "Quality is remembered long after the price is forgotten" WO Bentley and quality isn't expensive it's priceless" some famous quotes there...

Businesses do get discounted rates on postage and strike deals with the Royalmail, DPD, UPDS, Yodel etc etc. the more you send the cheaper it gets postage is a numbers game all of its own and very competitive. Some even make money at it.

Some retailers soak up postage when you spend over a certain value some don't. So potentially, if you spend say £100 you may get free postage which is always attractive and an incentive to buy,

All that means is that the margins are enough to swallow the postage costs and still make some money. (some post will be by snail mail so don't expect next day on everything you buy, the slower the cheaper)

So that's some margin in postage gone on say a parts that have a retail selling price of £100 or more then the retailer may have paid maybe in the region of £70 for the parts then added margin to that to get to the £100 selling price.

Shops needs to make money so I reckon on 30-40% margin on most stuff some more, some less if they aren't getting this level then they need to negotiate better - easier said than done? - ever tried? clothes retailers work on anything between 100% - 200%. Yep, so when theres a sale on they are still making a margin.

Oh and for those not in business margin is calculated differently to a normal percentage. So if a retailer adds a margin of 30% to the net cost of a parts at £70 then thats not £21, it's £30 (anyone wishing to argue that doesn't understand margin or business). Work that back and you will start to see the potential net cost of the parts cars etc to the retailer.

But small numbers are still small numbers never mind there percentages. So 30-40% margin on a fiver is not a lot. Keeping overheads low is a margin creator, shops are big overheads as too is staff costs. So the shops have turnover a fair few quid to survive.

Even if a shop did £1M turnover, which is probably on the high side, then at 30- 40% margin then its not time to go and buy a private island, rent, wages, taxes fuel, money tied up in stock, insurance etc all eats big chunks out of it so I doubt there are any real big earners in the hobby industry in the UK.

Maybe the retailers will argue over the percentages but buying better is another skill. In the internet world some retailers change prices every hour or even more frequent to stop automated systems tracking their prices by competitors, the toner market is one example of that, yep that stuff that goes in your printer is fought on fierce percentages of pennies.

You will maybe notice some businesses will use terms like "shadow stock" or similar. This means they don't have the parts and dropship it. Dropship means the transactions are through the retailer but a distributor sends the part to you the retailer cuts a commission and never sees the parts. (this is huge part of eBay and Amazon, does someone really have 5000 iphone covers in their stock room and looking to shift them on? no, unless they are mental, they will make pennies on each one and hope to sell loads by drop shipping. never touching the product.

This won't be true for all, but stock costs money so retailers may well keep high turnover items in stock and some stuff on shelves if they have a shop. But stuff on shelves is dead money. In business some retailers will have bonded stock, so have it in stock but don't pay for it until they sell it. Its like having a distributors warehouse in your own warehouse/shop. The best operators in online shopping may have a balance of footfall (shops) and online but the online is where the money is.

Now the days of popping down the local model shop are nearly over, I respect the guys keeping the shops open but reckon the main business is not from footfall but online sales and if it isn't the case then the grim reaper will come a knocking soon. so get online properly its not difficult, expensive or witchcraft.

I think we would all love to go to a model shop and have a rummage about but even here in Manchester a big city there isn't a single shop that caters for buggies or anything RC really (why because the market isn't there and the costs are high too).

The nearest real shops are in Bury or in Leeds but they are not a superstores by any means, I've never been to them but spent a fair few quid in them as their service is very good never phoned or anything all online. (my mrs would have a fit if she got the receipts)

As for making money online or in store there will be a margin in every part and reckon the percentages should still be enough to make some money. The shops may be on rebates from suppliers/manufacturers and distributors. RC gear etc is generally made in the far east (but isn't everything) maybe designed in the UK, US or Europe but more than likely made in China even UK manufacturers of RC cars have a very small turnover as manufacturers they also act as distributors for other brands to bolster sales and profit.

The model industry isn't massive money in the UK economy but it doesn't have to be like that, the online retailers will clean up in the end and thats it.

One model shop in Cheshire only has a Facebook page which is pretty poor, I visited the shop and while it was nice to meet the lady in the shop and her friendly dog I could only imagine that soon there will be sign in the window to say it's all over, because they didn't go online.

With no idea of what they have or sell, are you really going to waste your time driving to a shop to be told "I can order that for you" you can do that yourself without leaving home. Yes theres the retail experience but I would imagine anyone who's bought at TV has been to Currys or similar had a look and then gone online to get the best price. (showrooming)

So heres the word to all and any retailers get online and grow your business that way, your shop window is the global not regional or local. Sitting waiting for the phone to ring or someone popping is is all but over, even if you have a basic website get a retailing one, learn about online retailing and the like, google clicks etc etc and all will be well. get a decent site this is your shop window, theres no need for a big shop and overhead, buy better and move more products.

I'm sure there will adverse comments to online retailing and the good old days, but section your life into web time and shopping on the high street....

[Darren Boyle]

Some well written stuff above, but.....

This entire thread contains some VERY amusing numbers in terms of projected profit margins, cost's and turnovers etc. They are so far off it is untrue.... I speak from 23 years experience as a model shop owner and also 8 years more recently as a distributor too...

[Lee1972]

Go on on Darren spill the beans

[Darren Boyle]

I wont spoil everyones fun on how much money people "think" the model trade are on, but I guarantee anyone else in the trade who reads this will be thinking the same as me.......

[mattr]

Not very much.

Same as many hobby based retail trades. My experience is the bike trade (not what i do for a living!)

"Best way to make a small fortune running a [insert hobby of choice] shop"

"Start with a large fortune"

[daz75]

My mum said the markup at her old shop was just 20% for kits which is a joke, basically the middlemen take all the profit

Imagine someone going in dragons den saying the markup was 20% they'd get laughed out the door

Although the big post above is very informative it does mainly talk about having their own website which is a no brainer, I actually set one up for my mum and dad's shop, this was about 8 years ago, and it made a difference, but my initial point about eBay is still valid because the numbers just don't stack up, especially when model sport sell stuff so cheap, which must be a pain for the smaller model shops

[milesallen]

The margins are assumed, i'm not wishing to state what the industry can command and it's all better if everyone makes a decent margin then they more money is going back into the system. For those in business for year has your business grown year on year? as well established are you are, are you the first name on peoples minds when they want to buy? is trade local rather than national.

I would think bigger ticket items such as kits would carry a lower margin than spares, tyres etc etc and theres more to RC than cars. Anyway hope it gives an insight into online business.

eBay is a bit like the wild west for retailers some make huge amounts some make pennies. Lots of pennies can add up though if its the right product. But sometimes there are too many people selling the same thing, some of the big household name retails use eBay etc to offload old stock and clearance items.

Most eBay retailers will look to have some angle or so little overhead that they are happy to just make modest wages. Wges don't build business and only profit does that so natural selection will generally prevail.

Best to build up your own brand, make people want to buy from you and provide 1st class service.

Think of the most desirable brands and retailers see how they do it and magic wands it just hard work maybe not face to face in a shop but in an online marketing strategy.