The hobby and hard times

I see a good number of hobby firms that are closing their doors placing the blame for their demise on a tough economy, and while that's certainly a factor, I don't think it's that simple.

Polks was born in 1935, not exactly the most rosy of economic times ... in fact the entire hobby infrastructure we enjoy today (Walthers, Kalmbach, Carstens) all were born during the DEPRESSION, so you can't blame economic hard times as the one-and-only reason for hobby firms shutting their doors today.

During hard times, money is tight, but people WANT a diversion or a hobby, so smart entrepreneurs see the silver lining in bad economic times and they adapt their business to meet the needs for a hobby diversion. More telling, I think, is that Polks failed to adapt.

And that failure to adapt, more than tough economic times, is the REAL reason Polks failed to survive. If I check Polks web presence, for instance, it ranks at the bottom of the barrel in Google.

I see other hobby businesses like BLMA, Fast Tracks, TrainTek, and many others, and they're booming. Failure to adapt to the times is killing many old school businesses, including now, Polks.

"all were born during the DEPRESSION"

 The key is they were small start-up's and only had to have a few customers to survive, then as now it takes disposable money to model. Over the years the hobby grew as the middle class grew and now it's shrinking as the middle class shrinks. The companies  that survive will just divide up a smaller pot of wealthier customers . ...DaveBranum

I think you are right, Joe.

I have never gone to Polks web site because I think of them as a supplier of large scale, garden  railroad models.  I think the other telling thing is that they spoke of spending millions of dollars to design, develop, and produce new products.  In a recession, it would make more sense to retrench, and just stick with existing products until the economy improves rather than to keep spending money on product development for what is a non-essential for most people facing hard economic times.

Perhaps ...

Maybe.

Facts are the official sales numbers for the hobby industry show Model Railroading spending is up, while model airplanes and RC cars sales are down. As to how that spending spreads across heads is unknown.

My own research using Google Trends, known hobby demographic patterns, etc say model railroading is entering a period of expansion and growth that should continue for the next two decades.

MRH's own reader survey shows 70% of our readership building layouts - doing the hobby. People building layouts need lots of everything, which means they will be buying hobby goods.

If model railroading spending us up overall, why did Polks fail to get more of that pie? To me, that's the real question - and my guess is they didn't adapt to a changing market, figuring they could just keep on doing things like they'd always done and things would be fine.

Unfortunately, you can't do that in business and expect to have a long term future. As the leader of MRH, I keep asking what's next. No way do you ever want to sit on your laurels with how you do business ... or you will become a statistic.

If you're not moving forward, you're moving backward...

Those that try to stand still, will be left far behind.   

So many examples

There are so many examples of companies in similar situations.  Even the big three automakers blamed the economy for their woes, when in fact, they simply didn't keep up with the market.  One thing we teach in leadership development is that you can't blame anything on anyone else because you are simply justifying that you've done all you can and "the world" caused the problem(s).  Only when you take a cold, hard, honest look at yourself and what you do can you really hope to succeed in the long term.  And that isn't taking that look when things are starting to go wrong, its when they are going right.  You can never get comfortable with your success and those that do often end up wondering what happened.

...

If you look at the companies that have survived, I think there's something else...

Atlas, for example, focused on making good affordable track.  Doing that alone made them into the company they are now.

Kadee made a coupler.  They have wonderful freight cars, but it is the couplers that pay the bills.

It reminds me of Ben and Jerry's, where they pride themselves with their variety in flavors.  Still, their best selling flavor?  Vanilla.  They may have 30 varieties of vanilla, but still, vanilla is the best seller. Their secret to success?  Make other flavors too, but Keep Making GREAT Vanilla.

All the other things create excitement, but it is that central product that keeps the till running. BLMA was created out of N scale drop step grab irons - a lowly detail part, and yet, it had a good market and he had the tenacity to sit there and make them by the thousands.

The danger comes when that market goes away for that lowly product, or you decide your company doesn't need it because it's the low man on the totem pole, because without it, your company no longer has that bread and butter staple.

Make one product that is a relevant staple, and make it well, and do it better than anyone else.

Kadee remains the coupler standard.  The knockoffs fail to be as good.  I worry about Atlas, though, with their supply problems, because they're losing their place in the marketplace.

In running a snack bar, I encountered a fool who thought the $1.75 Monster was our best deal because the snack bar brought in $1.75 very time we sold one.  I set him straight, as I showed him he was buying them for $1.25 each, so he was only making $0.50 on each sale, which meant the profit margin on that piece was 28 cents on the dollar.  I then pointed out our best money maker, the lowly Water that we sold for only $0.25 each.  By the case, we were getting them for $0.11 each, which meant for every sale, we made $0.14.  For a dollar spent on water, we made $0.56, twice as much as we made versus the same dollar spent on Monster.

What "water product" did Polk sell?

People miss this all the time, of course.

Joe, just keep this in mind with MRH...

Based on the Polk story.............

.....................how is the other old time "Big Box" hobby outfit Walthers faring?  I ask this because all of Joe's examples are relatively new businesses that were developed with and during the "change" and didn't have to change with the times.

Peter

...

Walther's staple is their Bible...the big catalog that has "everything" in it.

But not so much, anymore, I dare say...

Is there still a measurable use for a book that has all the manufacturers and their products in it?  Yes.

Is it as saleable?

No.

You can't quite browse a web resource like you browse a book, this is where the difference is...

The Chinese bubble

I think Polk was a victim of the globalization fad. For a while all of the economic forecasts and chicken entrails were predicting that the future of manufacturing lay in China, where key components could be manufactured for 10% of the cost of doing it here. For some areas of manufacturing that is true- electronics circuits do not require a heavy investment in tooling, as the production houses own the the tools themselves. (After all, they are made in China.) All an electronics company has to supply is a file showing the foil pattern and parts layout and that is programmed into the same machine that made last year's model.

For heavier manufacturing, the story is different. A company like Polk would have had to duplicate all of their existing tooling and molds at the China factory, a significant expense. For a variety of reasons, including earthquakes, a change in political direction and a rising standard of living in China, there is less advantage in overseas manufacturing than was projected. Add to that a downturn in demand for whatever reason, and smaller companies are in deep trouble. (The big outfits are pulling back to the US. Even some Japanese auto makers are building cars here for export to South America.)

I don't know the original relationship between Polk and Crest, but if they were the same entity, spinning the Crest product line off is changing with the times, moving from a pretty static market to an area with obvious potential for growth. (How many recent threads here have been about the wonders of radio control? How many new garden RRs are being built?) Spinning off profitable divisions and folding the mothership is a time honored way of avoiding dept. (CF Hostes Brands and Twinkies.)

pqe

Polk Hobby Shop Shut down

Could they ave been a victim of the new health care mandate? Lot's of companies are are cutting back to 29 hours so they don't have to pay health care because it's to expensive. Others are saying the hell with it and shutting down.

Who is John Galt anyway?

Bernd

Not sure on some numbers....

Survey says ...

Joe F wrote:

Interesting ... but what is the 'truth' behind the numbers?  when you say "70% of our readership", do you mean 70% of the 27,000 readers (thinking that was the last figure I saw you post on readership) or 18,900 people responded that they are building layouts?  I think not!  Rather I suspect that 70% of a MUCH small number of readers who responded to your survey claimed they were building layouts.  It would be my guess that the number of responders is weighted more toward those 'doing the hobby' and is likely not a true representation of the entire population of readers -- those who are building layouts would be more inclined to respond to the survey than those who are not.  Likewise, I doubt that a survey of MRH readers would accurately reflect the attitude of the general public; again a greater proportion of readers would likely be involved in model railroading than the population in general.

So out of curiosity, what percentage of readers actually participated in the survey?

MRH readership and survey results

MRH has going on 28,000 subscribers and ~70,000 readers. You can read the magazine without subscribing and most don't bother subscribing - so let's get that straight. The readers number is tricky because we estimate about 1/3 of our audience downloads copies on multiple devices, and/or they read the online edition from multiple devices. So getting a precise readership number is tricky.

Total unique visits to the MRH site in a month is almost 100,000 - however some number of those represent different devices but the same person. So the ~70,000 number has factored out the estimated multiple devices (home computer, work computer, tablet, smartphone ...)

When we say 70%, we're basing this on a reader survey that 3.5% of our readers responded to. That's a large enough number that we have  95% confidence the variance of the full audience is no more than +/- 2.5% - it's something statisticians can tell you about. Just look at election polls sometimes - same kind of mathematics involved.

Statistics ...

Yes, a little familiar with those ... which is what prompted my question.  So much depends on how the respondents were selected, it is so important that the sample is a random one when you are trying to extrapolate results to the general population.  (Yes, there are weighting techniques that can be used to account for the sample not being a truly 'random' sampling; but they are very complex and prone to error.)  

I am not familiar with the MRH survey; therefore I have no idea of how the participants were selected nor how accurately the results of those who participated reflect the attitude/behavior of the population of readers in general.  Most web polls, which get their data from whoever chooses to respond (as opposed to a scientific sampling of the population) are generally not considered 'reliable'.

edit ... applying the 70% "doing" to the 3.5% of the 46,667 readers (2/3 of 70,000 'hits' -- not sure what you meant by 1/3 use multiple devices, so just took the easy route of using 2/3 of 70,000) who responded tells us that 1050 MRH readers responded that they are building a model railroad.

Never heard of Polk Hobby

What did they manufacturer? Did they manufacture items that are still relevant to todays modelers? Is this a Hobby Shop only?

There are many businesses that are at a fork in the road. Due to the owner's age, they may sell the business or they may close shop and enjoy their retirement. If there is no one to carry on a boutique business that was built around the skills of the owner vs. a duplicative business model, the likelihood of that business carrying on is pretty slim.

Some businesses were built around technology that has been replaced by a more modern version. For those, adaptation was never considered and their product line was never refreshed. Stagnation is death to a model RR business. Some may be slower deaths then others.

The hobby is changing, not dying.

Chris Palomarez

You may have heard of them as ...

Aristocraft Toy Trains ... specialized in G-scale with some O/O-27 as well.

https://www.aristocraft.com/

[Perhaps if they had not used the word 'toy' so much ...]

...

Joe, I'm building a layout.

I mean, I have a half built layout in my room, where it will likely stay in it's present state until I move out of the apartment.  Not because it isn't fun, but because it isn't worth my investment.  I switched gears to writing a novel, and the novel set now has north of 348,000 words in it.  It may never go anywhere, but it is far more likely this other hobby will provide a return than my model railroad hobby, but at the very least, the words are free to make out of electrons.

But if I was building my layout, the only staple I NEED that a model railroad company makes is track.  Everything else, at this point, is fully loaded.When I plunge into a home DCC system, I'm looking harder at a SPROG than every before, hugely happy I didn't buy that Digitrax rig like I wanted to back in 2006.

We just saw the new face of model railroading in Building a GE 85 ton steeple cab.  We saw the new face of the hobby in the German HO adventure and the Georgetown & Allen Mountain Railroad.  We saw the new face of the hobby in Afinia 3D Printer and 3-D Explained.  We saw the new face of the hobby when the Bachmann Alco 2-6-0 was released.

Now I Have been building on a layout, at the club.  My expenditures have been rail, ties, backdrop [only because I ruined the old one] and...well, that's it...

On multiple devices and MRH readership

The ~70,000 readers number already has the multiple devices for one person factored out. The raw number is 98,000 unique website visits per month - but that's all unique device IPs for those who are technical enough to get what that means.

We factor into our computations that 34% of our readers told us they download or read MRH online with multiple devices, so adjusting the 98,000 monthly number to account for that gives us ~70,000 actual heads.

Also, it's worth noting our monthly unique visits is up 50% year-over-year. By comparison, the paper magazines are dropping 3-5% per year. It's worth noting this downward slide for paper mags is also similar across the entire paper magazine publishing industry, so you can't take that as any indication of what the hobby is doing - paper publishing in general is down and has been sliding that direction since the advent of the internet in the mid 90s.

ah ... ok

70,000 is the 'number' gotcha.    

(So around 1700 readers responding with layouts ... at least the lower boundary is fairly will defined ...)

What really caught my eye though was the statement that most readers don't subscribe ... any ideas of why this is?  Granted, there are those who simply don't want to risk getting spam so want to keep their eMail address off of any lists ... but more than half?

Personal example:

I am a subscriber.  Enjoy reading the magazine very much.  Enjoy reading the forums here; learning lots of new things; it is good value for my time.  It is also good value for my pocket ... thank you Joe and MRH staff!

I do not download the magazine, but read it on-line whenever I want to.

I generally access the magazine and this site from my desktop machine (and log-in when I do so).

I do not own a mobile device (although I suppose many, perhaps even most, do).

I do on occasion access the site from an Internet Cafe (2-3 times per month?)  I do not log-in when doing so.

So, based upon my personal 'activity', it would seem that I get counted as a subscriber+reader.  But I am also getting counted as 2-3 non-subscription readers each month for a total of 3-4 'counts' out of the 98,000.  Have I gotten it right?

Paper ... honestly, I am very much surprised that it has managed to hang on as long as it has?  It seems like a very expensive way to disseminate information in this day and age.  I suppose they are still making money, or they'd quit doing it?  But you can do so much more with electronic media -- really, it seems almost like a 'no brainer' to me.

[And then I look over my shoulder at the boxes of MR and NMRR Bulletins from a decade past ... and smile.to myself.]

Not buying it.

I am not buying it that the economy is what killed these guys. I did get a chuckle out of someone trying to thrust the affordable care act into the conversation also. The fact of the matter is, they did not keep up with the times. USA trains has pretty well spanked them. If anything, G scale model railroading is on an upward trend, not a downward one. We have an annual garden railroad tour around here, and the number of railroads on the list is steadily increasing. 

As for the smaller scales, I have said it before and I will say it again. We are in the middle of a model railroading renaissance, not a downturn. Some people are just "glass half empty" types sometimes I guess. 

Overextended?

Reading their 2nd paragraph, it looks to me like they bet on the wrong horse and overextended themselves.  Not the first company to do that, but during a recession it can kill you.

I often wonder if G wouldn't have done better if it had stuck to #1 scale instead of all those oddball narrow gauge scales.  Or perhaps if it had started as 1:24 with standard gauge equipment and tracks.

Still and all, I am sorry to see an old name go under, whatever the reasons.

Paul

My thoughts exactly....

When I first read the press release I thought to myself "what economic downturn?"  We (Fast Tracks) have seen consistent growth for the last 10 years, with an increase around 2008....

Model railroaders all migrated onto the internet, that is where the commerce is taking place.  When people point to the demise of hobby shops as a sign the hobby is dying it makes me wonder if they are aware that all that traffic has moved online.  That is where the hobby is.  Of course if you are reading this, you are already aware of that...

Polks blaming the economy as the sole reason for their demise sounds like they aren't in touch with what is going on around them...

-T

Bad internet, bad, bad!

As an internet-based business we've seen strong growth ever since we started in late 2008.

We talked to one well known firm (you would be surprised if I told you which firm) about advertising with us and their response was, "We hate the internet, it's killing the hobby. No, we don't want to advertise with you and we never will".

Interesting perspective, no? I suppose if you consider the hobby to be hobby shops and snail mail order, then yes, the internet is killing those things.

But hold on here - is the hobby infrastructure the hobby or is it people having fun with trains? If you get to the real root here, people enjoying model trains, then you will consider any and all means of making that happen.

Same goes for the traditional paper publishers - is your business putting ink on paper or is it getting information into the hands of modelers? If it's the latter, then it's obvious the internet is the coming thing.

My favorite head-slapper on "what business are you really in" is what happened to the Swiss watch makers in the 1970s. One of their more ingenious workers put together a digital time display - but since it didn't have hands and gears, the Swiss powers-that-be just thought of it as an eye catcher to use at a trade show - so they put it out there for all to see.

And guess what, some Japanese Sieko folks walked by, saw the digital time display, then went back and turned digital watches into a major business that captured the watch market over the next 10 years. Meanwhile the Swiss watch makers' market share dwindled to 10% of what it was just a decade before.

They didn't get it - their business was not timepieces with hands and gears - their business was helping people tell time. Get what business you're in wrong and you can make really dumb decisions that will kill your business like these watchmakers did.