Dogs, Fleas, and Slot Car Tracks

There are certain things in life you can count on.  If you have a dog, at some point that dog will probably have fleas to some degree.  Some dogs get more fleas and some dogs get fewer fleas.  They all get fleas to some degree at some time.  A commercial slot car track is the same.  There are certain things that are going to happen and you cannot avoid it.  All you can do is try to make the things that are bad as few as possible.  I know this seems like an odd topic for a slot car blog, but hang in here with me for a while.  I know this will be a long post, but it will be worth it by the end and you will understand about dogs, fleas, and slot car tracks.

Let's take a look at one particular flea.  At least the slot car track owner may consider this person a flea.  This "flea" buys slot car items and supplies over the internet instead of the local track.  This creates a distinct itch for the track owner.  So, how does the track owner scratch this itch?  Let's look at the dog again.  If it has fleas, the dog owner can let the dog suffer or can treat the poor unfortunate dog.  There are many things a dog owner can do to get rid of the fleas.  He can wash the dog.  He can get shots for the dog.  He can get pills the dog takes each month.  He can apply a chemical to the dog that will ward off fleas.  Or, he can let the dog suffer and deal with the itch by scratching and chewing.

Unfortunately, some track owners who would not let their own dogs itch will let their racers itch and suffer without trying to remedy the situation.  I do not try to point a finger at any one track or track owner; this is just a general statement.  Just as true as the previous statement, some track owners do try to satisfy the itch their racers have.  When a dog comes into the house with fleas you get fleas on the sofa, the chairs, the carpet and even the bed.  A dog with fleas hurts the house.  A slot car racer who buys over the internet instead of at their local track hurts the local track by taking away possible revenue that can help keep the doors open.  So, do you beat the dog because it has fleas?  I don't think so.  As pointed out earlier, it is the dog owners responsibility for getting rid of the fleas.  If this is done, he can get rid of the fleas in his sofa, chair, carpet, bed...etc.  Happy home once again....or, happy slot car business.

We know how to get fleas off the dog.  Now, how do we get people to buy from the local track instead of the internet?  I hope any track owners who read this post will keep an open mind and take what I am about to say seriously.  I will speak the truth and only the truth in this matter.  After all, I am on the side of the person who had a dream about opening a track and actually put his money where his dream was.

Recently, I had a track owner share his laments with me about people buying off the internet and not from him.  Let's look at the actual facts of life concerning purchasing slot car racing supplies.  The track owner buys from distributors and the racers buy from retailers.  Even on the internet you will find the prices similar to what the distributors had in mind for the local tracks to sell products for.  So, the reason for internet purchases is not really the price if everything goes right.  For everything to go right it depends on the internet sellers not cutting their profits and the track owner not escalating his prices.  If either one does, then you get "fleas".  Unfortunately, sometimes, both break this rule of economy.  If you bear with me a little longer we will look at what makes this happen and the results that follow.

As much as I admire people who invest their money in slot car raceways, I do believe the following.  Anyone who wants to open a track should first get a MBA degree.  Most track owners do not understand the principles of incremental sales or purchases and the savings these reflect.  At the same time, most track owners I have met do not understand the principle of keeping your cash flowing instead of having dead stock.  These are two of the simplest principles learned in earning a MBA.  Another principle is the principal of adding value to a product, thus adding profit.

Lets look at incremental sales and purchases.  If it cost you $1.00 to buy an item from a distributor, the cost of freight, plus your overhead for the transaction (your time, your phone, the power being on, etc...) would be so high you could not sell the item for a profit because the price would be so high no one would buy it if that was all you purchased.  With each additional purchase you make your cost go down.  If you make a purchase that is large enough, in most cases you can get free shipping.  It has been years since I have talked with distributors about this, but in the past, if you made a large enough purchase, you could get a price reduction on the whole order (understand, I am not saying this still exists as I have not talked with distributors recently).  IF this price break plus free shipping still does exist, then a track owner would be foolish not to take advantage of the opportunity to increase his profit margin.  Note, profit margin is not the same as mark-up.  Profit margin is the actual amount of the dollar spent in your store that you keep.  I once had an argument with a lawyer who owned a jobber business concerning this.  The lawyer was advertising his customers would get a 60% profit margin.  I pointed out to him that the profit margin was only about 40%.  He mistook markup for profit.  This just goes to show you can be smart and still not understand basic sales economics.  By the way, most grocery stores would die for a 40% profit margin.  Most grocery stores work on 20-24% profit margin on most items.  So what all this means is if you buy smart and plan so you take advantage of all the savings you can get, you will have a higher profit margin.

Next, let's look at adding value to a product.  This is taking a product and improving it in-store so you can sell it for a higher price.  This in turns skyrockets your profit margin.  How does a track do this?  Just a few ideas are as follows... A commutator brush goes for xxx amount per pair.  However, if you take a simple tool and contour the brushes so they are pre-broken in you can sell them for a higher price (increased profit margin).  Commutator brush springs are sold in various degrees of stiffness and sell for xxx per pair.  There is a simple tool that rates the spring tension on a scale of 1-10.  You can buy springs in bulk and measure them pairing matching springs.  These springs can then be sold as matched springs for a higher amount (increased profit margin).  Motors can be pre-broken in and sold for a....you guessed it, a higher profit margin.  You add value to an item at no additional cost and make more money on that same product.  This is just three such items that are easy to do.  I am not going to make a long list here for the track owners; if they want my expertise, they can pay me for it and increase my profit margin, lol.  When does all this work get done adding value?  It gets done during the slack time in the shop.  Also, any track owner should learn to work on the cars himself.  By doing this he can take in cars to be repaired and make a profit this way.  A track owner should be able to solder in motors, set gear meshes, straighten chassis, trim and mount bodies, align rear axle oilites, etc...  All these repairs or modifications offer profit opportunities plus an earned loyalty to the track.  The repairs are taken in and done as time allows, to be picked up on the racers next trip to the track.  A track owner should be willing to help others learn how to do these things, but should not even solder a lead wire into place without charging a fee.  All these things add value and profit to a track operation.

Now, let's look at cash flow.  I have visited tracks from west Texas all the way to Pennsylvania and have only seen a few where the owners understood this principle.  At most slot car tracks you will see a bunch of outdated parts no one wants to buy.  No matter how savvy a track owner you are, you will encounter this problem.  The smart track owners, and there aren't many of them, will see the trend and dump their unpopular stock before it becomes completely outdated.  The smart track owner will sacrifice his profit on this item and sell it at cost if necessary to get rid of it.  Most track owners look at these items as items that are already paid for and won't cost them anything to keep them until they do sell.  The problem is it DOES cost them.  It costs them cash flow.  Without good cash flow you cannot keep buying new items to sell.  Think about it this way.  You will eventually, maybe 2 or 3 years from now, sell that item for a whopping 40% profit margin if you are lucky.  If you were to get your cash back out of it early and reinvest in fresh inventory, how many times could you turn your money over for that 40% profit margin in 2-3 years?  Inventory should turn over every 90 days or less.  If it lasts more than 6 months you are sitting on dead merchandise that is hurting cash flow.

So, how does all this deal with the internet and "fleas" at the slot car track?  The internet providers will understand the cash flow situation and will drop the price on inventory that doesn't move.  This is where the internet providers get a bad reputation for undercutting the local tracks.  The problem is they are selling, at lower prices, product no one would otherwise buy, not even at the local track unless it was dirt cheap.  If you doubt this, go to JK Products website and look at their bargain page.  It is a myth that people buy from the internet instead of local tracks to save money.  The real reason most people buy on the internet instead of the local track falls into two categories.  The first is the local track does not have what the racers want.  The local track owner may be resistant to ordering items because he is worried it will become dead stock.  It doesn't matter why the local track owner doesn't have the items desired by his racers. It only matters that the track doesn't have what the racers want.  In these cases the racers will go where they can to buy the products they want.  When a track tries to control their inventory to the point of not having what the racers want, they cannot expect the racers to stay off the internet.  The benefit of purchasing at the local track is having it available when it is needed and not having to wait on it.  The track owner may say "I can order it for you.", but there is a problem here.  The problem here is, it will usually take the track owner possibly two races to get the item in.  The racer can order it on the internet and have it in 2 or 3 days in most cases.  Also, often the track owner may say "I can't order it unless you place an order for x amount of them".  On the internet a person can buy one item if he only needs one.  He is going to pay more shipping for one item if he has to order it off the internet so he will probably go ahead and buy other items he could have bought at the local track to get free shipping (Remember incremental purchasing?  The racers do I assure you.).  At this point, and this really happens, the track will lose $75-$100 in sales because they did not have a $4 item.

Another way "fleas" get into the local track are the track owners forgetting ways of increasing profit margin and going for the easy increase by upping their price.  When you buy a product from the local track for $5.00, then notice the price on the label says $4.50, it lets the buyer know that accepted prices and profits mean nothing to the track owner.  A track owner should not complain if his customers buy products for the suggested retail online because he is selling the same item for 50-100% more than what the suggested price is.  Remember, the racers are customers and you are a business owner.  They do not owe you their business.  You must earn their business.  This isn't a movie and the words "If you build it, they will come" do not apply.

So, how does a track owner get rid of "fleas"?  You care for them as a person would for their dog.  If you do nothing, they will suffer like the dog with fleas and so will you.  Try keeping competitive prices.  You do not have to be lower than the internet.  Just sell the items at the suggested retail price unless you have increased the value in some way.  Keep the items that are desired in stock.  Do not be resentful because someone wants something you don't have.  Try to get it so they will not be forced to buy it over the internet.  Remember, not having that $4 item could cost you $100 in sales.  Keep your inventory fresh.  If it is not selling, put it on sale dirt cheap and get rid of it so that money can go back to work for you.  This will allow the track owner to keep those desired items he does not currently have in stock.

One last little point.....In a marriage, if you are not interested in the things your spouse is interested in, they will more than likely not not be as interested in you.  Be interested in what your racers are doing.  The most successful track owners are interested in and take an active part in what the racers are doing.  The track owners who are attentive and try to help their "dogs" with the "flea" problem earn the loyalty of the racers and the "fleas" soon go away.