A Market In Motion

Hobby enthusiasts unite! According to industry insiders, the hobby market has been thriving—a refreshing bit of news considering the recent goings-on at its toy-selling sister industry. As a result, retailers are stocking up on goods and manufacturers are keeping up with the demand, delivering modernized trains, planes and automobiles to attract both youth and adult hobbyists.

In a market that serves two distinct customer profiles, companies must appeal to a younger crowd fascinated by the allure of remote-controlled, working vehicles and scaled models, as well as to an avid community of more serious-minded adult collectors. While such diversity leaves plenty of room for innovation, it also requires manufacturers to hone in on specific design criteria without losing sight of the importance of play value. With an eye to market trends, a handful of manufacturers spoke with Playthings on how the industry has changed over the last few years, and which factors are currently influencing the overall market.

When it comes to fulfilling customer expectations, hobby vendors believe consumers will accept no less than the best. “Innovation and commensurate value are important than ever,” says Michael Brezette, vice president of marketing for Revell, Northbrook, Ill.

But on top of demanding product that is unique, shoppers are also looking for hobby merchandise that is ready to assemble in an instant. “Consumers continue to expect the highest quality and model detailing 'right out of the box,'” says Doug Blaine, vice president of marketing for Philadelphia-based Bachmann Trains. “With so much competition for leisure time, there's less time for modeling projects; customers want to enjoy their model railroading experience as quickly as possible.”

Marsha Cannonie, special markets sales manager for Nikko/Erector of Plano, Texas, seconds that notion. “People seem to have less time for hobbies with all the demands that come with instant communication and rapidly changing technology,” she says.

Alan Hess, president of Carrera of America, Cranbury, N.J., concurs. “Five years ago, many people purchased kits and would spend weeks, if not months, putting them together. Now it's mostly plug-and-play,” he tells Playthings.

Keeping an eye toward popular trends helps keep product design fresh and innovative, manufacturers say, and several mini trends are helping to shape the hobby market as of late.

Higher quality and better affordability in the die-cast arena has proven its worth, notes Scott Stern, president and CEO of Norscot Group Inc. of Mequon, Wis., a company best known for its replicas of real-life farming and construction equipment. Thanks to the growth of skill and technology available through Chinese manufacturing, this category has skyrocketed over the last decade. “With the product variety and quality that's available today at historically reasonable prices, there has never been a better time to be a die-cast collector,” he tells Playthings.

Slot cars and similar forms of electric road racing also are continuing to see a resurgence, having increased approximately 15 percent per year for the last three years, according to Hess. He attributes this interest to consumers' desire for a “retro feeling … many people are searching for the 'good old days.'” Carrera is also finding an audience with new customers who, Hess says, have never seen a slot car before and think they are “cool.”

On the other side of the tracks, model railroads are experiencing a drive toward digital command and control (DCC) in terms of model railroad operation, and offering products with sound. “With the cost barrier to entry falling and easier-to-use systems, we find customers are responding very well to products in the DCC category,” says Bachmann Trains' Blaine.

To serve a growing niche, manufacturers are placing a particular emphasis on kids ages 8 to 12. Revell, for one, is repositioning its Snap Tite no-glue line to greater foster in kids an interest in building model kits. Retailers will be able to stock shelves with an expanded Star Wars licensed product line in 2008, and the company will continue to expand its R/C and robotics lines with an eye towards those consumers.

Following on the success of its Thomas & Friends products, Bachmann will release train sets under such kid-friendly licenses as Shrek (based on the forthcoming Shrek the Halls television special), Disney (Walt Disney's Carolwood Pacific Railroad) and Hershey (the Hershey's Express).

Also next year, Nikko's R/C line will feature a TriBand feature in almost every scale, enabling up to six vehicles to race at one time. In addition, a lighter-weight vehicle design will foster longer running times and faster speeds.

Carrera will add to its Hot Rods collection in 1:32 and 1:24 scales, as well as in the digital area. Hess says these items were extremely well received this past year, dubbing them some of the “most revolutionary new products that category has seen.”

A size that works well for Norscot is 1:87, which Stern believes “demonstrates the success that can be achieved via the integration of die-cast vehicles and HO scale modeling railroad availability in the same retail location.” The company also recently introduced three categories of entry-level collectibles: 1:64, 1:87 and smaller construction minis. “They are designed to draw more people into the excitement of collecting construction models, to capture the first-time buyer who may not quite be ready to commit to a full-featured model,” says Stern.

In terms of navigating the retail landscape, most hobby manufacturers agree that determining the right partners can make or break their reputation in the business. A mix of e-tailers, hard-core hobby shops and penetration into the mass market helps sustain their business on multiple retail fronts.

The growing number of hobby chains is having an impact. According to Hess, while many of the old-line hobby stores are going out of business, chain retailers such as Hobby Town and Hobby Lobby are taking their place, carrying a large assortment of goods. “They can use economies of scale in their advertising and draw in many customers,” he says, adding that he expects this trend to continue.

The acquisition of mass retail accounts enables some suppliers to expand their presence in alternative distribution channels. For instance, Bachmann bolsters its reputation outside of the core hobby market with sets sold at mass retailers like Sam's Club and Kmart.

Ideally, a variety of retail partners come together to help support all scales of the die-cast business, from mass marketers to chains to online stores. “Hobby shops and specialty retailers need to look for niches of opportunity,” observes Stern. “One [such] opportunity is offering a one-stop shopping experience for serious collectors.”

For those independent toy retailers looking to enter the hobby market, manufacturers advise that having an experienced, educated sales staff is essential for communicating the proper selling points and working with a new customer base. “They should be prepared for serious customer service and repair, and having trained personnel available to counsel and direct customers for the best product to fit their needs,” offers Nikko/Erector's Cannonie.

Some companies make it their business to help newbie retailers do just that. When interested retailers contact Carrera, the company dispatches one of its sales staff to teach buyers about its line and to assist in ordering, displaying and pricing. Hess dubs these sales representatives “our version of business consultants who actually visit each account.”

As important as knowing what to do when entering a new area of business is what not to do. Brezette cautions retailers to first and foremost, understand the serious nature of selling hobbies; they are not toys. “Hobbies have more value as they are an on-going activity that people will pay for if they become interested in it,” he tells Playthings. “They are less likely to be impulse purchases.” As a result, knowing your customer and being equipped to answer their questions to the fullest extent will help to ensure their loyalty.

Whether retailers are hard-core hobby shops or independent toy stores, each has the ability to fulfill its community's hobby needs with a vast product selection and top-notch customer service.

Tree Top Kids, with 10 toy stores serving the Washington, D.C., area (and an Illinois venue set to open next spring), devotes 10 percent of its inventory to the hobby market. Rather than concentrate on adult consumers, the 30-year-old specialty chain appeals to its core customers—children—with kid-friendly offerings, such as Thomas & Friends trains from RC2 Corp. and RC Morphibians from Kid Galaxy.

“Most of our products are purchased by parents for their children, either per the child's request or because the parent enjoys a hobby and wants to share it with their children,” says Susan Hancuff-Sellers, senior vice president of merchandising.

To appeal to these consumers, Tree Top Kids hosts hobby events through the year, including an annual Train Day when a large-scale train track runs through the store. “Children get to color in special coloring sheets and we typically make conductor hats,” she says.

Instead of catering to the younger subset, Hobby Action in Tempe, Ariz., focuses its product selection and service on adult hobbyists ages 20 and over. The 4-year-old store's entire inventory is dedicated to hobbies, with 50 percent centered on R/C (cars, trucks, buggies and parts), and the remainder broken down into subcategories of R/C planes, models, rockets, trains and educational toys. A supplemental Web site boasts more than 65,000 items. The store prides itself on its hands-on customer service, assisting patrons with the tuning, maintenance and set-up of all products, says owner Craig Nelson.

Bob Zednik also understands the importance of helping his customers. The owner of the Parma, Ohio-based Parma Hobby offers how-to classes twice a year to teach the ins and outs of specific hobbies. His 10-year-old shop, which serves adult hobbyists in the Greater Cleveland area, stocks on site 100 percent of its inventory, from product to accessories to supplies like tools and paints. Top sellers include Revell Monogram models, E-Flite's line of airplanes and helicopters and paints from Testors.

With the holidays nearly upon us, retailers have been busily stocking their shelves in preparation for the onslaught of shoppers. While toy makers tend to count on this selling period as their most profitable, does the same hold true for hobby companies?

“Strangely, the hobby industry as a whole traditionally does well in times of economic uncertainty as people enjoy their hobbies while spending more time at home,” Blaine tells Playthings. Bachmann's own products are perennial sellers, although the company's starter train sets move a bit more quickly during the holiday season, Blaine says.

The same holds true for Carrera. Hess notes that hobbies tend to prosper when there is a recession. “People have less money ... and are looking for things to do around the house,” he says, noting that trains, R/C and slot cars all help to fill this void.

According to Hess, about half of all hobby business is conducted in the fourth quarter, with the period of January to March following closely behind. Similarly, for Norscot sales surge during Christmas when business is strong at big box retailers, says Stern.

Hobby vendors remain hopeful that the holiday season will bestow their segment with some of the business pundits are expecting the toy industry to lose due to this year's recalls. Notes Revell's Brezette, “[The toy recalls] are expected to help drive sales of model kits as parents seek more traditional 'old standards' that they are comfortable with.”