Retailers Laying Year-Round Track for Model Trains

Almost 70 years ago, an employee at the Lionel train company suggested that getting people to run a model train around their Christmas tree might sell more trains. Whether that inspiration came from personal experience or a flash of marketing brilliance is lost in time.

Nonetheless, the custom now accounts for sale of millions of dollars’ worth of trains annually in the United States, though “it’s not a tradition we see in any other country,” said Richard Maddox, chief operating officer of Lionel, the nation’s largest model train builder.

The challenge for Maddox and his competitors is to transform this seasonal interest in the hobby into a 12-month passion.

“Barring some big celebrity showing an interest in trains, this is a fourth-quarter business,” said Adina Ardman, president of Allied Hobbies, a nine-store chain in the Philadelphia suburbs.

Model trains make up a roughly $1-billion annual business in the U.S., according to industry estimates. The figure rises if popular toys such as the Brio or Thomas the Tank Engine wooden trains are thrown into the mix.

By any measure it’s a fragmented industry with no single manufacturer or retailer commanding a dominant share of the market. Indeed, the bulk of model train sales are scattered across thousands of single hobby stores nationally and some specialty toy stores.

But with sales growing 5% to 12% annually in recent years, trains are starting to capture the eye of bigger players.

Cerritos-based Store of Knowledge, whose 91 stores have marketing alliances with regional public broadcasting stations, is experimenting with a concept called Transportation Station.

The chain set aside a quarter of its Orland Square store near Chicago to see whether there’s sufficient interest in model trains, boats, planes and automobiles to merit a separate store. The store quickly ran short on some products. James Berk, chief executive of the privately held company, said he’s trying to determine whether that was a good sign or simply conservative sales estimates.

Based on the success of the project this holiday season, Store of Knowledge might roll out Transportation Station as a stand-alone concept or a themed department in its larger stores. A decision will be made early next year, said James Berk, chief executive of the privately held company.

Even software giant Microsoft Corp. is getting into the action, releasing its “Train Simulator” video game next spring, which will allow virtual engineers to control trains such as the high-speed Amtrak Acela or the steam-powered Flying Scotsman.

Children have been the catalyst for much of the renewed interest in trains through the popularity of Wilbert Vere Awdry’s Thomas the Tank Engine stories. They have spawned toys, a television show, videos and a feature-length movie.

“As Thomas has become so popular, parents buy toys for their children and then become interested in trains themselves,” said Steven Haase, who operates the Trainfans.com Web site (https://www .trainfans.com). “It’s another way parents are bonding with children.”

Maddox believes that the 3-year-old pushing a blue Thomas across a wooden track will want a $300 Lionel Burlington Steam Freight set when he’s older.

Store of Knowledge hopes to tap into that market by selling everything from Thomas trains and videos to the more expensive LGB brand of G gauge trains that can run in a backyard garden, Berk said.

Mindful of past failures by others in the same business, Transportation Station will sell more planes, cars and boats to try to capture a broader market.

Store of Knowledge attempted to jump-start the business by offering to buy Dallas-based Great Train Store Co., a chain that operated 56 stores before it went into bankruptcy. They were unable to agree on terms, and Great Train was liquidated this year.

Analysts attributed its failure to a squabble with its lender, overly rapid expansion, spotty site selection and an exclusive focus on trains. Its demise doesn’t necessarily spell doom for another company attempting to put together a national chain, they said.

“The manufacturers would love to see someone pick up where the Great Train Store left off,” Maddox said.

He predicts the broader product selection of a Transportation Station will improve its chances.

“You should see these NASCAR racing fans,” Maddox said. “Many have huge collections of miniature cars with the same markings as the real-life race cars. They are living vicariously through their hobby something they can’t do in real life.”

That would bump Transportation Station up against Nashville Thunder, a chain of 12 stores in 10 states selling NASCAR models and merchandise.

Allied Hobbies has grown slowly by offering a similar mix of trains, boats and planes. Each year, trains account for about 30% of its sales, Ardman said. That grows to 50% during the Christmas season.

“You need to have a lot of those die-cast models of cars and airplanes if you are going to be in a mall,” Ardman said. “They are the types of things people buy on impulse.”

Store of Knowledge is pondering an expansion as the economy and the retail industry are slowing.

“There’s too much retail in almost every category for the number of customers out there,” Berk acknowledged.

Yet that might help establish Transportation Station.

Berk expects several of the toy and gadget chains--the type that would compete for some of the same dollars--to go out of business. This month, the 309-store Natural Wonders retailer of nature and science gifts filed for federal bankruptcy protection.

He expects other retailers also to retrench, giving up mall space and making mall landlords more likely to offer favorable terms to a new concept from an established retailer.

If he’s right, Store of Knowledge’s train concept will get the signal to leave the station.