Joe Grubba, owner of Factory Direct Trains in Arden, North Carolina, began his journey as an entrepreneur before he could drive a car. Originally a native of southern Florida, Grubba mowed lawns, sold lemonade and saved his money from a young age. Grubba studied business at Florida State University with the intent to become a stockbroker. However, a college internship in the field convinced Grubba that this was not the correct career choice for him.
Grubba is from a blue-collar family, where he learned to work in his father’s radiator shop as he grew up. Upon graduating from FSU, Grubba opened his own radiator shop in Fort Lauderdale at age 22, which he owned and operated for 14 years.
Around 2006, running a radiator shop had run its course with Grubba, and he chose to relocate to the Asheville area with his wife. Around this time Grubba had the opportunity to acquire 200 “Galloping Goose” HO scale model train locomotives. It was the acquisition of these locomotives that launched Factory Direct Trains.
During the years that Grubba ran his radiator shop, he did not use computers to keep books, nor did he have so much as an e-mail address. Grubba was uninterested in using computers and the internet. However, this changed rapidly when he began selling trains. Grubba started a website in the summer of 2006 in order to sell his “Galloping Goose” locomotives, and by January of 2007, Factory Direct Trains was established.
Grubba’s father had an interest in trains and model railroading, which he shared with his kids as he raised them. This interest in trains combined with the opportunity to sell a few locomotives revealed to Grubba a new business opportunity.
Upon starting Factory Direct Trains, Grubba launched himself on a steep learning curve of internet and website fluency. Concurrent with this, Grubba began courting manufacturers and wholesalers in order to build his inventory. Grubba’s initial business model was to be an internet retailer of HO scale model trains. However, as he appealed to some major manufacturers and distributors to become a dealer, he learned that many of the big names he sought required that Grubba maintain a physical storefront location, in which he could display the merchandise. As such, Grubba adapted his plans and established a physical store. Grubba presently maintains a physical store, although the clarifies that he is primarily an internet retailer, which constitutes the vast majority of his business volume.
As he built his suite of product offerings, Grubba did not win the major names overnight. Grubba educated himself in the model railroading business. He became acquainted with the field of manufacturers and wholesalers by such seemingly simple and obvious steps as getting a copy of Model Railroading magazine, locating the list of suppliers in the back of the magazine, then calling each one to see if they would agree to let him sell their products. Not everyone said yes initially, but many did. And as Grubba’s product offerings grew, so did his sales.
Model railroading is a niche industry, which has historically been dominated by traditional hobby shops. In recent years however, these hobby shops seem to be continually closing their doors. It may surprise the unfamiliar, but model railroading is primarily an adult hobby, and a largely older adult hobby, at that. Many of the hobby shops, which were operated by older business owners reflected this demographic. This same demographic was slow to embrace the migration of retail from storefront to the internet. While this trend has caused problems for hobby shop owners who did not update with the times, it has created opportunity for Joe Grubba.
The growth of Factory Direct Trains has not been without setbacks, particularly in the wake of the recent economic downturn. Two years prior to the interview Grubba found it necessary to take on after-hours jobs, sometimes even doing jobs for customers, to stay solvent. But those hard times have passed. Lean times aside, Grubba’s business has overall enjoyed a consistent trend of growth accompanied by an increasing and more sophisticated web presence. Traditional hobby shops are suffering a downward trend, but this same trend has created a vacuum that Factory Direct Trains continues to grow and fill.
As Grubba gradually built his inventory, he was able to get the smaller manufacturers and distributors on board first. Grubba cited one of his earliest partners, Twin Whistle Sign and Kit Company, which is also based in Arden. Twin Whistle manufactures scale model buildings to supplement model railroad displays. In addition to adding to his inventory, Grubba enjoys the opportunity to increase the profile of smaller companies such as Twin Whistle through the exposure his website provides.
Through building his inventory and persistence of courting the business of the larger players, Grubba was eventually able to get a “yes” from the major distributor names in the model railroad industry, such as Walthers and Horizon. They made him work for it, but he achieved his goal. It took Grubba two years from his first request to finally get Walthers agree to distribute their products through Factory Direct Trains. As part of the process, Walthers sent a representative from the Milwaukee headquarters to physically inspect and assess Grubba’s storefront, which was one of the requirements to distribute Walthers’ products. Grubba explained that, once he was able to carry Walthers’ products, he picked up Horizon immediately thereafter, as Horizon is Walthers’ main competitor.
Grubba established a physical storefront primarily for the purpose of gaining approval to distribute products for the large players such as Walthers and Horizon. In the course of meeting this prerequisite, Grubba also found another opportunity to differentiate Factory Direct Trains. He explained that many traditional hobby shops feature train displays of varying sizes and scope. However, such in-store displays typically feature very limited inventory, which usually excludes the top-of-the-line products. Factory Direct Trains differs in this respect. Although it is a comparatively small store, Factory Direct Trains offers excellent service. Grubba’s shop carries high-end scale model trains, specializing in the HO scale, and on any given day a customer can walk into Factory Direct Trains and see anything the company sells operating on a track. Grubba gives customers the chance to “test drive” something before they buy. The same cannot be said for many of his competitors.
In addition to a robust web presence, social media connectivity and comprehensive in-store demonstration, Grubba takes pride in what he describes as Factory Direct Trains’ “bend-over-backwards” customer service. Grubba does whatever he can to meet his customers’ needs. At times he has gone as far as to personally negotiate flexible payment options. He also noted that he has taken instances in which he fielded complaints on errant orders to create new opportunities. By doing whatever he can to right a wrong order, Grubba has exceeded his customer expectations and won over many repeat and long-term customers whose first call to Grubba was to complain about a problem. Grubba excels his larger competitors by offering post-order modifications at the customer’s request. In contrast, he illustrated his point with his own past attempts to change an order with Amazon after it was placed.
Factory Direct Trains employs only two people, Grubba and his wife. However, Grubba has secured services to ensure that his company is always accessible to his customers. Factory Direct trains accepts orders online, but they also accept orders via phone. Grubba has hired a local answering service that fields calls and takes messages and orders outside of normal business hours. He explained that this constant accessibility has been critical for his business. Grubba tries to personally return every message that is taken for the company when he is away.
A user-friendly website with a professional appearance and a large inventory creates the impression of a large company. Conversely, a company whose owner makes personal contact with every customer that seeks him creates the impression of a small and personally connected operation. Grubba explained that both impressions play to his advantage.
The professional logo and sophisticated web presence, combined with occasional large and expensive advertisements in major industry periodicals reassures Grubba’s suppliers and customers alike that they are dealing with a large, competent and established business. In fact, Grubba explained that his web presence creates the appearance that Factory Direct Trains is larger than it is. Grubba’s accessibility to his customers creates a personal connection associated more with a small business, which results in a high rate of return customers. Grubba uses live chat and Facebook to further interact with his customers on a daily basis. He is able to make his company appear both large and small simultaneously.
While Grubba may see only two or three customers in his store on a daily basis, he sees 200-300 customers online daily, and he is continually exploring new ways to use the internet to expand his business. The use of Facebook by Factory Direct Trains is relatively new. Grubba uses Facebook in concert with a customer e-mail list he has compiled to maintain contact with his customers. Grubba explained that he can send out an e-mail to his distribution list and observe a spike in website and Facebook hits immediately. The e-mails typically advise of new inventory, or advertise a sale. Either way, the ability to observe the increased attention and customer traffic that results provides Grubba with valuable real-time feedback. The increased Facebook and website traffic is most always accompanied by sales.
Grubba has been able to build momentum with his company by augmenting his competitive advantages of excellent customer service, internet accessibility and social media connectivity, and a small but thorough showroom with a low overhead business model. Grubba only employs himself and his wife. He maintains limited inventory in his physical storefront. The rest of his products are shipped from a warehouse in Florida, which is sub-contracted. Grubba also subcontracts his phone service, which is far more economical than the alternative of hiring employees to provide the same service. He is also able to decrease his inventory costs by selling product pre-orders, which enables him to sell much of his inventory before he ever pays for and receives it.
Grubba is very pleased with the growth his company has enjoyed. He is always looking to add new inventory and product offerings, and his success with Factory Direct Trains has generated more business ideas Grubba intends to explore. Factory Direct Trains began with 200 items of inventory and an idea, and has grown into a successful international internet retailer. This business provides an excellent example of what can be accomplished with an entrepreneur, ingenuity, and a well-executed idea.
