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How to Start a Toy Store Business Online

Toy Shop Business

Do you want to start a toy store online? If YES, here is a complete guide to starting a toy store business with NO money and no experience plus a sample toy store business plan template. 

Children love toys, which is why it is the most common gift that adults select for children during their birthdays or whenever there is a holiday. Most children in the united states have more than one toy and regardless of the number they have do not mind getting more.

This why starting a toy store business is a lucrative venture for an entrepreneur who has the passion, dedication and knowledge. Before starting your toy store business, it is important that you love toys as this will give you an edge over someone who is unfamiliar with the market.

While researching the toy market before starting the business is important, it is also important that you network with others that run such businesses in order to ensure that you get the inside scoop on what the latest upcoming toys will be.

However, while having the desire to run a toy store should be enough, it isn’t as there are other aspects involved when looking to start a business and ensuring that you are able to attain your goals and objectives.

In starting your toy store, you can decide to make it very general by offering a wide variety of toys in order to attract a wider range of customers or you might look to specializing in niche products in order to focus on a select market.

This is why it is often advised that entrepreneurs conduct a thorough survey of the business before starting it as this will enable them have an idea of who their target market is and therefore what products and or services will suit their style of the intended target market.

While the toy store business can be seen as any other retail business, there are still differences because unlike other businesses, the amount that you can charge your customers must be within the range of what the manufacturer suggests.

Steps to Starting a Toy Store Business Online

1. Understand the Industry

As disposable income continues to rise because the United States is slowly recovering from the 2008 – 2009 recession, sales of toys will continue to increase. Even though the input prices have continued to rise in such a way as to temper profitability, it is believed that the continuing growth of the e-commerce sector will cushion a lot of losses.

The industry generates an average of $31 billion but between the periods of 2011 and 2016, there has been a decline of -4.4 percent. There are more than 128,000 toy stores in the United States employing more than 133,000 people.

The industry has experienced a low level of capital intensity even though the ratio of the cost of labor to capital expenditures vary based on the size of the company. Industry operators have to invest a lot on their employees in order that certain operations of the company such as customer service, marketing and inventory, can be carried out. Another significant cost for operators in the industry is depreciation.

Even though brick and mortar retailers have to spend a whole lot in purchasing displays, shelves as well as computerized systems, online retailers have to also spend a significant amount on the heavy machinery that is needed to move their goods around warehouses.

Between the periods of 2011 and 2016, toy stores lumped together with the hobby industry, according to IBISWorld, has continued to struggle to rebound from recessionary lows even though the overall economy has seen great improvement.

The reason for this is the amount of competition that discount stores as well as e-commerce channels have brought which has absorbed demand especially as these stores not only offer low prices but also a one-stop-shop experience for customers. During the five year period, discount stores have become leaders in this industry.

According to The NPD Group, toy sales in the United States surpassed $20 billion in 2016 growing by 5 percent. The data according to the group showed that the industry grew by 16 percent between a 3 year period – 2013 and 2016. According to the NPD, blind packs were popular gift items and sales grew about 60 percent enabling the sector gain tremendously through the first three quarters and continuing through the fourth quarter.

The games segment during this period grew at about 21 percent generating revenue of more than $300 million with games for children as well as adults showing tremendous growth.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those who visit toy stores are parents that have younger children because young children are always changing which means their taste in toys will continue to change. Demographics might constantly change depending on the kind of niche that the toy store is focusing on. Therefore in defining your demographics, you should take your kind of toy store into consideration.

3. Decide Which Niche to Concentrate On

A toy store typically sells toys that are either new or used as well as games and hobby goods. Because toy sales peak only during certain periods, many toy store owners usually combine other products or services in order to generate sustainable revenue.

While niches are however good, it is best that you ensure that you have conducted a thorough research about the niches you intend to go into, the target market available and how profitable they are so that you do not end up wasting your time and resources.

The list of niche ideas within this particular business that one can specialize in includes;

  • Traditional toys
  • Retro toys
  • Collector’s items
  • Traditional games and gaming supplies
  • Electronic and video games
The Level of Competition in the Industry

The toy store industry is highly competitive as traditional toy manufacturers are experiencing stiff competition from digital gaming products, products that are analog  in nature but provide digital play as well as the digital media, where there are lots of games that are stealing the attention of children. One factor that has increased competition in this industry is the low barrier to entry.

The key driver for toy stores is how much the consumer spends. Individual companies find that they have to go extra lengths to generate traffic as well as engage in effective merchandising in order to remain profitable. Small companies compete effectively by offering customers specialized products, serving a local market or providing superior customer service; larger companies on the other hand usually offer deep discounts and wider selections.

If you are therefore looking to start your toy store business in the United States of America, you should be aware of the fact that you will not only be competing against large stores that have already had a share of the target market but also against online retailers and digital media.

4. Know Your Major Competitors in the Industry

According to industry statistics, the largest retailers of toys have a major share – about 70 percent – of the total toy store market in the United States. There are reasons why these brands that are well known have remained on top and this is due to the competitive pricing they offer clients, their customer-friendly environments as well as innovativeness in their products.

As one who is just starting out, knowing who the top players in your industry are will allow you to remain focused on achieving your goals and objectives. Some of the well-known brands in the toy store industry include;

  • Toys R Us Inc
  • Target
  • The LEGO Store
  • GameStop Corporation
  • Walmart
  • Amazon.com Inc
Economic Analysis

Domestically, the toy industry is seen as a low growth industry that is not only stable but also mature with a retail channel of distribution that is highly fragmented. The industry has low barriers to entry which has led to the high level of competition being exhibited in the market place.

The competition especially from online retailers have caused prices to drop across board and therefore lowering the profit margins. This is bad for operators in the industry especially as toys are regarded as seasonal items.

The dynamics of the industry has long been impacted by shifting demographics because women are choosing to have fewer children. According to statistics from U.S Centers for Disease Control and Prevention, the average age for first time mothers was 21 in 1970 and had risen to 25 in 2008, stating that the birth rate had continued to experience a decline since 2007.

The long term growth of the toy industry in the United States market is expected to remain between 1 and 2 percent annually for a long period of time.

According to a consumer research firm, NPD Group, the toy store industry in 2012 generated revenue that was nearly $17 billion even though the Toy Industry Association (TIA) stated that the total revenue generated by its industry was $22 billion.

Even though the TIA estimated growth during this year to be at 2 percent, the NPD stated that there was a decline and that the industry’s growth was at a negative of 0.6 percent. Future growth for this industry is expected to remain low but stable.

5. Decide Whether to Buy a Franchise or Start from Scratch

One of the decisions that you will have to make when looking to start your toy store is whether to start the business from scratch or to buy a franchise. Because no decision is a bad one, you will have to ensure that you choose that which will enable you attain your goals and objectives quicker.

Entrepreneurs who are looking to control the pace of their business are those that will likely look to starting the business from scratch especially if they have had previous experience with the kind of business they are starting. While starting a business from scratch might overwhelm a new entrepreneur, having a business plan in place helps to ensure that one is guided when it comes to certain aspects of the business.

Buying a franchise is considered a very suitable decision for an entrepreneur who is not looking to bother with the rudiments of starting a business from scratch. A franchise system offers the entrepreneur a support system from marketing to sales and customer service, leaving the entrepreneur with little to worry about.

However, while looking to buy a toy store franchise, it is important that you thoroughly research on the franchises available so as to know which one will suit your budget and goals that you intend to attain; just buying any franchise might lead you into wasting your money.

6. Know the Possible Threats and Challenges You Will Face

As an entrepreneur, you should be aware of the fact that no business can run smoothly without experiencing several hitches along the way. One thing you should note is that while some challenges might be easy to handle, not all that you encounter will be solved and so when the unsolvable ones come, the best you can do is remain optimistic, whilst focusing on running your business.

Some of the threats and challenges that you are therefore likely to face when looking to start your toy store are; seasonal purchase of toys, intense competition from already existing toy stores and changing industry trends as well as consumer’s preferences and lifestyle.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

When starting a business, one of the most important decisions that you will need to make is what legal entity would best suit your company.

The reason why the legal entity is very important is because it determines how much of an impact your business is going to be able to have because while some legal entities might be easy to operate, they might limit your business expansion potentials and so it is quite necessary that you have made thorough research on all legal entities in order that you might determine which would best suit the kind of business you intend to run.

For an entrepreneur that is looking to start his business, four legal entities that are available; sole proprietorship, partnership, Limited Liability Company (LLC) and corporation. You must consider the attributes of each legal entity in order to decide which one will help you achieve your goals and objectives faster.

If you aren’t sure what dynamics will work for you, engage the services of an attorney to help you out. The attributes that guide these legal entities can be thoroughly reviewed by you in order to have an idea of what legal entity will be most appropriate for you.

The attributes to be concerned with include; ease of set up and ownership control of the legal entity, how flexible the legal entity is, what the taxation structure is and the extent of liability that you will be exposed to under the legal entity.

Most entrepreneurs in the United State start out as sole proprietors due to the fact that this sort of legal entity is very easy to set up and control and there isn’t much paperwork that the entrepreneur has to deal with. All profits that are accrued in this business goes directly to the entrepreneur and paying tax is on the entrepreneur’s personal income returns.

The liability of the entrepreneur under this entity is unlimited as the entrepreneur can be personally held liable for any debts that the business accrues. If you are however going to run a toy store that is not only large but will be in other locations, then it might be best to incorporate your company so as to limit the extent of liability that you will face.

8. Choose a Catchy Business Name

Before you can apply for a business license or incorporate your business, it is necessary to have a name that will be used to identify your business as well as the industry that you are in.

While choosing a business name might look easy, it is not usually so as the business name must satisfy certain criteria such as being unique, easily memorable and indicative of the industry which you are in. Some of the catchy business name ideas that are suitable for a toy store include;

  • Wilko Toy Stores
  • Walkaman Toys
  • Quaint Toys, Inc.
  • Clan Toys Corp

9. Discuss with an Agent to Know the Best Insurance Policies for You

Once you have started running your toy store, you should know that anything can go wrong within the store and so it is necessary that you have the right protection in place for your business, your employees, yourself and your bottom line.

Having insurance policies means transferring the risks of running the business to someone else. It is however necessary that you know the right insurance policies to purchase so that you can set aside the right budget for it. Engage the services of an insurance agent to help you in choosing the right insurance policies for your toy store.

Some of the insurance policies that you should consider purchasing when starting your toy store business in the United States include;

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

Owning a toy store does not require that one applies for an intellectual property protection since most of the toys in the market are not so unique; however if you are inventing a new toy, then it is best to apply for an IPP in order to protect your idea from being stolen.

You might wish to apply for intellectual property protection on the name of your company, logo or any slogan you deem should be appropriately covered.

11. Get the Necessary Professional Certification

The only things that are required when looking to start a toy store is that you have the capital and knowledge about the business you are looking to start. Customers walking through the door want to find the right toys for their kids and are therefore not interested in whatever professional certifications that you might possess.

In order to run your business and attain the success you require, having a professional degree in business management or even hospitality management can help you run your toy store better but it is essential to note that customers are not concerned about this.

12. Get the Necessary Legal Documents You Need to Operate

When starting any business in the United States of America, it is expected that you have all the necessary documents in place so that you do not end up falling into trouble with regulated authorities.

If you do not know what documents will be required from you when looking to start your toy store, it is best that you ask others who are in the same business as you or engage the services of an attorney who will help you in getting all the legal documents required.

Some of the legal documents that you will need in order to run your toy store include;

  • Certificate of Incorporation
  • Operating Agreements
  • Business License and Permit
  • Business Plan
  • Insurance Policy
  • Employment Agreement
  • Seller’s Tax Permit
  • Federal Tax Identification Number (TIN)
  • Employer Identification Number (EIN)

13. Raise the Needed Startup Capital

Whether looking to start a toy store business on a small, medium or large scale; it is important that the right amount of capital is at hand so that you would not have challenges starting the business. Many entrepreneurs have fantastic business ideas but due to lack of capital have been unable to bring their ideas to reality which is why even though sourcing for capital isn’t an easy task.

Ensuring that there is a business plan at hand makes it easier for the entrepreneur to not only find out how much will be needed to start and run the business to sustainability but also to convince external investors of how serious and committed the entrepreneur is about the business.

Some of the financing options that you can explore when looking to start your toy store include;

  • Generating part of your startup capital from personal savings and sale of stock
  • Sourcing for soft loan from your family members and friends
  • Applying for loan from the commercial bank
  • Getting a business partner to share the startup capital with

14. Choose a Suitable Location for your Business

Where you intend to locate your business is very important in how your goals and objectives will be quickly realized. The impact a location has on a business especially one that is competitive in nature is why many entrepreneurs take their time to get an appropriate location for their business.

Most toy stores are usually run out of a storefront and if this is what you intend to do; you should ensure that the landlord has obtained a valid Certificate of Occupancy (CO) that confirms that government regulations, zoning laws as well as the building codes have all been met before your lease payments commences.

If you are going to carry out major renovations before starting up your toy store, you should ensure that a new CO is issued before commencing lease payments.

If you are looking to purchase or build a location by yourself, then you should consider engaging the services of a real estate agent as they will have the best idea about the appropriate location to buy your land especially as they have information concerning zoning requirements. You should ensure that the real estate agent has an idea about the budget you have for a location.

If you are going to be purchasing or building a location, then obtaining a valid CO from the local government authority will be your own responsibility. You will also need to ensure you review all building codes in order to ensure that your toy store is in compliance.

Ensure that your location is in an area where there are lots of foot traffic and where customers can easily access it.

15. Hire Employees for your Technical and Manpower Needs

There are a variety of skills needed for entrepreneurs who are looking to open a toy store business because you must not only have the personal experience as a toy collector but you must also be enthusiastic and knowledgeable about the business and industry trends if you intend to have a competitive edge over your competitors.

Having experience from working previously in a toy store especially in a managerial capacity will be very helpful when looking to start your toy store business.

The exact amount that you will need in order to start your toy store business will depend on certain factors and one of them is location because some locations are more expensive when renting and so while it is necessary to ensure that your location is close enough to attract your intended target market, it shouldn’t cost so much especially as it will be a while before the business can generate enough revenue to cover overhead as well as running expenses.

The basic way to make money when running a toy store is to order for toys, add your markup and then sell the toys, thereby making profit on each toy sold.

However, this doesn’t mean that the money will be coming in steadily especially as you will have to compete against other brick and mortar stores and also online stores and so in order to ensure that you have a steady stream of customers, you should focus on offering personalized services to your customers such as home deliveries, free storage or offering layaway plans.

There are a variety of expenses that running a toy store incurs and such expenses deal with include; monthly rent, business insurance, telephone and other utilities, advertisement costs, signage costs and any other additional decoration that you intend to carry out on your toy store. You must also take into consideration how many employees you intend to hire and how much you intend to pay them.

It is important that you build a solid business structure for your toy store business. The number of employees that you intend to have will depend on the size of your toy store as well as your own budget.

The Service Delivery Process of the Business

In operating a toy store, the day starts very early as the store has to be open during regular business hours, which means that as the entrepreneur, you have to ensure that the store is organized, presentable and waiting for customers.

Once customers start to come in, time has to be spent in helping the customers find the perfect toy. You will also need to patrol the aisles, organize and clean them especially as there will be toys lying around left by children who didn’t put it back on the shelf.

Keeping abreast of trends in the industry in order to know what to order and when to order it is vital in running a toy store. Customers that come into the store have to either pay for and pick up the toys immediately or pay online and have it delivered to their preferred destination at certain points in time.

16. Write a Marketing Plan Packed with ideas & Strategies

No one starts a business with the hope that the intended target market will take notice of the business without any sort of effort from the entrepreneur.

Even if customers notice the business, the rate at which they will respond might be slower than if you had actively engaged their interest in the business through promotion; this is why marketing is considered as very important to a business attaining its intended goals and objectives.

Marketing involves anticipating the needs of the entrepreneur and ensuring that these needs are being met and the only way this can be achieved successfully is to conduct a market survey of the overall demographics.

A market survey identifies who the potential customers of the business will be, what their expectations are; who the competitors are, where they are and what share of the market they are in  control of. In essence, marketing enables a business to penetrate the market, get its fair share whilst also competing against existing competition.

It is after one has done a thorough market survey that overall marketing objectives can be set. This is the only way through which marketing strategies can become effective for a business. Just creating marketing strategies will see you wasting a lot of time and resources because most of them will not be effective.

One factor that will ensure that your marketing strategies become more effective is where you are going to locate your business. The location of one’s business is very critical to the revenue that the business will generate as being in a visible location will mean that customers will continually remain aware of your toy store.

Below are some of the marketing ideas and strategies that you can use for your toy store;

  • Creating a user-friendly website and promoting it in search engines in order to increase customer awareness
  • Advertise your toy store through newspapers, radio and television ads
  • Have a social media presence such as a Facebook page in order to increase awareness for your toy store
  • Sell your products via online ecommerce platforms such as Amazon and eBay
  • Install flexi banners in strategic locations in order to increase awareness for your toy store
  • Advertise your toy store in popular online forums such as Reddit

17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

The toy store industry is dominated by a lot of popular stores and so in order to get the attention of your intended target market, you will need to engage in lots of activities that will ensure that you not only boost awareness for your brand but that you are also able to create a corporate identity for your company.

However, before any promotional activity can be considered effective, it is necessary that you have carefully thought out strategies in place.

When boosting up awareness for your brand, it is best that you know who your target market is and where they are likely to visit because not knowing these two factors would mean that you will be promoting your business without achieving the right results and so as an entrepreneur, you should realize that whatever you spend on your brand should yield the right results.

Promoting one’s business not only brings awareness for the brand but it also ensures that through the awareness, the business is able to generate the revenue it will need in growing and sustaining itself. Companies from all over the world, especially those that are considered successful, usually set aside a substantial amount of money in order that they might be able to engage in activities that will continually boost their image.

Technology has enabled entrepreneurs to be able to push their business beyond traditional means as the internet has made it easier to reach out to customers. Some of the strategies that you can use to boost awareness for your brand whilst also creating your corporate identity include;

  • Distributing handbills and fliers in various strategic locations such as parks and close to schools
  • Installing a flexi banner in strategic locations in order to create awareness about your toy store
  • Engaging in and sponsoring one or two community events in order to increase awareness for your toy store
  • Making use of social media platforms such as Facebook and Twitter to increase awareness for your toy store
  • Provide a separate webpage that provides additional information and allows customers to leave reviews in a way to promote your business
  • Advertising in local newspapers and related magazines as well as on radio and television stations