Our guide on starting a toy store covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of a toy store owner, the typical target market, growth potential, startup costs, legal considerations, and more!
Toy store businesses can be very general, offering a wide variety of toys, or very particular, specializing in niche products. It is possible to operate this business out of a physical location, or to operate entirely online. Regardless of your unique approach to the market, starting your own toy store requires a considerable amount of start up capital to acquire your merchandise.
Who is this business right for?
First and foremost, this job is for those who love toys. Someone who already collects and sometimes re-sells toys will have an edge over someone completely unfamiliar with this market. Similarly, the ability to research the toy market and network with others that do so allows you to get the inside track on what will be the latest upcoming toys. Having ties to the community can also help you advertise your business, especially if you plan on having any special events in order to help your business stand out from larger retailers. Finally, this is a job for the consummate “people person,” as it involves both understanding what children want and what their parents want and figuring out how to accommodate both demographics.
What happens during a typical day at a toy store?
The day starts early for toy store owners. While most such businesses operate during normal business hours, you must show up early to ensure that the store looks clean, organized, and otherwise presentable. Much of each day is spent balancing accounts and managing your money, including being ready for boom seasons such as Christmas. Ideally, much of your time will be spent helping your customers find the perfect toy they are looking for (and sometimes the perfect toy they didn’t know they needed). Along with busy days, you will likely be patrolling the aisles and cleaning them throughout the day, as kids often take things down and don’t put them back up. Finally, most days will be spent ordering stock for your store and keeping abreast of industry trends so that you know what to order (and how much).
What is the target market?
Some of the best clients for toy stores are the parents of younger children. Such children are at an age where they are very susceptible to advertising and marketing, and their constantly-changing tastes mean they often want new toys. Depending on the business, though, your ideal customers may change: a niche store focusing on collector’s items or retro toys will likely focus on customers in their 30’s, while a store that heavily sells games and gaming supplies (such as Magic: The Gathering) will likely focus on customers in their late teens and early 20s.
How does a toy store make money?
The most basic way that a toy store makes money is, of course, by selling toys and receiving some profit from every toy that is sold. One hurdle that small toy store owners must face is that it is completely impossible for them to compete with the mass market brick-and-mortar stores like Wal-Mart or Toys-R-Us or online juggernauts like Amazon.com and because of this, it’s important to focus on personalized service and attention for customers. Some toy store owners have taken to personally delivering toys to homes or offering free storage or layaway plans that many bigger stores are unwilling to offer.
What is the growth potential for a toy store?
The growth potential for a toy store business is respectable. Research published in 2016 found that domestic toy sales had increased by seven percent since 2014. The same report found that the overall toy industry has become a $25 billion dollar industry in America, making it a healthy market to enter into (albeit one that may become more competitive over time).
GETTING STARTED
What are some skills and experiences that will help you build a successful toy store?
There are a variety of skills that may help you open a toy store business. As mentioned above, having personal experience in toy collecting and being an enthusiast can help you gain a competitive edge in figuring out what to order and how to market and sell it. Having previous experience working in a toy store, especially in a management capacity, will help you understand the daily activities of the business quite well. A professional degree in something like Business or even Hospitality Management can help you master required skills such as accounting and customer service.
What are the costs involved in opening a toy store?
The exact costs of opening your toy store business will depend on location, amongst other factors. For instance, certain locations are more expensive to rent, as is more space, but it is important to open close enough to residential areas and other shopping centers in order to naturally attract your primary demographic. One toy store owner had to spend almost $5,000 on rent and utilities for the first month of business, and this included the monthly rent ($1,877), a security deposit (also $1,877), separate security deposit for utilities ($300), and her share of the operating expenses and property tax of the shopping center she opened in ($835).
The space itself needed work, and she spent nearly $8,000 to customize the space to her needs, acquire necessary fixtures, and hire a local handyman. Perhaps the biggest cost, though, is also the biggest question mark: the cost to purchase the products themselves. For instance, this same toy store owner had enough product she had accumulated over the years and began by selling that, which meant she initially spent nothing. Most people, though, must buy hundreds of toys to initially stock their shelves, and even at wholesale prices, the cost of this is significant. Because of this, some owners have taken to importing toys from places where it is cheaper, such as China, though you must be mindful of the possibility of being sold “knock-off” toys. Other owners become part of toy buying groups—which allow smaller retailers to pool together to buy toys at wholesale price and split the product—in order to buy toys in the kind of bulk that smaller stores normally cannot, which helps drive the purchasing prices lower.
What are the steps to start a toy store?
Once you’re ready to start your toy store, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. A few important topics to consider are:
- What are the initial costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google’s G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2. Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your toy store is sued. Consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3. Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
STEP 4. Open a business bank account
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 5. Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6. Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
STEP 7. Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8. Define your brand.
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
STEP 9. Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
