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A novelty store sells unusual items that appeal to a whimsical and fun audience. Items can range from gag gifts to adult-friendly items. Often, these stores will also sell toys or trinkets that inspire nostalgia in their target customer, which can be a delicate force that inspires loyalty and love to a particular establishment.
Who is this business right for?
People who are naturally goofy, charismatic, and fun-loving will thrive in a novelty store. An owner should be as appealing and one-of-a-kind as the objects they sell.
What happens during a typical day at a novelty store?
Novelty store owners may spend their days with the following agenda:
- Advertising their store online/in print
- Researching changes in public demand
- Providing customer service and a public face to customers
- Ordering inventory
- Preparing budgets
- Scheduling and managing employees
What is the target market?
The target market can literally be anyone — novelty items are often given as gifts. So even if a person isn’t interested in cute memorabilia or silly gags, they probably know someone who is.
How does a novelty store make money?
Owners charge a mark-up on their products, based on the wholesale cost of the item and store expenses. The baseline mark-up is typically 50%, though this number will depend on both demand and total business expenses.
What is the growth potential for a novelty store?
Growth potential for a novelty store may be limited at first, especially considering how many choices are on the market both in stores or online. However, as shopping becomes more and more impersonal, there will be a growing niche of people who are looking for personable owners who can connect with them on a deeper level. This can help stimulate your growth and establish a brand across a wider audience.
What are some skills and experiences that will help you build a successful novelty store?
Novelty store owners should have some idea of what it takes to manage inventory in a retail environment. They should be able to work with subordinates and customers alike to develop a consistent (and favorable) reputation. A formal business education may help you budget and develop strategic approaches to growing your business, but it's not an official requirement.
What are the costs involved in opening a novelty store?
Entrepreneurs should factor in the following costs for their business:
- Employee salary
- Cost of inventory
- Advertising/marketing fees
- Administrative supplies
- Office equipment (e.g., payment system, etc.)
What are the steps to start a novelty store?
Once you're ready to start your novelty store, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your novelty store is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your novelty store keeps your finances organized and makes your business appear more professional to your customers.
- 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.
- 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.
- 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.
- 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.
- Establish a 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.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a novelty store?
A solid business plan should be developed before jumping in. Novelty stores vary greatly in terms of size, items sold, and marketing campaigns, so it is essential to strategize as many details as possible before you get started, such as which markets you’ll put your primary focus on. For example, you may want to focus only a small portion (or none at all) on gag gifts.
Owners need to stay flexible in terms of which novelties they sell. There will always be a need for novelty items, but the demand can change at the drop of the hat. Novelty stores may succeed by capitalizing off funny trends or odd quirks that only local shoppers would understand. For example, if the local high school is obsessed with Taco Tuesdays in the cafeteria, then owners could create funny items that declare a student's love for the day.
Novelty stores may also want to branch out to fulfilling personal orders as another way of appealing to a wider audience. For example, if a friend wants to give their mother a T-shirt with a specific saying and image, or if they want an unusual design on a license plate frame. There are plenty of ways to source one-of-a-kind gifts for individuals if the price is right.
Sellers without a lot of capital may want to get a sense of the market by starting an online presence before establishing a physical one. This can be especially helpful if you’re targeting a local audience as opposed to a regional one. It gives you an idea of what will be popular in a store location, and a chance to make a name prior to a Grand Opening. Finally, ensure you have a Certificate of Occupancy, Seller’s Permit, and all relevant federal or state licenses necessary to operate your physical location.
How to promote & market a novelty store
If your products are novel, you’ll want your marketing campaign to be as well. Throw a wacky party or stage a fun scavenger hunt with desirable prizes. Make your social media be more about fun than about selling and work on charming everyone you come into contact with — whether it’s online, printed materials, or in-person.
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How to keep customers coming back
People will come back if you’re offering a wide selection of merchandise that’s updated based on the consumer demand. They’ll begin to form an attachment if they have consistently pleasant (and memorable) experiences whenever they visit your store.
How and when to build a team
Novelty stores don’t necessarily need to keep long hours in order to make money, so you may be able to get away with either hiring one employee or managing the store on your own. Once you have an idea of when people are shopping (e.g., nights, weekends), you can structure the hours to fit the demand. If you do choose to hire a manager or employees, make sure you’re hiring people who are both personable and knowledgeable about the novelty products your store sells .
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a novelty store business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
Certificate of Occupancy
A novelty store business is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a novelty store business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your novelty store business will be in compliance and able to obtain a CO.
How much can you charge customers?
People will routinely pay up to 50% more than what an item sells at wholesale. Going to other novelty stores will give you an idea of what you can charge for each product you sell, but be responsive to customer feedback if they feel your prices are too high. An in-demand, exclusive item in your store may sell at 75 – 100% more than what it cost to make.
What are the ongoing expenses for a novelty store?
Novelty stores will need to account for the following expenses
- Office rental/mortgage
- Employee salaries
- Equipment maintenance/replacement
- Permit renewals
- New inventory
- Advertising costs
How much profit can a novelty store make?
Most retail stores operate at a profit margin of between 25 – 50%. So if you sell $100,000 worth of merchandise, your profits would be somewhere between $25,000 and $50,000 after all of the dust has settled. However, it should be noted that this number will vary significantly based on location and demand.
How can you make your business more profitable?
If you choose to make more personal items, consider catering to high-end customers who have very specific tastes. You could set up a side business that is strictly by-appointment only. Novelty stores may also choose to either franchise their business once it grows in popularity, or establish smaller kiosks in malls or other public areas. Holding frequent events and gatherings may be a good way to generate profits by charging a small entrance fee or a major mark-up on snacks or amenities.