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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).
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 as a toy collector and 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 business?
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:
- 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 toy 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 toy store business 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.
How to promote & market a toy store
Some of the ways to market and promote toy businesses include usual methods, such as advertising through newspapers, radio, and television ads. It’s also important to have a social media presence, such as a Facebook page, where customers can see your hours, news about new toys, and information about any deals or specials. You should also have a separate web page that provides additional information and allows customers to leave reviews, which serves as its own form of advertisement when prospective customers can see how much others enjoyed shopping there. One unexpected way to market your business is to sell products via eBay and Amazon. This not only serves as a good sideline business, but helps advertise your business to customers that like to shop online.
Recommended: A website is essential for promoting your business and attracting customers. Weebly is a great tool.
How to keep customers coming back
Some of the ways to attract and retain customers were mentioned above, including offering home delivery and toy storage (great for parents who don’t want to worry about hiding toys for upcoming birthdays or Christmas). You should also hold regular events at your store if you have space, such as tournaments for popular games like Pokemon. This encourages customers to regularly visit, and you can make the tournament entry fee something like “buy two packs of cards,” which may encourage them to buy more while they are there. If you sell video games, you may also consider hosting video game tournaments. These are both methods of encouraging regular customers to show up every week while they publicly demonstrate the fun of something you sell. Traditional promotions also work, such as offering special promotions tied to other events (like discounts and specials on Marvel or Star Wars toys on the eve of their next movie) is good.
How and when to build a team
At the end of the day, a toy store is like any other retail business. You should develop an idea early on for how many employees you need to cover your hours. Thus, building the team is usually tied to either expanding your hours or services. Examples of this include staying open later for Christmas (and hiring more people for the Christmas rush) or hiring dedicated employees to do things like toy delivery or other “extra” services meant to retain customer loyalty.
Read our toy store hiring guide to learn about the different roles a toy store typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a toy store. 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, check out our informative guide, Sales Tax for Small Businesses.
Toy stores may also wish to look into applying for a resale certificate, which allows retailers to purchase goods intended for resale without paying sales tax.
In addition, certain local licensing or regulatory requirements may apply. For more 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
Certificate of Occupancy
A toy store 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 toy store.
- 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 toy store will be in compliance and able to obtain a CO.
How much can you charge customers?
Unlike other businesses, the amount for how much you can charge customers is relatively fixed by the manufacturer's suggested retail price (MSRP) of the products you sell. While you can sell products for more than this amount, remember that you are in constant competition with major stores both online and offline, so driving prices beyond MSRP may drive people away. You can supplement your in-store toys by possibly selling certain things on eBay, where an in-demand toys may sell for far more than its standard MSRP.
What are the ongoing expenses for a toy store?
There are a variety of ongoing toy store expenses. Monthly rent is a factor (likely to be $1,500 or greater), telephone and other utilities (which also may be around $1,500), and business insurance ($600 or more). Don’t forget advertisement costs (around $1,000), and any additional decoration/new signage costs (under $1,000). Finally, you must budget for how much to pay employees, which will depend on how many employees you have and what you want their wage to be.
How much profit can a toy store make?
The overall profit of the toy industry has been variable in recent years. It seemed to peak in 2015 at 4.5 percent, but 2016 is looking exactly like 2012 did at 2.8 percent. With that being said, much of this is determined by the different big box stores competing with one another as well as competing with the online world, and opening a local retail store with ties to the community can help you build a steady stable of regular customers.
How can you make your business more profitable?
Some of the ways to make your business more profitable have been discussed, including holding gaming tournaments and selling online. If you sell games like Magic: The Gathering, you may also branch into selling single cards to eager customers, some of which are worth a great deal. You can also work on mastering exactly how much product to order each month so that you do not have an excess of product that doesn’t sell. Handling as much of the business yourself (from stocking and selling to cleaning) can also cut down on costs, thus increasing your profits.