How to Start a Novelty Store

Part 1 - How to start a Novelty Store business - Background

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.

Our guide is in 3 parts:

• Part 1 - How to start a Novelty Store business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a novelty store?

Entrepreneurs should factor in the following costs for their business:

• Rent
• Employee salary
• Cost of inventory
• Advertising/marketing fees
• Administrative supplies
• Licenses/permits
• Office equipment (e.g., payment system, etc.)

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

Who 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.

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.

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.

Day-to-Day and Growth

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 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 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 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 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 .

Part 2 - Is a Novelty Store business the right fit for you?

Part 3 - Action plan to launch your Novelty Store business in 90 days