How to Open a Toy Store

Part 1 - How to start a How to Open a Toy Store business - Background

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.

Our guide is in 3 parts:

• Part 1 - How to start a Toy 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 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 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.

Who 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.

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.

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.

Day-to-Day and Growth

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 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 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).

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.

Part 2 - Is a How to Open a Toy Store business the right fit for you?

Part 3 - Action plan to launch your How to Open a Toy Store business in 90 days