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Starting a Toy Shop Start-Up: "Pros & Cons, Tips, and Earning"

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The children's toys industry is a massive one, with the U.S. market size of the industry above $21 billion in 2011, and has grown ever since. That translates to an average spending of $317 per American children annually.

That data alone may tempt you to open a toy store as a business. There's a catch to it, though, The toy industry is dominated by big retailers. Retailer stores like Toys R Us, Argos, Early Learning Centre, and many famous names eats the majority portion of the market share (source: www.statista.com/statistics/194424/amount-spent-on-toys-per-child-by-country-since-2009/).

However, there's still many opportunities to be exploited, if you strive to start a toy business. Here are some pros and cons of it:

1- Pros:

- Massive Potential Market Size
As discussed above, the toy industry is a massive one

- Huge Potential Margin
Each toy item can net a margin as high as 20%-40%

- The Market is Still Growing
The market moves toward electronic and educational toys, with traditional toys' growth has been stagnant in the past 10 years.

2 - Cons:

Very Tight Competition
Even among the big retailers, the competition is tight.

- Relatively High Start-Up Cost
Starting a small toy shop will cost you considerably. It may vary in the tens of thousands range and above.

- Relatively High Entry Barrier
With the vast amount of product available and equally vast amount of suppliers, you'll need to do a lot of homework to understand product knowledge, search for the best supplier, and demographic research among many others.

3 - Tips on Opening a Toy Store

With those in mind, these ideas might help you with some starting points for your toy business plan:

- Niche or Mainstream?
With the tight competitiveness of the industry, there'are generally two ways for you to approach things.

First, you can go for rarer items not found in major retailers. For example, premium action figures intended for mature customers like Hot-Toys, Kotobukiya, and many others can gain you, loyal customers of hobbyists, if executed right.

The other approach will be to enter the mainstream market with items also found on major retailers. Here you can gain an advantage by offering discounts, having closer proximity to areas with a lot of children, or other competitive strategies you may adopt.

- Marketing Plan
With the tight competition, a marketing plan, and its execution will make or break your business.

Since you are dealing with major competitors, try to approach more out-of-the-box ideas. You can't outgun them with your marketing budget, yet you can do it with creativity.

- Invest on Interior Design
Whether you do it yourself, or with the help of an interior designer, appearance is one of, if not the most important aspect of a toy store. If you are selling specific kinds of toys, consider incorporating elements of it into your store.

4 - How Much can You Earn?

Calculating potential earnings for your toy store business will depend on many factors:

- How many children lives nearby your store area
U.S. Children spends $317 annually on toys or around $26.4 per month. Consider getting children population data from the local government to understand your potential market size better.

- Number of competitor near your area
Is there any Toys R US nearby your future store? Or other similar competitors. After you know your competitor, you can assess how big of the market share you are confident to capture.

- Your average selling price per item
The global average is slightly below 8$, you can either go below or above it.

After you get all those data, you can do a simple calculation yourself. Say for example the area has about 400 children in a 3-mile radius around it, with 3 major competitors, making you only confident to get 10 percent of the market share.

That translates to 40 children times $26,4 monthly spending or $1056 per month or $12,000 annually. Although this is a simplified calculation, with many other factors will affect it on practice, like customer loyalty, etc., this should help you understand the size of your market better.

The profit margin should be around 20%-40% depending on your efficiency on rent, labor costs, etc. With this simple calculation, you can assess for yourself whether your proposed location, demographics and market size are still desirable to start the business.

5 - End Words

The toy industry is a very tempting one with its huge potential market size. However, competition can be very tough with major retailers dominating the market.

The opportunity is still massive with the industry still growing every year. Proper market research, marketing plan, and correct positioning will help your toy business start-up to gain better competitive advantages.