How to start up a toy shop

Although the toy market is very competitive there's still room for well-run independents offering great service. Read our in-depth practical guide to starting up and running your own toy shop business.

Research your target market

Estimating demand

Unless you're aiming to generate most of your income from selling online, you will need to find out whether there is enough local demand for your toy shop. Firstly, check out the competition and make a count of the number of outlets already selling toys in your area. As well as other independent toy specialists, remember to include large stores such as Smyths and The Entertainer, catalogue shops such as Argos, variety retailers (for example Debenhams), market stalls, supermarkets and newsagents who also sell toys. Try to establish what kind of toys these competitors are selling and see if you can identify an unfilled niche in the market which your shop can fill. As well as your local competitors, you'll also face strong competition from online and mail order retailers.

Competition may be less fierce in smaller towns and villages where there are fewer major retailers and specialist chains, but of course the customer base will be smaller than in a large city. The types of toy that your customers buy may be influenced to a certain extent by the nature of your area. If it is an affluent area then expensive, high quality items might sell well; if it is less well off, you might do better concentrating on cheaper toys. However, this is not easy to judge - research has shown that the least wealthy parents often buy their children some of the most expensive toys.

In 2017 the average spend on toys per child was £350 a year, with £121 of this being at Christmas. For 2016 the figures were £350 and £105 respectively. Consider how many households your shop needs to attract in order to achieve the turnover you require. Do many of the households in your area have children? Are there schools nearby? Bear in mind that if your area is mainly populated by retired people, you may find it more difficult to attract sufficient numbers of customers.

Shop location

Generally, for a retail outlet such as a toy shop, it is important to have as much passing trade as possible. If you are planning to set up in your local town or city then ideally you will aim to locate your shop as close to the centre as possible. The cost of doing this may be prohibitive, in which case you might consider setting up in a suburban shopping precinct. These have the benefit of a fairly large number of customers visiting them each day as well as more affordable premises costs. Alternatively, a market stall may be a cheaper way of securing a good location.

Parking facilities outside the shop or nearby will be helpful, especially if you intend to sell any bulky toys. Also check out local crime rates - you don't want to have to cope with excessive levels of shoplifting, break-ins and theft.

Why will customers choose your shop

You need to make sure that enough customers will choose your shop rather than other existing outlets. Check out the competition to see:

  • what range of toys they offer
  • what prices they charge
  • what their opening hours are
  • what type of customer they attract
  • whether the premises and fittings are modern and smart
  • how helpful and knowledgeable their staff are

Your market research might indicate that there is a gap in the market that your shop can fill, but even if you can't identify a clear gap in the market, specialising in a particular type of toy may be the best way to persuade customers to choose your shop - especially if you stock items not generally available in the larger stores. Specialising like this will distinguish your shop from its competitors and should help to build your customer base.

Check out future developments

Try to find out if a competitor like Smyths has plans to open an outlet in your proposed area, or or whether the local council intends to build new road systems which mean that local traffic - or pedestrians - will bypass your shop. Look out for any proposals to impose parking restrictions nearby too.

Find out what people want

It is difficult for a small, independent premises-based toy shop to survive in the face of competition from national chains, variety stores, supermarkets, mail order and online retailers. So it's very important that you make sure that there is a market for the toys that you intend to stock. You could carry out some surveys of the people in your local area to find out:

  • if there are any particular products ranges that they would like you to stock - for example, those that aren't currently offered by existing retailers in your area
  • whether there are any local schools, playgroups or nurseries looking for a source of early learning toys
  • what they think of the range of toys you're planning to stock and your proposals in general
  • what, if anything, they don't like about the existing toy shops in your area

Research current trends, plus legal and tax issues

Selling on eBay and Amazon

Selling online can be an excellent way of reaching new customers and boosting your sales. But setting up your own ecommerce website can be expensive and you may not be sure at the beginning whether the value of the sales you'll make online will justify the set-up costs.

As an alternative, trading on eBay or Amazon lets you get a feel for selling online but with much lower start up costs. And you may decide to keep on selling through eBay and Amazon even when you have your own online shop.

Getting started

You might already have your own personal eBay account that you use to buy items for yourself and to sell things that you don't need any more. But if you're trading as a business on eBay you're legally obliged to make it clear in your listings that you're a business seller. This means that you'll either need to register a new business account or upgrade your personal account to a business one. There's guidance in the eBay Seller Centre on the definition of 'trading' if you're not sure whether you need to register as a business seller.

Similarly, with Amazon you can use an existing account or create a new one when you register as a business seller.

If you're not already running a business and you intend to start selling things on eBay or Amazon - perhaps just in a small way to begin with - then you'll need to notify HM Revenue & Customs (HMRC) that you're trading. There's guidance on the Gov.uk website that gives an overview of what counts as trading and what counts as self employment. It also gives details of your tax and record keeping obligations.

Decide whether to have your own virtual 'shop'

Having your own virtual storefront will give your business a valuable online presence and will allow you to display all your products together in one place.

When you sign up to sell on eBay, you have the option of setting up an eBay Shop. This allows you to create your shop using an existing template or to customise it to your own design. You don't have to choose the eBay Shop option straight away - you may decide it's best to wait until your monthly sales build up to a certain level and then upgrade.

With Amazon, you'll automatically create your own storefront regardless of the package you choose. You won't be able to customise it very much but you will be able to add your name and logo and provide some information about your business.

How much does selling on Amazon and eBay cost?

Before you start selling on Amazon and eBay it's a good idea to find out how much you'll have to pay in fees. Depending on the items you sell and the method you choose for selling them, your total fees can be quite substantial. And while some of the fees you pay will be linked to the number of items you sell each month, others are likely to be fixed costs which you incur even if you don't sell anything.

Both eBay and Amazon give you the option of selling as a business seller without paying any fixed monthly fees, although it's usually more cost-effective to choose a subscription-based package unless you're only selling a small number of items each month.

The eBay website has a fee illustrator tool and a fee calculator that will help you compare the fees for different selling methods and get a good idea of how much your actual per-item selling fees are likely to be.

The Amazon website gives detailed fee guidance, including some examples of pricing for their subscription and non-subscription packages.

Managing your listings

Uploading your inventory to eBay or Amazon and managing your listings can be a time consuming task, particularly if you're planning to sell a large number of items.

Both eBay and Amazon offer useful listing tools, some of which are free and others that you'll have to pay for.

Promoting your items

Because there's such a huge number of items for sale on eBay and Amazon at any one time, it's very important that you do everything you can to stand out from the crowd.

Always make sure that your listings include accurate, spell-checked descriptions and that your photos and other images show the items that you're selling in the best possible light.

You might want to take it a step further and use the various marketing tools provided by eBay and Amazon such as search optimisation, cross-promotions and paid-for advertisements.

Your reputation

As an eBay or Amazon seller your online reputation is extremely important. All sellers have a feedback score based on actual customer feedback and this is the main measure that future customers will use to check that you are trustworthy and reliable.

So you'll want to keep your rating as high as possible by providing an excellent level of customer service and fast delivery at reasonable prices. Make sure you always respond promptly to customer queries, deal with returns efficiently and keep an eye on your stock levels to avoid your listings showing an item as being in stock when it has sold out.

Be aware that packing up orders and sending them out can be time consuming, but it's important to stay on top of the job to make sure that the right items get delivered in good time to the right people. Very many parcel delivery services now offer bulk shipping tools that integrate with your eBay or Amazon account and these can greatly simplify the process of arranging and tracking your deliveries.

If you're selling on Amazon you might also consider using the Fulfilment by Amazon service, where you send Amazon your inventory and they do all of the picking, packing and shipping as well as providing customer service.

More information

The eBay and Amazon websites have a great deal of useful guidance to help you get started as a business seller and to expand your business as demand for your products grows. Both also have lively seller community forums where experienced sellers are often happy to answer questions.

Decide what to sell

The range of toys that you sell will depend on the type of shop you intend to run. The choice is enormous, with as many as 100,000 product lines to choose from and you are likely to spend a great deal of time searching for new lines to stock, for example by regularly attending trade fairs like the Independent Toy and Gift Show. Stocking items that are difficult to obtain elsewhere could help to attract customers to your shop. Becoming a member of a buying group like Toymaster can help you to reduce the time spent looking for stock as you'll gain access to the group's suppliers from a central website (Toymaster currently has around 250).

Rather than specialising in a particular type of toy you might decide to sell a range of small pocket-money priced items and keep up with the latest toy fads and fashions. Trying to stock a wide selection of toys to cater for everybody will put you in direct competition with large chain stores like Smyths and other outlets such as Argos. As they buy in bulk it will be very difficult to compete on price terms. Specialising in some way will enable you to avoid having to compete directly with them, particularly if they decide to discount, for example in the way that supermarket chains do periodically when they sell all their toys at half price in the run-up to Christmas.

The types of toys you stock might include some or all of the following:

  • outdoor toys, such as paddling pools, climbing frames and trampolines
  • children's sports accessories, such as balls and cricket 'starter kits'
  • ride-on toys such as pedal cars, scooters, rocking horses, tricycles
  • children's stationery and arts and crafts materials
  • masks, costumes and outfits
  • dolls and dolls accessories
  • soft toys
  • early learning toys and accessories
  • board games and jigsaw puzzles
  • train sets and slot car racing sets
  • toy vehicles of various types and sizes (from simple push toys to detailed collectors models)
  • scale model construction kits, paint and glue
  • radio-controlled toys
  • electronic toys and games software

Most of your income is likely to come from the sale of toys, but you might also consider selling a number of other items. For example:

  • children's clothes and footwear
  • prams, cots and other baby items
  • books, DVDs and children's music or story CDs
  • branded merchandise such as school bags, pencils cases and lunch boxes
  • comics and sweets

Seasonality and toy 'crazes'

Toy shops are busiest in the period leading up to Christmas - it is possible that over half your annual sales will be made in November and December. At this time of the year you need to make sure that you have enough stock to cope with demand. You will need to order stock in advance, so it is vital to plan ahead.

Other busy periods for toy shops include January, when children spend money given to them at Christmas, and the school summer holidays. If the weather is poor during the summer, sales may increase as children are forced to stay indoors. On the other hand, sales of outdoor toys, such as buckets and spades and paddling pools, may increase during fine weather. If you are located in a tourist area, the summer may well be the busiest time of year for you.

School items such as bags, pencil cases and stationery sell well before the start of the new school year in late summer. Fireworks and Halloween masks and outfits have a brief selling period during October.

It is common to hold seasonal sales, traditionally in January. However, you might decide to discount slow moving lines at any time of the year.

The toy market has become increasingly fashionable with crazes for a particular toy leading to huge but short-lived demand. A good example is the popularity of toys linked to a particular film - there is a sudden demand, which normally wanes as soon as the film ceases to be current. Trying to predict which toys will sell well or what the next children's craze will be is difficult, but ordering stock early will enable you to benefit from the rush on these items, should it occur. It may be difficult to cope with demand for toys that become so popular very quickly. Over-ordering in anticipation of such a rush is risky though, as a toy may fall out of favour quickly, leaving you with a pile of unwanted stock.

Promoting your business

The right image

It's really important that your shop projects the right image to customers. Everything about the way your shop looks and feels ideally needs to be designed to attract new customers and encourage existing customers to keep coming back regularly. Aim to offer a high quality, friendly and knowledgeable service, which can help to differentiate your shop from its competitors. If you have enough room, providing a play corner where children can try out toys might help to create a good atmosphere and boost sales, as well as distracting them from playing with toys that are on display!

Most toys need little or no after-sales service and many customers do not require specialist advice (except perhaps for the suitability of particular toys for very young children). Nevertheless, providing a helpful service to customers is vital in creating a good image for your shop. Try to make sure that:

  • your shop is clean, tidy and attractively fitted out
  • the decor reflects the type of toys sold (a shop specialising in pre-school toys and baby accessories will look different to one selling more sophisticated toys or models)
  • the window displays are changed regularly to attract passing trade
  • signs are used to draw attention to new ranges or special offers

You could also consider joining the Toy Retailers Association. Members agree to abide by a Code of Practice, much of which is concerned with toy safety. (The Association's research has found that safety of the toy is the number one factor that influences people's toy buying.) Membership entitles you to display the 'Approved Lion Mark Retailer' sign, indicating to customers that your shop has a clear commitment to toy safety.

Advertising your shop

To make sure your sales reach their full potential it's essential that your potential customers know about you and the range of toys you offer.

The window display and external signs can inform and attract passing trade but it may be beneficial to take out advertising to reach a wider audience. You could advertise your shop in the local press or telephone directories. Your advertisements should emphasise any unusual toys offered, mention which brands you stock and note any other features that distinguish your shop from the competition. Donating toys to local charities or hospitals or providing items as competition prizes is a good way to raise the profile of your shop locally.

You could try advertising on the internet to reach a wider market, especially if you are selling specialist collectors' items. If you sell radio-controlled models, scale model vehicles or model railways, you may find that it is worthwhile advertising in specialist magazines devoted to these hobbies. This will enable you to reach enthusiasts around the country. You could also try offering mail order and online sales.

Almost all types of advertising and promotion have a cost, whether it's financial, your own time and effort - or both. You need to make sure that the beneficial effects of your advertising efforts are worth the time and money spent on them. It's up to you to decide which types of advertising work best for you - sometimes this is down to trial and error.

Members of buying groups like Toymaster also benefit from the group's marketing program and social media activity.

Establish your customer profiles

Your market

Customers that visit your shop will be mainly local people, with some passing trade (for example tourists, if you are in a holiday area). Many of your customers will be adults or children shopping specifically for toys, often with a particular product in mind, but some will just happen to be passing your shop - which means it's important to have a good window display. Your customer base will also be influenced by the extent to which your shop specialises. If you become known as a source of interesting or unusual toys, you may be able to attract customers from further afield. Of course, trading online through your own website and/or online marketplaces like eBay and Amazon gives your business access to a huge potential market, although it's a market that is extremely competitive and one where a good marketing strategy is likely to be essential to help you stand out from the competition.

Your market research will have helped you to identify any gaps in the local market and the type of customer you can target. It may also be worth checking whether there are any local day nurseries or play groups that you could supply toys to.

Special offers and discounts

Toy shops often hold sales in January and these provide an excellent opportunity to clear out old stock. Toys can go out of fashion very quickly and if you are unlucky you may find yourself with money tied up in toys that nobody wants. Discounting these items may be the only way of shifting them.

As well as a regular January sale, you might decide to try occasional special offers. For example, you might give your customers a discount if they buy more than one game at a time, or perhaps provide free glue or paint with model kits. Many shops also give discounts to staff, regular customers, family and friends. Check out the local opposition for ideas and keep a close eye on any special offers you do make to be sure that they are working for you. After all, these kinds of promotions might encourage extra sales, but they will also affect the amount of profit you make on each sale.

Price your products

Many toys have recommended retail prices. You might decide to stick closely to these, or to just use them as a guideline. If you decide to price your goods consistently below recommended prices then it is a good idea to keep details of your price lists. Other toys may come with no guidance on pricing, leaving it up to the retailer.

Getting the price right is very important. You need to make sure that the difference between the cost price and the selling price is enough to cover all of your operating costs, including your own drawings.

Also consider the following points when setting your prices:

  • what do your competitors charge for similar items? Don't forget that many customers will shop around for the best prices, particularly with purchases of more expensive toys, so you may have to charge in line with your competitors (The Argos catalogue and website tend to be used by the public, as well as by many retailers, as a benchmark for pricing of mainstream toys)
  • will you aim to compete on price? Undercutting your competitors can be effective in achieving sales but will your business be able to survive on slender profit margins
  • do you really need to discount? People expect to pay high prices for high quality items and you may be the only shop in the area selling a particular brand or type of toy

Buy an existing business

You might decide to buy an existing toy shop rather than start your own venture from scratch. Buying a going concern can mean that:

  • the premises, business equipment and shop fittings are already in place
  • the business website has already been set up and is possibly ecommerce enabled allowing you to sell toys online. eBay and Amazon 'shops' may also have been set up
  • there are established customers
  • the business can generate income immediately
  • suppliers have been identified and relationships established with them
  • the business has a track record, which can help if you are looking for finance
  • staff are already in place

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up?

Your market research into the sector as a whole - and the locality in particular - will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to establish the current position so that the price you pay for the business is not too high.

Other matters to consider include:

  • the state of the premises, fittings, equipment and so on. Will you have to spend money refurbishing or replacing assets
  • the condition of any stock you are buying. Check this over carefully before agreeing a price. Also make sure that the stock is not out of fashion
  • existing staff rights
  • how to retain key personnel once you've taken over
  • does the business owe money that you will be responsible for
  • if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.

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