Profitable Toy Business

5 Tips to Starting a Profitable Toy Business

Ezra Cabrera | August 9, 2019

Contents

    Did you know that the toy industry accounted for $28 billion in annual revenues in 2018? Other than generating billions of dollars, the toy industry also creates the most innovative products to ever hit the market. The bankruptcy of Toys ‘R’ Us opened business opportunities for entrepreneurs looking to venture into the toy industry and take over the market. But starting a profitable business takes time, effort and sufficient capital.

    Here are a few tips on how to start a successful toy business:

    1. Secure a Toy Business Loan

    It’ll be very challenging for you to start and operate a profitable toy business if you don’t have enough financial resources. How can you work with the best talents if you can’t afford to hire them? How can you invoice your suppliers and maintain transparency if you don’t have money to implement innovative strategies? Before you think of how you can effectively run your toy business, it’s best if you start by securing a toy business loan first.

    Before starting your business, you need to make sure that you have enough working capital on hand. Many entrepreneurs make the mistake of underestimating overhead costs, causing them to go negative. Having the motivation to start a toy business and wanting to earn profits is not enough reason for you to dive into the business arena. Keep in mind that managing a business requires long-term effort – and not having enough money to pay for all of your business needs can usually result in bankruptcy.

    You can steer away from this direction by securing a toy business loan first. By taking out toy business loans, you’ll have the funds you need to cover operating expenses, purchase equipment, buy inventory, market your business, and more.

    2. Research Your Market

    It’s crucial you research everything before starting a new business. Knowledge is power when it comes to running a toy business. Having adequate and well-researched information will make it very easy for you to determine what your customers want, and how you can stand from the competition. On the other side of the coin, diving into the industry without all of this information can put your efforts down the drain.

    In order to succeed, you need to understand the marketplace, your target audience, current trends in the toy industry, what your customers want, and more. This means that you should spend months of conducting thorough research and gather as much information as you can about the business arena. The more you know, the easier it’ll be for you to come up with strategies that can help you become successful in the business.

    3. Innovate, Innovate, Innovate

    Toy businesses are fast-paced, which means that your customers will want different things as time passes. If you want to adapt to their demands, it’s best if you learn when and how to innovate.

    There are two ways on how to develop new ideas for your company: 100% originality and tweaking an existing idea with the goal of making it better. You may think that an entirely original idea will fare better, but it’s actually the opposite.

    Unless there is a demand or need, there’s a huge chance that creating an entirely new invention won’t be commercially successful. There are multiple factors you need to consider when doing so. They are themes, concepts, demand, play patterns, and more. In fact, improving an established idea is proven to be more viable.

    4. Make it Fun!

    If you want your toys to sell, they have to be fun. As you look for toys to sell or create, carefully consider the fun factor behind every product. Making toys ‘fun’ may seem obvious, but there are toys that are educational or beneficial but not fun. Fun toys will sell because it’s more appealing to children and even people of all ages.

    5. Find Your Niche

    The toy industry is booming, and this can only mean two things for independent toy retailers: get lost in a highly congested market or stand out among the competition. Every entrepreneur wants the latter, which is why it’s important to know what it takes to succeed in your selected market.

    Retailers like Walmart, Amazon, and other online stores have no problem underselling toy prices, making it harder for independent toy retailers to compete. Finding a niche market allows you to target a specific group of customers and cater to their needs and preferences.

    Toy Business Loans for Your Startup Company

    With large competitors like Walmart and Target, it’s challenging for independent toy retailers to thrive in a competitive market. They need to step up their game and offer high-quality toys at a competitive price.

    FAQ

    How profitable is the toy industry?

    Toy businesses are one of the most profitable ventures in the United States. In fact, three out of five major toy companies in the world are American companies. Each of these companies generates around $6.6 million in revenue each year. Moreover, the toy industry generated a total economic impact of $97.2 billion dollars in 2020 and opened more than 600,000 for Americans in the same year. 

    What is the profit margin on toys?

    In general, toy stores usually have a profit margin of around 23.3% to 25.9%. That means every toy item sold should generate at least 0.233 cents to 0.259 cents of profit per dollar earned.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.