You have always been fascinated by the world of toys - the bright colors, diverse characters, and endless possibilities for playtime. Now, you're ready to turn your passion into a profitable business venture. The world of toy retail is an exciting and dynamic industry that has continued to grow steadily over the years. According to IBIS World, the US toy and hobby store industry has an estimated revenue of $27 billion in 2020 and is projected to experience a compound annual growth rate of 2.4% from 2020 to 2025. If you're looking to start your own toy retail store, this article will provide you with a 10-step checklist to guide you through the journey. Step 1: Define a business idea & execute market research Before launching your business, it's essential to have a clear understanding of what you want to accomplish. Define your business concept, develop your mission statement, and lay out your goals and objectives. Conduct market research to determine the demand for your product and identify key competitors in the industry. Analyze customer behavior and preferences and use this information to develop a customer persona or avatar for your business. Step 2: Create a business plan A business plan is a roadmap that outlines your goals, strategies, and financial projections for your business. It should be detailed and comprehensive, covering all aspects of your business from marketing to logistics. A business plan is crucial for securing funding and investors and also helps you stay focused on your goals. Step 3: Establish legal entity & secure necessary permits & licenses To protect your business, it's essential to establish a legal entity such as an LLC or corporation. You must also secure all necessary permits and licenses to operate your business. These requirements vary by state and city, so make sure to do your research and comply with all regulations. Step 4: Set up financial structures & models Establishing your financial structures and models includes setting up your financial statements, accounting systems, and payment processes. You should also determine your pricing strategy, including markup, discounts, and specials. Step 5: Secure funding & financing Starting any business requires a significant amount of capital. You can secure funding from various sources such as banks, investors, or crowdfunding platforms. Ensure that you have a solid financial plan and present your business idea effectively to potential financiers. Step 6: Assess competitors and build effective strategy Research your competitors and analyze their strengths and weaknesses. Identify what sets your business apart and formulate a strategy to gain a competitive advantage. This can include offering unique products and services, excellent customer service, or competitive pricing. Step 7: Establish pricing model & determine target market Determine your target customer and tailor your pricing model to meet their needs and preferences. Conduct pricing research to ensure that you can remain competitive while still making a profit. Consider offering loyalty programs, discounts, and bundle deals to attract and retain customers. Step 8: Develop an online and/or physical presence In today's digital age, having an online presence is crucial for any business. Develop an engaging and user-friendly website and social media platforms to reach a wider audience and showcase your products. You can also consider opening a physical retail store to provide your customers with a tangible shopping experience. Step 9: Determine team & resources Your team and resources are critical factors in the success of your business. Hire employees with relevant experience and skills and provide them with continuous training and support. Determine your resource needs, such as inventory, equipment, and technology, and plan accordingly. Step 10: Execute marketing plan & build relationships with customers A comprehensive marketing plan is essential to reach potential customers and build brand awareness. Use a combination of digital and traditional marketing strategies such as SEO, content marketing, and local advertising. Establish a customer relationship management (CRM) system to build lasting relationships with your customers and improve customer satisfaction and retention. Starting a toy retail store can be a challenging endeavor, but with careful planning and execution, it can also be a rewarding and profitable business venture. Follow this 10-step checklist to set up your business for success and join the ranks of successful toy retailers around the world.

1. Define A Business Idea & Execute Market Research

To open a toy retail store in your area, you need to start with defining a business idea. A business idea is a conceptualization of a unique, valuable, and profitable business. You should begin by brainstorming and asking yourself what you want to sell? What kind of toys do you enjoy playing with? What kinds of toys would most parents in your area want? Answering these questions will give you a good starting point for your toy retail store business idea.

Once you have defined your business idea, the next step is to execute market research. Market research is the process of gathering information about your target market, which will help you to develop a better understanding of your customers and the market. This information will help you to create a better and more effective business plan, which will help you to run a successful toy retail store business. Here is how to execute market research:

  • Identify your target market
  • Conduct surveys and focus groups
  • Check out the competition
  • Identify trends in the toy industry

Tips & Tricks:

  • Attend trade fairs and conferences to keep up with industry trends and network with other toy retailers
  • Don't forget to consider your location. Will you be opening your toy store in a residential or commercial area? Will it be convenient for families with children to visit?
  • Use social media and online platforms to connect with your target market and gather insights to improve your business model

Excel financial model

Toy Store Financial Model

  • 5-Year Excel Financial Projection
  • 40+ Charts & Metrics
  • DCF & Multiple Valuation
  • Free Email Support

2. Create A Business Plan

A successful toy retail store business requires a well-thought-out business plan that outlines your goals, strategies and financial projections. It will serve as the roadmap for your business and help you stay focused on achieving your objectives.

Here are the key chapters you should include in your business plan:

  • Executive Summary: This section should summarize your business concept and goals, and provide an overview of your target market, products, competition, and financial projections.
  • Market Analysis: In this section, you should conduct a thorough analysis of your target market, including demographic and psychographic information, trends, customer needs, and buying behaviors. You should also assess your competition's strengths and weaknesses and identify your competitive advantages.
  • Products and Services: Describe the types of toys and games you will carry, and how you plan to differentiate your products from those of your competitors.
  • Marketing and Sales: Explain how you will promote your products, reach your target market, and drive sales growth. This section should also include your pricing strategy, distribution channels, and customer service policies.
  • Operations: This section should detail how you will manage your store, including staffing, inventory management, ordering, shipping, and store layout and design.
  • Financial Plan: This section should include your startup costs, revenue projections, expense estimates, and cash flow analysis. It should also outline your financing strategy and potential sources of funding.
  • Appendix: Include any supporting documents, such as resumes, market research data, product catalogs, and legal documents.

Tips & Tricks:

  • Be realistic and conservative in your financial projections. It's better to underestimate your revenue and overestimate your expenses, to avoid cash flow shortfalls.
  • Research and benchmark the industry standards to ensure your pricing strategy is competitive and profitable.
  • Keep your business plan updated regularly, to reflect changes in your market, products, or financials.

Investing time and effort in creating a comprehensive business plan will help you secure funding, make sound business decisions, and improve your chances of success. Consult with a business advisor or mentor for guidance and feedback.

3. Establish Legal Entity & Secure Necessary Permits & Licenses

One of the most crucial steps in opening a toy retail store business is to establish a legal entity. This will ensure that you have a separate legal identity from yourself as the owner or any other personal assets. You can select a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation, depending on your preferences and the legal requirements of your state or country. You can seek the help of a lawyer or a business consultant to assist you with the process and advise you on the best option.

In addition to the legal entity, you also need to secure the necessary permits and licenses. These may vary depending on your location and the type of toys you plan to sell. Some of the common licenses and permits include a business license, a sales tax permit, a zoning permit, a health permit, and a fire department permit. You can check with your local government or hire a permit service to help you obtain the required permits and ensure that you are compliant with the regulations.

  • Consult with a lawyer or a business consultant to establish a legal entity.
  • Check with your local government to determine the required permits and licenses.
  • Hire a permit service to assist you with obtaining the necessary permits.

By following these steps, you can ensure that your toy retail store business is legally compliant and protected. You can then focus on other essential aspects of the business, such as sourcing suppliers, setting up the store, marketing, and hiring employees.

Tips & Tricks:

  • Always prioritize legal compliance to avoid any legal issues or fines in the future.
  • Consider obtaining insurance coverage to protect your business and its assets.
  • Regularly review the regulations and laws that govern your business to ensure that you are up-to-date and compliant.

4. Set Up Financial Structures & Models

One of the crucial steps in opening a toy retail store business is setting up financial structures and models. This step is important to ensure that your business is financially stable and profitable. Here are some chapters to guide you through this process:

  • Establish your Budget: Before starting any business, it is essential to have a budget in place. Decide how much money you need to start the business, what are your fixed and variable expenses, and how much cash flow you expect in the initial phase.
  • Determine Funding Sources: Once you've established your budget, you need to figure out where the money will come from. Do you have sufficient savings or assets to finance your business? Will you need to apply for a loan? Will you attract investors? You need to evaluate which funding options suit your situation the best.
  • Choose the Right Business Structure: Choosing the right legal structure for your business is essential. Decide which structure works best for you, whether it's a sole proprietorship, partnership, LLC, or corporation. Each business structure has its pros and cons, and you need to decide which model offers the most benefits for your toy retail store.
  • Create a Financial Model: Next, create a financial model that projects future earnings and expenses. This step is essential as it helps you evaluate if your business can generate enough income to cover your expenses and make a profit. Your financial model should include a sales forecast, expenses list, profit and loss statement, and a cash flow statement.
  • Set Up Accounting System: Finally, you need to set up an accounting system to keep accurate and up-to-date records of your finances. You can choose to use accounting software or hire an accountant. Ensure you keep track of all transactions, invoices, receipts, and taxes.

Pro Tips:

  • Regularly review your financial statements to evaluate your business's financial health and make necessary adjustments.
  • Invest in a good point of sale system and inventory management software to keep track of sales and stock levels.
  • Consider hiring a professional financial advisor to help you with financial planning and management.

By setting up sound financial structures and models, you can ensure that your toy retail store business is financially stable and sustainable. Take the time to develop a solid financial plan, and you'll be on the right track to success.

5. Secure Funding & Financing

A toy retail store requires adequate funding to launch and run successfully. You need to consider the cost that comes with this kind of business, including the cost of renting or leasing your location, purchasing inventory, paying salaries, and marketing the business. Here are some ways to secure funding and financing:

  • Personal Savings: It is always great to have personal savings to launch a business. This is the easiest and quickest way to obtain capital, and you also don't have to worry about interest rates.
  • Business Loans: You can obtain business loans from financial institutions like banks and credit unions. Ensure you have a solid business plan and good credit score to secure the loan.
  • Investors: You can attract investors who will invest in your business for a share of the profit. They can be family members or friends, or you can pitch your idea to angel investors and venture capitalists.
  • Crowdfunding: This has become a popular way to fund a small business. You can create an online campaign and solicit donations from the public who share your vision.

Tips & Tricks:

  • Make sure you have a good credit score. It will improve your chances of getting approved for a loan.
  • Investors are more likely to invest in your business when they see that you have invested your personal funds in it.
  • When crowdfunding, be sure to have a clear and concise campaign that explains your business plan and why people should invest in it.

When you have secured financing, it is time to think about how you will manage your cash flow. You should have a budget that covers all expenses, including marketing and advertising costs, inventory, and employee salaries. It is also essential to have a contingency plan in case of unexpected expenses or low sales periods.

Additionally, you must take advantage of any opportunities to save costs where possible. For instance, you can cut down on costs by buying inventory in bulk or negotiating lower rental rates with your landlord. Ensure you keep proper records and regularly review your expenses to identify areas where you can save money.

In conclusion, securing funding and financing is an important step in opening a toy retail store. You need to consider all available options and choose the one that suits your business needs. Once you have funding, managing your cash flow and reducing costs can ensure your business runs successfully in the long term.

6. Assess Competitors And Build Effective Strategy

One of the most important steps to start a toy retail store business is to assess your competitors and build an effective strategy. This will help you differentiate your business and offer something unique to your customers. Here's what you need to do:

  • Identify your direct and indirect competitors: Look for stores that sell toys in your area. This can include big-box retailers, specialty toy stores, and online retailers. You should also look for indirect competitors such as department stores and gift shops that sell toys.
  • Research their strengths and weaknesses: Visit their stores, go through their websites, and check out their social media profiles to see what they offer, what their prices are like, and what kind of marketing and advertising they do. Take note of their strengths and weaknesses.
  • Find gaps in the market: Look for areas where your competitors are weak or not offering certain products. This could be an opportunity for your business to fill that gap and offer something unique.
  • Create a unique selling proposition (USP): Based on your research, create a USP that differentiates your business from your competitors. This can be a product or service that you offer or a feature that your store has that others don't.
  • Develop a pricing strategy: Determine how you will price your products based on your competitors' pricing. You may want to offer a lower price to attract customers or a higher price if you offer something unique that can't be found elsewhere.

Tips & Tricks:

  • Try to build a relationship with your competitors. You can learn a lot from them and they can help you if you ever need it.
  • Consider offering a loyalty program to your customers. This can help you retain customers and encourage them to shop with you more often.
  • Don't be afraid to pivot if you find that your initial strategy isn't working. Be open to making changes based on customer feedback and market trends.

By assessing your competitors and building an effective strategy, you can set your toy retail store business up for success. Make sure to keep track of your progress and adjust your strategy as needed to ensure long-term growth.

7. Establish Pricing Model & Determine Target Market

One of the crucial steps for starting a toy retail store is determining the pricing model and target market. If the pricing is too high, the business may struggle to attract customers. On the other hand, if the pricing is too low, the business may face profit challenges. Similarly, without a clear target market, it becomes tough to create a valuable customer base. Hence, businesses need to establish a sound pricing model and accurately determine their target market.

  • Determine the right price for products: While setting product prices, businesses need to consider various factors such as production cost, marketing expenses, and profit margin. It's essential to analyze competition and the target market's purchasing power and set a pricing model accordingly.
  • Offer competitive prices: It's imperative to offer reasonable prices to beat your competitors, but that doesn't mean it should sacrifice quality. A pricing strategy involves knowing the maximum price customers are willing to pay. 
  • Identify target market: Determine the ideal buyer persona for toy products. Identify their age group, marital status, income level, location, and interests to have a sound understanding of the target market.
  • Conduct market research: Analyze buying behavior, market demand, and trends. Gain insights from local market demographics, area competitors, and market conditions to establish a proper pricing model and target audience.
  • Data-driven pricing: Data plays a crucial role in pricing strategy and target market identification. Ensure that the pricing model and target market are based on sales data, market data, and customer feedback. Monitor sales data and review the business model to adapt to changing market conditions and customer preferences.

Tips & Tricks:

  • Offer discounts, coupon codes, or rewards for the first-time buyers.
  • Choose a pricing model that attracts both budget-conscious and high-income earning customers.
  • Focus on quality, safety, and value-addition to products instead of just lower prices.

In conclusion, the pricing model and target market are two essential factors that could make or break a toy retail store. Therefore, it's vital to understand the market landscape and customer insights and develop the most reasonable pricing model that offers value for money while staying competitive in the market.

8. Develop An Online And/Or Physical Presence

After completing the initial start-up tasks for your toy retail store, it's essential to develop a presence for your business. This includes both online and physical presence. In this chapter, we'll discuss how to establish a strong online presence along with a well-decorated physical store.

8.1 Establish an Online Presence

With 90% of customers researching products online before making a purchase, it's vital to have a strong online presence for your toy retail store. Here are some steps to establish an online presence:

  • Create a website: Your website should be visually appealing, user-friendly, and easy to navigate so that customers can easily find the toys they're looking for. Make sure your website is optimized for search engines, and it should be mobile-friendly too.
  • Social media presence: You should create social media accounts for your toy store and post regularly. Use social media platforms like Facebook, Instagram, and Twitter to promote your products, offer deals, discounts, and interact with your customers.
  • Listing on Online Directories: List your retail store on popular online directories and social platforms. Use directories like Yelp, Google My Business, and Yellow Pages to increase your visibility on search engines.

Tips and Tricks:

  • Post high-quality images and videos of toys regularly on social media platforms to attract your audience's attention.
  • Add positive customer reviews and testimonials on your website and social media platforms to build trust and credibility.
  • Offer free shipping deals or discounts on online orders periodically to encourage online shopping.

8.2 Set Up A Physical Store

Along with an online presence, a well-decorated physical toy store is critical to attract customers and build a loyal customer base. Here are some aspects that you need to consider when setting up a physical toy store:

  • Location: The location of your store should be easily accessible, visible, and within a reasonable distance to your target audience. Ensure that your store is located in an area with high foot traffic.
  • Interior Design: A well-decorated and visually appealing toy store attracts customers and enhances their shopping experience. Hire an interior designer to create a visually appealing space that makes it easy for customers to navigate and find the toys they want.
  • Promotional displays: Showcase your best or trending toys at the front of the store to attract potential customers. Use appealing banners and posters for promotional activities and sales.

Tips and Tricks:

  • Provide seating arrangements or play stations for kids in your store so that parents have more time to shop for products.
  • Offer free Wi-Fi for customers to help them shop and promote your social media accounts.
  • Create customer loyalty programs to reward regular customers with discounts, coupons, and early access to sales and new products.

By developing an online presence and a well-decorated physical store, your toy retail business will create a memorable experience for customers and build a loyal customer base and generate more sales.

9. Determine Team & Resources

When starting a toy retail store, determining the right team and resources is a crucial step in ensuring success. Here are some of the key aspects to consider for your team and resources:

  • Hiring: You need to hire the right people to manage your toy store. Consider hiring friendly and knowledgeable staff members who understand the toy industry.
  • Training: Once you hire employees, you need to train them on how to deal with customers, operate the point-of-sale system, and navigate the inventory system.
  • Budget: Set a reasonable budget for your human and material resources. Your budget should include salaries, rent, inventory, utilities, and other expenses.
  • Inventory Management System: Implement a system that is easy to use in managing inventory, especially important when it comes to tracking popular toys and restocking them on time.
  • Suppliers: Look for a reputable supplier that offers competitive prices and quality toys to supply your store.

Tips & Tricks

  • Conduct background checks before hiring to ensure you bring the best team on board.
  • Consider using an automated inventory management system to save time and promote efficiency.
  • Look for suppliers that offer bulk purchases at discounted prices.

With the correct team and resources in place, your toy retail store will be in a great position to thrive. As an experienced business consultant, I strongly advise business owners to carefully consider this aspect to run their operations smoothly.

10. Execute Marketing Plan & Build Relationships With Customers

There is no business without customers, and therefore it’s crucial that you devise a marketing plan that includes reaching out to potential customers, creating brand awareness, and building relationships with your customers.

1. Develop a Marketing Plan

A marketing plan is a critical component of any business, and toy retail stores are no different. It’s essential to identify your target customer demographics and create promotional strategies that will appeal to them. You should also consider the most effective channels for your campaigns and budgeting for advertising costs.

2. Online Marketing

Marketing a toy store today would be incomplete without an online presence. Social media platforms such as Facebook and Twitter offer potential customers an opportunity to engage with you and keep up with your latest products. Building an email list is also a great way to keep customers informed of promotions, new products, and store changes.

3. Stock-Up Your Store

Keeping your shelves stocked with exciting merchandise will go a long way to keep customers returning. Make sure you carry a variety of toys at different price points to appeal to all customers’ budgets.

4. Offer Sales and Discounts

Everyone loves to get a good deal, and it’s essential to keep your customers returning by providing promotions. Seasonal sales, bundle offers, and other incentives are excellent ways to attract and keep customers loyal.

5. Create Great Store Ambience

Creating a welcoming atmosphere in your store is another way to improve customer loyalty. Bright, colorful, and clean store spaces with organized toy displays will go a long way in creating a happy shopping experience for your customers.

6. Focus on Excellent Customer Service

Providing exceptional customer service should be a top priority for any business owner. Make sure your sales team is knowledgeable about your products and services, friendly, and approachable and deals with customer queries or complaints efficiently.

7. Feedback Mechanisms

Although it's easy to see customer reviews online, it's essential to provide opportunities for customers to share their feedback with you and your sales teams. Creating an efficient feedback mechanism like a suggestion box in-store or an online form will help you in resolving the issues and also improve the products and services you offer.

Marketing Tips and Tricks

  • Use local influencers to promote and advertise your toy store on social media platforms like Twitter and Instagram.
  • Host in-store events and workshops for children to foster a love of learning and create lasting memories for the whole family.
  • Create a referral program where customers receive discounts or rewards when they refer friends to your store.

Creating a marketing plan, building relationships with customers, and delivering exceptional customer service will go a long way in establishing your Toy Retail store as a prime location for children and parents alike. By following these steps, your toy store can become a success and continue growing in the ever-competitive retail industry.

In conclusion, starting a toy retail store business requires proper planning and execution. With a clear business idea, comprehensive business plan, legal compliance, sound financial structures, effective competitor analysis, proper pricing strategy, a strong online and/or physical presence, an experienced and well-trained team, and a robust marketing plan, your business can thrive. According to IBIS World, the toy and hobby store industry has an estimated revenue of $27 billion in 2020 and is projected to grow at a compound annual growth rate of 2.4% from 2020 to 2025. By following this 10-step checklist, you can join the ranks of successful toy retailers and contribute to the growth of this dynamic industry.

Excel financial model

Toy Store Financial Model
  • 5-Year Financial Projection
  • 40+ Charts & Metrics
  • DCF & Multiple Valuation
  • Free Email Support