This is a complete guide about toy business and how to start a toy business of your own from scratch.
The guide is divided into 5 parts, the earlier stage product selection, cost calculation, business model selection, and then the toy wholesale channels and some practical tips about running a toy business.
- What to sell? Research the market and select the right toys to sell
- How much will it take? Calculate the cost before selling
- How to sell? Choose a suitable platform to start selling
- Where to wholesale toys for resale? Buy from local markets or wholesale from China
- Six practical tips about running a toy business
1. What to sell? Research the market and select the right toys to sell
This is the first and the most important part. The product selection process is rather essential if you want to start a toy business from scratch.
There are many strategies online you can find about choosing profitable products, while in this article, I’ll list the most practical and essential ones that are applicable to different seller groups according to my sourcing experience.
Every-day toys in large market demand
For the earliest stage of your business, toy products that can constantly generate cash flow can be a good option.
Since steadily growing is the most ideal state one can hope for a new store, so, you don’t have to risk trying anything too fashionable or novel. For the sake of your cash flow, you should try to find your first batch of products in commonly seen product niches.
Toys that are easy to ship and hard to break
Every penny counts when you plan to initiate your business. If you choose a product made of fragile materials, it will raise your package cost, and the goods damage rate of the international shipping process might be out of control.
And any further goods damage that arises from the domestic shipping process will bring negative reviews to your store.
Toys free of over-saturated competitiveness
For most of the new sellers, the resources are relatively limited, so, it is hardly wise for them to compete with the big sellers in a saturated product niche. You will have to pay a high extra cost just to gain some market shares in a saturated toy niche.
A simple trick to identify if a toy niche is over-saturated is to check the search volume and the advertising price of the keyword of that niche, the higher the two values are, the more competition there will be in the toy niche. Or you can simply search for a product on Amazon, if there are too many results with over 1,000 reviews, this product may not be the best option for you to start your toy business.
Toys with a profit margin above 50%
When you are calculating the profit margin, you have to consider all the possible costs that may incur during the sales process. Make sure there is still money left when including all costs, from purchase cost to shipping to advertising and to any platform service fee, into the profit margin. Normally, for online businesses, a profit margin of 50% would be a relatively reasonable target to go for.
Toys with a unit price above $10
Obviously, the profit margin is not the only factor that influences your revenue. If the unit sales price of your toys is too low, you still can’t get a remarkable payback even if the profit margin is high enough.
Toys free of infringe
Many toy sellers ran into this issue, especially when they were importing overseas. For toys infringe, there are two commonly seen situations.
The first situation is that the toys you bought constitute an infringement to the existing big toy brands in your country in regards to design, logo, or other aspects. The other one is that you bought some originally designed toys from overseas, yet some other buyer has already registered a patent in your country for those toys.
If you are accused of infringing, great losses will be caused to your business. To avoid any unexpected infringement, you should check if the product is registered under any trademark or with any patent before you place orders. For example, if you are importing toys to the US, you can check the patents and trademarks on the Patent and Trademark Office’s website.
Research methods and channels for choosing toy products
By adhering to the above principles, you can try to get some ideas and inspiration through the following channels to choose the right products and get your toy business up and running.
- Local market
Local toy markets usually represent the local retail demand. If there is any local market near you, paying a visit to it would be a wise thing to do.
When you are in the market, pay attention to the frequently appeared categories in toy shops, or even ask around about the most selling products if you can.
By doing that, you’ll get to know the local customer group and their consumption habits, and some more exact directions that you can look into for your toy business.
- Best-selling list and other sales data of the online marketplaces
Checking the best-selling list and other sales data of the online marketplaces is the most direct and effective way to collect information on general trends of the toy market.
And it’s one of the simplest ways too – most retail or wholesale websites have a best-selling list in each category, like Amazon’s Best Sellers page, all you have to do is click and see.
Also, you can use professional tools, such as Jungle Scout, to collect sales data more deeply and comprehensively.
- Social media platforms (ins, Pinterest)
People love to share eye-catching and mind-blowing toys on the Internet, and many influential toy manufacturers also like to post some conceptional pictures on social media platforms before they officially launch a new product.
If you see a toy picture or video ‘went viral on social media platforms such as Instagram or Pinterest, you will find it on Amazon within a few months to the most.
So, keeping an eye on the latest social media trends will help you to grasp the newest ideas about what’s going on in the industry and what toy lovers are up to.
Here is some extra information related to toys that we posted recently, you can try exploring the following articles to get some inspiration.
2. How much will it take? Calculate the cost before selling
There are many types of cost you must cover when you are calculating the budget you need to start a toy business, I’ll give a quick list about the specific types of the cost that can be possibly generated during the selling process here first, and then we’ll get to them one by one.
In the earlier stage of the sales process, before you start selling, there are the following basic cost and fees that might be incurred:
- Purchase cost of the toys
- Domestic logistic fee
- Overseas shipping fee
- Customs duty
- Toy regulation and certification-related fees
- Hiring staff
There comes the purchase cost when you buy toys for resale, which will make a considerable proportion of your total cost.
To ship the toys to your warehouses, you have to pay for the logistic cost, which consists of the domestic logistic fee and the overseas shipping fee.
If your toys are imported from other countries, there will be customs duty to be included in your cost. The amount of customs duty varies between different toy types.In addition to that, you might need to pay for some special certificates needed for customs clearance according to the local regulations.
For toy businesses on a bigger scale, the cost of hiring staff should also be taken into consideration.
If you are running a traditional physical toy shop, the cost below should also be covered:
- Shop rent cost
- Utilities (water, electricity)
- Shop decoration cost
- Warehouse rent charges
- Warehouse maintenance fee
For physical toy shops, the rent and utilities are always at the top of the cost list. The amount of the rent will mostly depend on where your store is located and how big it is.
One of our clients in the US spent over $4,000 for his first month, which included a monthly rent of $1,780, a security deposit of $1,780, utilities, and other miscellaneous expenses. If you open a similar toy shop in China, such cost might be half less.
Apart from the rent and utilities, you might have to spend more money on customizing the business space to your needs. During that process, decoration costs will be incurred. But unlike the rent cost and utilities that go continuously, the decoration cost will be spent on a one-off basis.
Storage cost which includes warehouse rent charges and maintenance fee is another essential type of cost that physical toy shop owners have to bear.
Although running a traditional physical toy store can still be profitable, more and more sellers , attracted by the unique advantages of online retail, are planning to start a toy business from home. In 2019, Toys “R” Us, one of the biggest toy retailers in America, closed all its physical stores and set its focus on online retail channels. We can say that the Internet did thoroughly change the toy retail industry.
If you plan to start an online toy business on Amazon or other online markets, there are the following cost to be taken into consideration:
- Google advertising fee
- Affiliate marketing fee
- Amazon pay per click fee
- Amazon FBA fee (use a calculator)
- Online store operation fee (custom service etc.)
The promotional fee will be one of the most essential types of expense that could bring you profit.
If you plan to open an independent toy shop online, you need to invest money in promotion to attract enough customer volume to your shop. There are two common channels to promote your shop: the first one is to run ads on Google, the second one is to carry on affiliate marketing.
Selling on big e-commerce platforms such as Amazon will spare you the efforts in gaining customer volume, but you still have to pay for the volume you can get from those platforms in the earlier stage of your business. For example, if you want to have more customers visit your toy shop, you can buy Amazon’s pay-per-click service, which will give your more access to Amazon’s customer base.
After shipping to the FBA warehouse, you’d have to pay an additional FBA fee, the amount of which varies between different toy niches. The calculation of the FBA fee is a little bit complicated, but you can use an online FBA calculator to get to the approximate amount of the estimated FBA fee.
In addition to the above, when your business scale grows to a certain level, you may need to invest more operational money in your shop.
3. How to sell? Choose a suitable platform to start selling
One of the most important steps to start a toy business online is to choose the right platform. In this part, we going to talk about the pros and cons of several e-commerce platforms that you could start a toy business on:
If you want to start a toy business that can bring you consistent passive income. Opening a store on Amazon would be a good option for you.
It may sound easy, but you have to spend a lot of energy to choose your products and test the markets before you can really get started.
Especially in recent years, the competitiveness is getting saturated on Amazon, more and more strict requirements are imposed to the sellers by Amazon.
eBay has many similarities with Amazon. It has also set independent sites in different countries just like Amazon.
One of the biggest differences between Amazon and eBay is that the toys on Amazon are generally more premium and high-end than those on eBay. I think it’s mostly because of the much stricter requirements and rules of Amazon for toys.
So, for toys of lower value, eBay would be a good platform to sell them on. One other thing to be noted, if you want to sell toys in the Australian market, eBay might also be a better option than Amazon for its No.1 position among e-commerce markets in Australia.
Wish is a rather young e-commerce platform whose main target market is the USA. It features eye-catching and low-value fashionable products and novelties. In the meantime, Wish has the laxest rules about the toys to be listed on it.
All and all, for sellers who want to open a shop on big e-commerce platforms, the most important thing is making a toy businesss plan after understanding the platforms’ rules and calculate the operational cost respectively.
If you intend to manage your shop finely, focus on product optimization, and go deep in certain toy niche, you should consider Amazon.
On the contrary, if you want to cover as many toy types as possible and earn more revenue by selling more, you can consider other platforms such as eBay and Wish for their friendlier listing restrictions.
For sellers that have enough budget and sellers equipped with marketing expertise, you can consider opening an independent online toy shop through Shopify or other similar platforms. This business model will allow you to do your branding and build your own customer base, and run your business more independently.
Under the dropshipping model, your supplier will directly deliver the goods to your customers when they place any orders in your toy shop.
You only need a few hundred dollars to get your toy business started. This business model is very suitable for sellers who just want to make some extra money.
However, because of the uncertainties in this model, it is only recommended for those who can find reliable dropshipping suppliers. One of my clients has been selling trendy products by dropshipping for a very long time, and according to him, the dropshipping business is getting increasingly harder these years.
So, as profitable as this business model can be, I won’t recommend it if you want to have a long-run business.
4. Where to wholesale toys for resale? Buy from local markets or wholesale from China
Toy sellers usually import toys from China or wholesale them from local markets. If you are not so certain about what toys to sell, you can go to the local markets for toy sourcing. If you have a clear idea about your products, you’d better try to import them from China to improve your profit margin. I’ll explain the benefits and advantages of these two channels for wholesale toys respectively in this part.
Benefits of purchasing toys from local markets
- Short shipping time
The shipping time will be dramatically shortened compared with importing overseas when you wholesale toys in large quantities from the markets near your location, especially when your goods are shipped by sea freight.
- Convenient contact
Because of the short geographic distance and no language barrier, it would be easier for you to get in contact with your supplier. Without the limit of borders, you can even pay a visit to your supplier whenever you want.
- Smaller MOQ
The minimum order quantity will be relatively lower too. For the same product, the MOQ in international trading is normally higher than that in domestic trading. If your budget and time are limited, buying toys from local markets might give you space for a more diversified portfolio.
Unique advantages you can gain by wholesale toys from China
- More competitive prices
Due to the lower material and labor cost, the more developed and efficient industry chain, the toy manufacturers in China can offer more competitive wholesale prices than most of the western countries. Importing from China is what more than 70% of the toy sellers on Amazon are doing to gain price advantages.
- More options for toy types and models
There are many big international toy brands all around the world that choose to manufacturer their products in China. You can always find the latest models and types of toys in China manufactured with state-of-the-art technologies.
- More convenient for customization
China has many toy industry clusters dedicated to different product niches. The manufacturers located in these industry clusters are capable to offer customization services with high efficiency and high quality but at a low price.
You can find a suitable supplier for your toy business here no matter you want to do private label on a small scale or develop your own product from scratch.
5. Six practical tips about running a toy business
In the end, I’ve got a few practical tips that I learn from our toy sourcing experience to share with new toy sellers:
1. Don’t be obsessed with real factories
Original toy factories aren’t always the best partners to work with. Even you managed to find your target factory, if your order quantity is not large enough, you can’t get their best offer in the first place.
Secondly, you may run into all sorts of issues in product certification, customs clearance, even language barriers when you work with factories in your toy importing business.
2. Don’t put all your eggs in one basket
One of the most common mistakes that new sellers make is to invest all the money in one single product.
You have to know the toy business is rather evolving, hot trends are changing every day. If all your money is stuck in one hot-selling toy at the moment, you will lose the ability to follow new trends, and you won’t have the power to fight back in case you get lost.
3. Balance the price and quality
Always balance the price and quality. The purpose of pricing should be to match your customers’ expectations.
If you sell something very cheap but of low quality to your customers, they’ll probably feel deceived by you, in which case all you can get would be lots of negative reviews and a bad reputation.
4. Find a supplier willing to communicate and help you solve problems
When it comes to problem-solving, communication is always the key. You should take the responding rate and the cooperative attitude as your primary concern when you are looking for reliable suppliers.
5. Don’t be cheated by the low prices quoted by suppliers
Many new sellers would be easily attracted by the low prices offered by suppliers. However, there is a common scam on Alibaba: a supplier will offer you a very competitive price first, when you’ve checked the sample and decided to place an order for massive production, the supplier will try to raise the price using all kinds of excuses such as extra shipping fee, packaging fee, or a price increase in raw materials. Note such traps to ensure your safety on Alibaba if buying.
6. Make sure your toys can pass all the necessary certifications in your country
Before you enter the massive production process, you should make an inquiry with the customs authorities in your country and the seller center of the platform you plan to sell toys on about the mandatory product certifications of your product.
After getting that information, you can ask your supplier or hire a third-party agent to make sure all the needed certifications are in order.
If you think this guide to starting a toy business is helpful, feel free to share it with others. And leave a comment below about anything you want to ask or say about this article.
We are Jingsourcing, a leading sourcing company based in Yiwu, China. Our office is located right in front of the toy wholesale market of Yiwu, and we have been working with many large toy manufacturers in Guangzhou for years too. If you need help in sourcing and importing toys from China, or you are interested in some particular products, please feel free to CONTACT US.