How to Start a Toy Business

This is a complete guide to the toy business and how to start your own toy business from scratch.

The guide is divided into five parts: initial product selection, cost calculation, business model selection, and then toy wholesale channels and some practical tips on how to run a toy business.

1. What to sell? Research the market and select the right toys to sell.
This is the first and most important part. The product selection process is essential if you want to start a toy business from scratch.

There are many strategies online that you can find on how to choose profitable products, while in this article I will list the most practical and essential ones that can be applied to different groups of sellers based on my sourcing experience.

Everyday toys with high demand in the market.
For the initial stage of your business, toy products that can generate a steady cash flow may be a good option.

Since steady growth is the ideal state for a new store, you shouldn't risk trying something too trendy or new. To optimize your cash flow, you should try to find your first batch of products in common niche markets.

Toys that are easy to ship and hard to break.
Every penny counts when starting your business. If you choose a product made with fragile materials, the cost of packaging will increase, and the damage rate during international shipping could spiral out of control.

And any additional damage to the goods arising from the domestic shipping process will bring negative reviews to your store.

Toys free from oversaturated competitiveness
For most new sellers, resources are relatively limited, so it's unwise for them to compete with larger sellers in a saturated product niche. They'll have to pay a high premium just to gain market share in a saturated toy niche.

A simple trick to identify if a toy niche is oversaturated is to check the search volume and ad price for that niche keyword. The higher both values ​​are, the greater the competition in the niche. Or you can simply search for a product on Amazon. If there are too many results with over 1,000 reviews, that product may not be the best choice for starting your toy business.

Toys with a profit margin of more than 50%
When calculating your profit margin, you should consider all possible costs that may arise during the sales process. Make sure there's still money left over by including all costs, from purchasing to shipping, advertising, and any platform service fees. Typically, for online businesses, a 50% profit margin would be a reasonable goal.

Toys with a unit price greater than $10
Obviously, profit margin isn't the only factor that influences your revenue. If the unit selling price of your toys is too low, you won't be able to achieve significant profitability, even if the profit margin is high enough.

Toys free of violations
Many toy sellers have encountered this problem, especially when importing from abroad. In the case of toys that violate regulations, two common situations arise.

The first situation is that the toys you purchased infringe upon existing major toy brands in your country in terms of design, logo, or other aspects. The other is that you purchased toys with original designs from abroad, but another buyer has already registered a patent for them in your country.

If you are accused of infringement, your business will suffer significant losses. To avoid unexpected infringements, check whether the product is registered under any trademark or patent before placing orders. For example, if you import toys into the U.S., you can check the registered patents and trademarks on the U.S. Patent and Trademark Office website.

Research methods and channels for selecting toy products.
Following the principles above, you can try to get some ideas and inspiration through the following channels to choose the right products and start your toy business.

Local market
Local toy markets often represent local retail demand. If there's a market nearby, visiting it would be a good idea.

When you're in the market, pay attention to the categories that appear frequently in toy stores, or even ask for the best-selling products if you can.

By doing so, you'll learn about your local customer base and their spending habits, and gain insight into some more specific directions you can consider for your toy business.

List of best sellers and other sales data from online marketplaces
Consulting best-seller lists and other sales data from online marketplaces is the most direct and effective way to gather information on overall toy market trends.

And it's also one of the easiest ways: most retail or wholesale websites have a list of bestsellers in each category, like Amazon's Best Sellers page; all you have to do is click and see.

Additionally, you can use professional tools, such as Jungle Scout, to collect sales data in more depth and completeness.

Social media platforms (Instagram, Pinterest)
People love to share eye-catching and mind-blowing toys online, and many influential toy makers also like to post concept images on social media platforms before officially launching a new product.

If you see an image or video of a toy that's gone viral on social media platforms like Instagram or Pinterest, you'll find it on Amazon within a few months at most.

Therefore, keeping an eye on the latest social media trends will help you understand the latest insights into what's happening in the industry and what toy lovers are doing.

Here's some additional information related to the toys we've recently published. You can try exploring the following articles for some inspiration.

The 25 Best Wooden Toys for Wholesale Buyers
15 wooden toy brands: big, famous brands and small, dedicated brands
The 32 best toy brands in the world to source toys for your business

2. How much will it cost? Calculate the cost before selling.

There are many types of costs you need to cover when calculating your budget for starting a toy business. Here, I'll first give you a quick list of the specific types of costs that can arise during the sales process, and then we'll address them one by one.

In the initial stage of the sales process, before the sale begins, the following basic costs and fees may be incurred:

• Purchase cost of toys
• National logistics rate
• Shipping fee abroad
• customs duties
• Fees related to the regulation and certification of toys
• Hiring staff

When you buy toys to resell, there is a purchase cost, which will represent a considerable proportion of your total cost.

To send the toys to your warehouses, you need to pay the logistics cost, which consists of domestic logistics fee and overseas shipping fee .

If your toys are imported from other countries, the cost will include customs duties. The amount of these duties varies depending on the type of toy. Additionally, you may be required to pay for special certificates required for customs inspection and clearance, depending on local regulations.

For larger toy companies, the cost of hiring staff must also be considered.

If you run a traditional brick-and-mortar toy store, the following costs should also be covered:

• Cost of shop rental
• Public services (water, electricity)
• Cost of store decoration
• Warehouse rental charges
• Warehouse maintenance fee

In brick-and-mortar toy stores, rent and utilities always top the list of expenses. The amount of rent will depend primarily on the location and size of the store.

One of our clients in the U.S. spent over $4,000 in their first month, which included a monthly rent of $1,780, a security deposit of $1,780, utilities, and other miscellaneous expenses. If they opened a similar toy store in China, this cost could be half that.

In addition to rent and utilities, you may need to invest more money in adapting the commercial space to your needs. During this process, you'll incur decoration costs. But unlike rent and utilities, which are paid continuously, decoration costs will be incurred on a one-time basis.

Storage costs, which include warehouse rental charges and maintenance fees, are another essential cost that brick-and-mortar toy store owners must bear.

Although running a traditional brick-and-mortar toy store can be profitable, more and more sellers, attracted by the unique advantages of online commerce, are planning to open a home-based toy business. In 2019, Toys “R” Us, one of the largest toy retailers in the United States, closed all its physical stores and focused on online sales channels. It's safe to say that the internet has completely transformed the toy retail industry.

If you're planning to start an online toy business on Amazon or other online marketplaces, you'll need to consider the following costs:

• Google advertising rate
• Affiliate Marketing Fee
• Amazon Pay Per Click Rate
• Amazon FBA Fee (use a calculator)
• Online store operating fee (custom service, etc.)

Promotional fees will be one of the most essential types of expenses that could bring you profits.

If you're planning to open an independent online toy store, you need to invest in promotion to attract enough customers. There are two common channels for promoting your store: first, running ads on Google, and second, affiliate marketing .

Selling on large e-commerce platforms like Amazon will save you the effort of increasing your customer volume, but you'll still have to pay for the volume you get from those platforms in the early stages of your business. For example, if you want more customers to visit your toy store, you can sign up for Amazon's pay-per-click service, which will give you greater access to Amazon's customer base.

After shipping to an Amazon Fulfillment (FBA) warehouse , you'll need to pay an additional FBA fee , the amount of which varies depending on the toy niche. Calculating the FBA fee is a bit complex, but you can use an online FBA calculator to get an approximate amount.

In addition to the above, when your business scale grows to a certain level, you may need to invest more operating money into your store.

Consider opening a high-yield business account with high interest or annual percentage yields (APY) to generate income from your excess cash. This money can then be reinvested in your business.

3. How to sell? Choose a suitable platform to start selling.

One of the most important steps in starting an online toy business is choosing the right platform. In this section, we'll discuss the advantages and disadvantages of several e-commerce platforms where you could start a toy business:

• Amazon
• eBay
• Want
• Shopify
• Dropshipping

If you want to start a toy business that generates consistent passive income, opening an Amazon store would be a good option.

It may seem easy, but you have to invest a lot of energy into choosing products and testing markets before you can really get started.

Especially in recent years, competition on Amazon has become saturated, and Amazon is imposing increasingly strict requirements on sellers.

eBay has many similarities to Amazon. It also has independent websites in different countries, just like Amazon.

One of the biggest differences between Amazon and eBay is that Amazon's toys tend to be higher quality and higher-end than eBay's. I think this is primarily due to Amazon's much stricter requirements and standards for toys.

Therefore, for lower-value toys, eBay would be a good platform to sell them. Another point to keep in mind: if you want to sell toys in the Australian market, eBay might also be a better option than Amazon, due to its number one position among e-commerce marketplaces in Australia.

Wish is a relatively young e-commerce platform whose main target market is the United States. It offers trendy products and attractive, low-priced novelties. However, Wish has the most lax rules regarding the toys that can be listed.

Ultimately, for sellers looking to open a store on major e-commerce platforms, the most important thing is to develop a toy business plan after understanding the platforms' rules and calculating operating costs accordingly.

If you want to manage your store precisely, focus on product optimization, and delve into specific toy niches, you should consider Amazon.

On the other hand, if you want to cover as many types of toys as possible and earn more revenue by selling more, you might consider other platforms like eBay and Wish for their more user-friendly listing restrictions.

If you have enough budget and marketing experience, you can consider opening an independent online toy store through Shopify or other similar platforms. This business model will allow you to develop your brand, build your own customer base, and manage your business more independently.

Under the dropshipping model, your supplier will deliver products directly to your customers when they place an order in your toy store.

You only need a few hundred dollars to start your toy business. This business model is ideal for sellers who just want to make some extra money.

However, due to the uncertainties of this model, it is only recommended for those who can find reliable dropshipping suppliers. One of my clients has been selling fashion products through dropshipping for a long time , and according to him, the dropshipping business has become increasingly difficult in recent years.

So, as profitable as this business model may be, I wouldn't recommend it if you want to have a long-term business.

4. Where to buy wholesale toys for resale? Buy from local markets or wholesale from China.

Toy sellers often import toys from China. or wholesale them at local markets. If you're unsure of which toys to sell, you can search for them at local markets. If you have a clear idea of ​​your products, it's worth importing them from China to improve your profit margin. In this section, I'll explain the benefits and advantages of these two channels for wholesale toys.

Benefits of buying toys at local markets

• Short shipping time

Shipping times will be drastically reduced compared to importing from abroad when you sell toys wholesale in large quantities from markets close to your location, especially when your products are shipped by ocean freight. 

• Convenient contact

Thanks to the short geographical distance and the absence of language barriers, you'll find it easier to contact your supplier. Without borders, you can even visit them whenever you want.

• Smaller MOQ

The minimum order quantity will also be relatively lower. For the same product, the minimum order quantity in international trade is usually higher than in domestic trade. If your budget and time are limited, purchasing toys from local markets could give you space for a more diverse portfolio.

Unique advantages you can get by buying wholesale toys from China

• More competitive prices

Thanks to lower material and labor costs, and a more developed and efficient industrial chain, toy manufacturers in China can offer more competitive wholesale prices than most Western countries. More than 70% of toy sellers on Amazon import from China to gain pricing advantages.

• More options for toy types and models.

Many major international toy brands around the world choose to manufacture their products in China. You'll always find the latest models and types of toys in China, manufactured with cutting-edge technology.

• More convenient for customization

China has numerous toy industry clusters dedicated to different product niches. Manufacturers located in these industrial clusters can offer highly efficient and high-quality customization services at a low price.

Here you can find the right supplier for your toy business, whether you want to launch a small-scale private label or develop your own product from scratch.

5. Six practical tips for managing a toy business

Finally, I have some practical tips I learned from our toy buying experience to share with new toy sellers:

1. Don't obsess over real factories

Original toy factories aren't always the best partners. Even if you find the ideal factory , if your order quantity isn't large enough, you won't be able to get the best deal.

Secondly, you may encounter all sorts of issues with product certification, customs clearance , and even language barriers when working with factories in your toy import business.

2. Don't put all your eggs in one basket

One of the most common mistakes new sellers make is investing all their money in a single product.

You should know that the toy business is constantly evolving; current trends change daily. If you invest all your money in a trendy toy, you'll lose the ability to keep up with new trends and won't be able to defend yourself if you miss out.

3. Balance price and quality

Always balance price and quality. The goal of pricing should be to meet your customers' expectations.

If you sell something very cheap but of low quality to your customers, they will probably feel cheated by you, in which case the only thing you can achieve is a lot of negative reviews and a bad reputation.

4. Find a provider willing to communicate and help you resolve issues.

When it comes to problem-solving, communication is always key. When looking for reliable suppliers, a quick response and a cooperative attitude should be your top priorities.

5. Don't be fooled by low prices offered by suppliers.

Many new sellers are easily lured by the low prices offered by suppliers. However, there is a common scam on Alibaba : a supplier will initially offer you a very competitive price; once you've reviewed the sample and decided to place a mass-produced order , they will try to raise the price with various excuses, such as additional shipping fees, packaging costs, or an increase in the price of raw materials. Be aware of these pitfalls to ensure your safety when shopping on Alibaba .

6. Make sure your toys can pass all the necessary certifications in your country.

Before entering mass production, you must consult with your country's customs authorities and the seller center of the platform where you plan to sell toys about any mandatory certifications for your product.

After obtaining that information, you can ask your supplier or hire a third-party agent to ensure all necessary certifications are in order.

The end

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