How to Open a Toy Store: Location, Cost & Profit Potential

Here are the most important factors to consider when you want to open a toy store:

1. Location and online store — Choose a physical location that is easily accessible and has high foot traffic, such as a shopping mall or a busy street. Additionally, set up an online store to reach a wider audience and increase sales. Ensure your online store is user-friendly and provides a seamless shopping experience.
2. Suppliers — Establish relationships with reliable suppliers who can provide a diverse selection of popular and high-quality toys. Consider working with manufacturers that offer branding customizations so you can sell your own branded toys for maximum margins.
3. Security — Implement security measures to protect your inventory and ensure the safety of your customers and staff. This can include surveillance cameras, alarm systems, and secure payment processing methods.
4. Licenses and permits — Obtain the necessary licenses and permits to operate your toy store legally. This may include a business license, sales tax permit, and any other local or state requirements.
5. Delivery — Offer delivery services to make shopping convenient for your customers. This can include same-day delivery for local customers and shipping options for online purchases. Ensure you have a reliable logistics system in place to handle deliveries efficiently.
6. Family cards (loyalty program) — Implement a loyalty program to encourage repeat business and build customer loyalty. Family cards can offer discounts, special promotions, and exclusive access to new products or events.
7. Stock a diverse selection — Ensure your store stocks a wide range of toys to cater to different age groups and interests. This can include educational toys, popular brands, and exclusive items that are not easily available elsewhere.
8. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
9. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.

Step 1: Decide if the Business Is Right for You

Pros and cons

Toy store industry trends

Industry size and growth

• Industry size and past growth – The U.S. hobby and toy stores industry is worth $19.4 billion in 2023 after declining .9% annually for the last five years, largely due to a pandemic dip.((https://www.ibisworld.com/united-states/market-research-reports/hobby-toy-stores-industry/))
• Growth forecast – The U.S. hobby and toy stores industry is projected to decline .1% in 2023.
• Number of businesses – In 2023, 19,865 hobby and toy store businesses are operating in the U.S. 
• Number of people employed – In 2023, the U.S. hobby and toy store industry employs 117,607 people.

Trends and challenges

Trends

• Toys that promote science and math skills are growing in popularity, as are toys that encourage sustainability.
• Toy trends are being heavily influenced by YouTube, where children often find the toys that they want. 

Challenges

• Supply chain issues are making it difficult for toy stores to keep their shelves stocked.
• Digital play options are decreasing the demand for physical toys. 

How much does it cost to start a toy store business?

Startup costs for a toy store range from $100,000 to $200,000. Costs include the space rental and preparation, an operating budget, and inventory.

Alternatively, you could start an online store and hold limited inventory to keep your costs down.

You’ll need a handful of items to successfully launch your toy store business, including: 

• Aisle partitions and shelving
• Checkout counters
• POS system

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Website	$200 - $1,000	$600
Space rental	$5,000 - $10,000	$7,500
Store preparation	$20,000 - $30,000	$25,000
Operating budget	$30,000 - $50,000	$40,000
Marketing budget	$2,000 - $4,000	$3,000
Inventory	$50,000 - $100,000	$75,000
Total	$107,500 - $196,300	$151,900

How much can you earn from a toy store business?

How much you charge for toys will vary greatly. These calculations will assume an average sale per customer of $50. Your profit margin after all costs should be about 10%. 

In your first year or two, you could have 50 customers a day, bringing in $912,000 in revenue. This would mean $91,200 in profit, assuming that 10% margin. 

As you gain traction, you might have 100 customers a day. With annual revenue of $1,824,000, you’d make a tidy profit of $182,400.

What barriers to entry are there?

There are a few barriers to entry for a toy store. Your biggest challenges will be:

• Funding the startup costs
• Breaking into a competitive market

Step 2: Hone Your Idea

Now that you know what’s involved in starting a toy store, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research toy stores in your area to examine their products, price points, and customer reviews.

• Make a list of toy stores that offer similar products. 
• Review your competitors’ products – their features, pricing, and quality – and marketing strategies.
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a toy shop that specializes in wooden toys or educational toys. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products

You could choose a toy niche, or you could offer a variety of toys for kids of all ages, which is probably your best bet. You could also sell snacks like cookies. 

How much should you charge for toys?

Your toy prices should be based on market prices in your area, but also on your costs to acquire the toys and your other costs.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be both kids and their parents. You’re most likely to find the parents on Instagram or Facebook, but you might also try YouTube to target kids. 

Where? Choose a toy store location

You’ll need to rent out a large space for your toy store. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a toy store location, you may want to follow these suggestions:

1. Demographics: Choose areas with a high concentration of families and children.
2. Visibility and Accessibility: Opt for high foot traffic locations with easy parking.
3. Competition: Ensure the market isn’t oversaturated or differentiate your offerings.
4. Size and Layout: Space should fit inventory and offer a pleasant shopping ambiance.
5. Costs: Ensure rent and associated expenses align with projected sales.
6. Future Development: Research upcoming projects that could affect store traffic.
7. Lease Terms: Look for favorable durations, renewals, and business-friendly clauses.
8. Local Regulations: Check that retail operations are permitted and understand restrictions.
9. Customer Convenience: Offer amenities and consider proximity to public transport.
10. Seasonal Factors: Understand how seasonal changes might influence business.
11. Community Engagement: Being near schools or community centers can be beneficial.

Step 3: Brainstorm a Toy Store Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “toys” or “toy store”, boosts SEO
• Name should allow for expansion, for ex: “PlayScape Ventures” and “ToyHorizon Emporium” over “TrainTot Depot” and “Dollhouse Dreams”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Toy Store Business Plan

Here are the key components of a business plan:

• Executive Summary: Summarize your toy store business plan, highlighting your business concept, target market, and financial projections.
• Business Overview: Provide an overview of your toy store, including its location, size, and the types of toys and products you plan to sell.
• Product and Services: Describe the range of toys and related products you will offer, including any unique or specialty items.
• Market Analysis: Analyze the local market for toy stores, considering factors like demographics, toy preferences, and competition.
• Competitive Analysis: Identify other toy stores in the area and explain how your store will differentiate itself, whether through pricing, product selection, or customer experience.
• Sales and Marketing: Outline your marketing and sales strategies, including advertising, promotions, and online presence to attract customers.
• Management Team: Introduce yourself and any key team members involved in running the toy store, highlighting relevant experience in the retail industry.
• Operations Plan: Detail how your toy store will operate on a daily basis, covering aspects like inventory management, staffing, and customer service.
• Financial Plan: Present financial projections, including startup costs, revenue forecasts based on expected sales volume, and profitability estimates.
• Appendix: Include any supplementary materials, such as product catalogs, store layouts, and marketing materials, to support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to toy stores. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your toy store will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a toy store business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Toy Store Licenses and Permits

Starting a toy store business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your toy store business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Lightspeed, RealTimePOS, or StarCode, to manage your inventory, pricing, purchases, and sales. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now” or “Order”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

• Engage in Local Partnerships: Collaborate with local schools, daycare centers, or community organizations to host events or offer special discounts, fostering community engagement and attracting families to your store.
• Local SEO — Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Themed In-Store Events: Host regular themed events, such as toy demonstrations, game nights, or costume contests, to create a fun and memorable in-store experience for customers, encouraging repeat visits.
• Loyalty Programs: Implement a loyalty program to reward frequent customers, offering discounts, exclusive access to new toys, or special promotions, enhancing customer retention and building brand loyalty.
• Social Media Contests: Leverage social media platforms to run engaging contests or challenges, encouraging user-generated content related to your toys, and increasing online visibility through shares and participation.
• Seasonal Promotions: Capitalize on holidays and special occasions with targeted promotions and discounts, aligning your toy selection with the season to attract gift shoppers and boost sales during peak periods.
• Collaborate with Influencers: Partner with local parenting bloggers, YouTubers, or social media influencers to review and showcase your toys, reaching a wider audience and gaining credibility through trusted recommendations.
• Interactive Store Displays: Create interactive and visually appealing in-store displays that allow children to play and experience the toys firsthand, enticing both kids and parents to spend more time exploring your store.
• Educational Workshops: Offer workshops or classes that emphasize the educational benefits of certain toys, providing added value to parents and positioning your store as a destination for both entertainment and learning.
• Customized Gift Wrapping: Provide a unique and memorable experience by offering free or premium customized gift-wrapping services, making your store the go-to destination for special and thoughtfully presented gifts.
• Customer Feedback Incentives: Encourage customers to leave reviews or provide feedback by offering small incentives such as discounts on their next purchase, helping to build a positive online reputation and attract new customers.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your toy store meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your toy store business could be:

• Largest toy selection in town
• Educational toys for kids of all ages
• Toys, puzzles, games, and more

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a toy store business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in toy stores for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in toy stores. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

You will likely need workers to fill various roles. Potential positions for a toy store business include:

• Store Clerks – customer service, make sales
• Stockers – stock shelves
• Marketing Lead – create and implement marketing strategies
• General Manager – scheduling, accounting, inventory management

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Toy Store – Start Making Money!

Imagine providing a toy paradise for the children in your area, watching their curiosity and happiness as they browse the aisles of your toy store. That’s the true reward of owning a toy store, and making a good living is just a bonus.

You’ve learned about the business now, so you’re ready to jump into the game and get your successful toy store going!

Q&A

Is a toy store profitable?

Yes, toy stores can be profitable if they do a high volume, because profit margins are thin. You need a good location, preferably with a lot of foot traffic to be successful.

What is the growth potential of a toy store?

A toy store can grow by adding new locations. It could even become a franchise like Toys R us if it’s successful.

Can you start a toy store on the side?

You may be able to start an online toy store as a side hustle. A physical toy store, however, is best run as a full time business.

How do I start my own toy brand?

You could create designs for unique toys and partner with a manufacturer to produce them. Alternatively, you could make toys by hand or with a 3D printer and sell them from an online store.