Opening a Toy Store

MRTULES

So the title says most of it.
I am looking for some help/advice/guidance on the following;
What sort of mark up are toys being sold at? I am trying to figure out how I can do a cash flow forecast.
I have received some information from toymaster about becoming a member and I think it is the way to go (more buying power).
I have approached a lot of independent and small toystores (some of which were with toymaster) looking for any information but none of them were keen to help(I stressed that I was not looking to set up anywhere near them).
I am really struggling putting a business plan together as there are so many unknowns atm.
I will leave it there for now and see what people think.
Some really great info gets shared in this forum everyday, hopefully someone can sprinkle a little my way

I supply Toys R Us stores across scandinavia with a line of products. They are making around 60% margin on my product after costs and shipping etc. They can sell at a high margin though because I give them that product exclusively in the nordic region and nobody else can sell it. If your going against stores selling the same stuff you probably have to start competing on prices a bit.

In my opinion you need to be making at least 50% on your products, you might have trouble getting a low purchase price though because of your MOQ's for one store are going to be low - if companies are producing stuff for you in china they will want 30,000 units to get their best price. 10,000 units won't even get you the best price.
Might be good to focus on products not everybody else has then, or another strategy would be to find distributors in other countries who are looking to get slightly older stock off their books at a discount.This strategy has its risks too though as they wouldn't be selling it that cheap if it had a very strong demand. Lots of research needed to be done on what sells right now in Ireland, and what is trending.
I notice the buying department that I deal with for the toys are incredibly sharp and on all the ball of every single kids cartoon and brand out there, right up to the minute.

MRTULES

Firstly, thank you for the info. One of the benefits of being a member of the Toymaster group is its buying power and trading terms which you couldn't get as an independent retailer. Does this make sense?
I feel a bank would look much more favorably on someone in this position (when looking for finance) then someone just setting up "on their own".

Is it a franchise your getting or you just pay a membership fee to join the group?

If it doesn't cost you too much then yeah it would be a lot better to take advantage of their all their groundwork. If they are anything like the company I deal with there is a huge amount of backend work that goes into selecting and approving products.

I'd say it will be pretty hard to get financing from a bank for something like this.
You'd need to be investing the same amount that your asking for, have to show some track record in business, and have a good long term relationship with them.
One thing I recommend doing is asking for double of what you really need, the two times I have got business financing from a bank for a startup, they gave me half of what I asked for on both occasions.

Peterdalkey

Retail has been doing so badly that I think it is highly unlikely that any bank would lend to an inexperienced new entrant to open a toy shop. The toy sector is very well supplied by the existing niche and toy superstores, Smyths,Argus etc plus the big supermarket chains stock up with toys for the big sales periods. Online toy shopping is also huge for planned events such as birthdays, Christmas etc.
Before you put a huge amount of work into a business plan etc, I would urge you to establish whether you have any chance of borrowing to meet your needs to get established.

MRTULES

Thanks Peterdalkey
I suppose my question is how could I find that out without a business plan and the items included in it like cash flow forecast and market research? Isn't a little bit of a catch 22.
All your points are (as always) extremely well thought out and valid. I don't want to give you an answer like "I feel it could be a runner in this location". I do however feel the location and unit I am looking at are a huge USP. Think of the sweets at a checkout concept. Basically there is so much road frontage (for want of a better word) and its located on quiet a busy intersection in a pretty busy and well anchored "retail park". So getting people (especially kids) aware of and into it would be the easy bit. Getting parents to then part with their hard earned euro is another thing altogether. I am trying to formulate some other usp's but basically I'm steering towards a hamleys style shop (which is very interactive for the kids) but with smyths pricing.

Peterdalkey

Thank you for your kind words. I picked on the benking as I see it as the primary concern and I know little or nothing of retail! There is nothing wrong in approaching banks with an outline of your business prospectus covering your concept and the already "knowns". All you are asking them is if is this something they would actually seriously consider, you are not asking for a decision. If you can get a couple of positive indications, then lash ahead with the serious work/plan.

jimmii

I went to AIB for finance when opening my retail outlet and they basically weren't going to be interested until they saw it was already working which was annoying but at least it means when it comes to opening a second outlet then they are a lot more likely to get on board. Joining toymaster is definitely going to make it more appealing to them but you are still going to need to be putting up at least 50% of the cost yourself by the looks of it they are only really willing to lend to buy stock so that if it does all go wrong they are able to return or sell the stock to get their money back.

Marks-ups across retail vary massively typically you are looking at 2.5x although its going to vary by manufacturer and for in demand products you are probably going to see it be a lot lower due to the higher demand.

You could also buy clearance lots from liquidated companies through websites like this http://www.wholesaleclearance.co.uk/toys.htm I used to trade on eBay before opening up and used them a lot they always provided an excellent service. You have to check it every day as the good stuff normally goes pretty quickly but sometimes you can get some great stock at really good prices and be sure to register for the newsletter as sometimes they get very limited stock in and make it only available to people who read the newsletter and don't post it on the site.

MRTULES

MRTULES wrote: »

Thanks Peterdalke-y
I suppose my question is how could I find that out without a business plan and the items included in it like cash flow forecast and market research? Isn't a little bit of a catch 22.
All your points are (as always) extremely well thought out and valid. I don't want to give you an answer like "I feel it could be a runner in this location". I do however feel the location and unit I am looking at are a huge USP. Think of the sweets at a checkout concept. Basically there is so much road frontage (for want of a better word) and its located on quiet a busy intersection in a pretty busy and well anchored "retail park". So getting people (especially kids) aware of and into it would be the easy bit. Getting parents to then part with their hard earned euro is another thing altogether. I am trying to formulate some other usp's but basically I'm steering towards a hamleys style shop (which is very interactive for the kids) but with smyths pricing.

If the key to this is getting a loan, then its not going to be those small things and clever ideas that turn them from not giving you the loan to giving it to you.
It will be the fundamentals - how much are you putting in, what is your current ability to pay it back, what assets do you have you could put on the line, can you personally guarantee the loan, what are other businesses in that industry turning over right now and what their margin is - surely they will compare you to other toy store customers. Then once those things are ticked off they will look at you and your ideas and what you can bring to the table, thats when the sales pitch comes in and you sell yourself and the plans.

Most importantly though it will be how much equity you are putting in yourself. I would be thinking of the bank as people who can 'supplement' your start up business, but not fund it, you will essentially have to do that yourself. That maybe a better approach for you to adopt given the way things are at the moment

MRTULES

Thanks again for all the input
@jimmii In relation to the below comment, did you manage to get your retail outlet open in the end?

jimmii wrote: »

I went to AIB for finance when opening my retail outlet and they basically weren't going to be interested until they saw it was already working which was annoying but at least it means when it comes to opening a second outlet then they are a lot more likely to get on board.

I suppose I could start a new thread on this next question but I'll fire away and see what you's think.
If you have little or no funds, what is the best business to try and start up?
By business I dont mean business type but more business model.
I assume online, as it cuts out the costs associated with a physical shop.
I cant seem to think small enough. Everything is always a €300k+ turnover pa business with rent rates staff costs and all the other bells and whistles.
I dont like to believe that its is easier to make money when you have money but it is definitely very hard when you have none

jimmii

MRTULES wrote: »

Thanks again for all the input
@jimmii In relation to the below comment, did you manage to get your retail outlet open in the end?

I did indeed we're open 11 months now there have been a few bumpy moments but luckily we were always able to find a bit more money to keep things going at the start!

I was very lucky to have the funds to be able to do it though and even luckier for everything to click into place at the right time. With little funds its very hard to get up and running. If you really want to do it you can apply to the bank and if that fails then apply to Microfinance Ireland that seems to be the route a lot of people are taking. The good thing about going via the bank is that you have to really have your business plan down and by the end of the process you will know a lot more about your business and what to expect from it.

What areas of expertise do you have? If you are looking at retail then I would definitely suggest running a website part time as unless you have a big budget it will take a while for it to be turning over enough to live off. At the same if you have a product that would be well at markets or fairs do as many of them as possible we did a weekend in Stillorgan and it went incredibly well that gets your name out there as well as selling products there and then.

You do need to turnover a lot to survive in retail €150k a year is really the minimum you can do and have enough left over to pay yourself something.

Shooter_galway

Hey I have worked in a large toy retailer and also helped many independants get their feet off the ground, if I can be of any assistance pm me and I can discuss margins etc with you and a lot of stuff from my experience that may help you out.