The toy market is not in crisis and remains strong over the years. It achieved a turnover of 1.667 billion USD in 2009, boosted by some segments acclaimed by the public: video games for consoles and PCs, licensed games merchandising. The good health of the sector fuels the interest of the powerful players that are general supermarkets and specialized supermarkets. Their development strategy allows them to capture the largest share of the market. To this already strong competitive pressure, is added that of the mail order booming with the proliferation of e-commerce sites. Independent professionals have difficulties in maintaining themselves, hence their progressive decline in favor of large specialized structures. In 2010 there were 38 failures. To resist, independents must specialize in segments that allow them to stand out. Thus, traditional wooden games or toys for infants are still accessible niches.
The types of toy trade in France
The outlook will remain excellent for PC and console gaming segments as well as for infant products. In this highly concentrated area around supermarkets, there are 4 poles.
- Subsidiary networks specialized in video games like Ultragamenia, or generalists like Toyus, control the market and have an energetic development strategy.
- Independent toy stores are in decline. Those who want to stay join groups or franchises. Playie Club is an example of these types of grouping.
- Retail stores are also very present in the sector with a very attractive price policy.
- Distance selling is booming with over 5% market share. The success of e-commerce sites is indisputable. Their offer is not limited to video games alone.
Create a game store: The constraints
In a particularly competitive sector, subject to the vagaries of fashion effects, and marked by seasonality, success requires a great deal of know-how. The professional must follow his market and listen to his customers. No training is required to practice in this sector. Given the riskiness of the business, it is particularly desirable that the professional has strong skills in business management. There are also many specialized trainings for this sector: university diploma “game science, play activities and educational and cultural products”, or even a professional qualification contract seller in store specialized in toys.
Similarly, no specific rule concerns the opening of a toy retail business. It is subject to the common law of the retail trade and the norms relative to the safety of the places receiving from the public. In addition to these general rules, very strict regulations apply to the safety of toys. In particular the texts specify the standards to be respected for the display and the marking of the products.
As for balances, the law introduced floating balances that supplement the national summer and winter balances, which last a week less. Professionals can organize two weeks of sales at their convenience.
The characteristics of a toy business
Because of their offensive strategy, specialized superstores are at the origin of most of the new installations. In 2010, there were 152 creations. The initial investments mainly concern the development of the premises. In the toy sector, particular care must be taken in the aesthetics of the point of sale. The starting stock is also a heavy investment.
The management of a toy point of sale
Given the highly competitive environment, rigorous management is essential. The turnover must be decomposed by references in order to follow the evolution of sales as closely as possible. Demand-side inventory management helps prevent supply disruptions.
It is also necessary to obtain the best conditions from suppliers, hence the need to know the distribution channels: manufacturers, wholesalers, or central purchasing.
The toy market is subject to fashion effects and technological developments. In addition, it is extremely seasonal, as 60% of sales occur during the holiday season. It is therefore crucial to anticipate and manage this period well. In particular orders must be placed at least 6 months before the holidays, which requires a good knowledge of market trends, modes, and potential demand.
In general, the management of the supply, certainly delicate, especially for the Christmas period, must be irreproachable. In particular, a stock-out at the end of the year would be particularly damaging for customers as well as for turnover.
Due to the very strong competitive pressure, gross margins must be calculated as closely as possible to remain competitive. In addition, most of the toys are made in Asia, and especially in China, to be distributed by importers in France to all operators. As a result, the real flexibility of the self-employed is very small. Under these conditions any decline in turnover makes profitability uncertain.
With around 60% of sales, purchases are the largest expense item.
Personnel costs, with around 10% of turnover, come second. In addition, it is necessary to resort to additional hires because of the influx of customers during the holiday season. As a result, hiring management must be rigorous to avoid any risk of skidding. The fixed-term and part-time contracts as well as the subsidized schemes must be privileged.
Due to the size of the land required and the quality of the sites, rents are also important. Both the seasonality of the activity and the weight of the investments impose solid capital. Cash requirements are very important because of the seasonal nature of the market.
Evaluate a toy business
A gaming store can be valued between 20 and 70% of its annual turnover. Thus a goodwill realizing 200K $ of turnover can be bought between 40K $ and 140K $. Of course the price depends on the quality of the location, the dilapidated amenities but also the profitability.
To this amount, it will be necessary to add the amount of the stock which can be important.
Get a professional loan for a toy store
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In this risky market, only professionals with strong financing capabilities can be maintained. To succeed, they have to rely on a group or position themselves on a buoyant segment.
The project leader must also have a solode experience in the toy field in order to anticipate sales.