Toy Retailing

The Market Place

Toy retailers carry a number of different products to suit the play needs of children. Small businesses may choose to specialise in certain toys or stock a wider range to accommodate children of all ages. Toys will range from rattles, squeaky toys and balls for babies (0-12 months); pull-along toys, dolls, finger paints, soft toys and crayons for toddlers (1-3 years); construction kits, train sets and puzzles for pre-school children (3-5 years); and bat and ball games, pencil sets, colouring sets, craft and hobby kits and musical instruments for children of school age (5 years and upwards). Action figures, play-sets, games and collectables as well as radio controlled and out-door toys add to the excitement for older children. Children aged two to three receive the most toys but expenditure focuses around the 6-8 year olds.

The current trend in all sectors of the market is towards electronic toys and computer assisted learning with many of these highly developed to attract children. These fully developed toys are no longer the preserve of electronic and computer game traders and independent toy retailers need to understand the market. Sales of traditional toys and games have been relatively static over the last ten years in real terms. The popularity of toys also follows film and TV trends with Licenses launching spin-off merchandise. The growing cable and satellite television markets are likely to further contribute to this. Licensing is particularly important as demonstrated by the success of the many top selling toys (see Toy of the Year and Toys for Christmas). However, with fashion trends it is often difficult to predict what will be popular, and toy retailers can be left with a backlog of unwanted stock. Toy retailers must also compete with other sectors including fashion, sport, music and entertainment for leisure expenditure.

While toy retailing is a crowded market, sales to and for children are rising, although this is attributed to the popularity of video and electronic games. The toy market is highly seasonal dominated by the pre-Christmas period, when the majority of purchases are made. There may also be a slight increase in interest around Easter and during the summer when children are on school holidays. Market conditions are subject to change and thorough up to date market research should be carried out before any business decision is made. Regardless of the type of toy shop you choose - most types find the trading pattern around the same: around 15% per quarter until the pre-Christmas period when you take around 55% of your turnover.

Customers

While very few children buy their own larger toys, today’s affluent pre-teens influence purchasing of their parents. Children know what toys they like, and if a product doesn’t deliver they simply won’t be interested. As children are becoming richer and more sophisticated they may grow out of toys – or at least see them as childish - more quickly than they did some years ago. To accommodate this phenomenon, dubbed Kids Getting Older Younger, toys are being reworked to track pre-teen fashions trends and adult interests especially sport and technology. The potential of “pure” toy buying has therefore narrowed. Where parents were once viewed as the customers in the toy market, the industry is much more consumer-orientated towards children. Parents and grandparents prefer to consider factors such as educational input, price, durability, brand name, toy safety and the suitability of the toy for various age groups.

Expenditure on toys continues to be affected by the significant rise in the number of working mothers, and a similar growth in the average age of women having their first child. These factors indicate that parents are, on the whole, more financially able to provide for their children and also see educational progress as very important. The elderly population is also expected to continue rising, and as many are in a higher socio-economic bracket, this could cause an increase in gift purchases for grandchildren. Adults may also buy traditional toys remembered from childhood (e.g. china dolls), although a small toy shop may choose to stock toys for play rather than decoration.

Margins

Margins are dictated by the type of product, what your competitors are selling it for, and how much it is hyped. Margins to strive for are around 40% to ensure you cover your overheads and allow for modest growth, but a TV-hyped product might bring in 20% - sometimes less. Key price 'controllers' are Argos and on-line catalogues. You'll find your customers have checked their prices for top lines and remember that toy superstores might be "out-of-town" but it's not that far up the road and car parking is usually free, so don't be fooled into thinking of competition as just around your immediate location.

Competition

The toy retailing market is broken up into multiples, department stores, on-line, catalogue showrooms and toy stores of varying sizes. In recent years the number of small, independent shops has declined. There has been a decrease in the market share of specialist retailers with variety stores benefiting. Argos, Woolworths, until its collapse in 2009, and the Toys R Us are the UK’s leading toy retailers. Other toy stores providing fierce competition are The Entertainer, Hamleys and the Early Learning Centre. Mixed multiples include Wilkos and WH Smith. Supermarkets also encroach on the sector, with Asda and Tesco strong in toys and games while some department stores also have major stocks of toys, eg House of Fraser and John Lewis.

Due to growth in the sector, largely by multiples, the independent toy shop is finding it increasingly difficult to compete on price and breadth of range. As a result, smaller retailers have formed buying associations or are specialising in niche markets such as higher quality branded goods, or models. Despite this, many small toy shops have been forced to cease trading. Therefore it is advisable to consult the Yellow Pages to gauge competition. Prices for toys should be measured against the Argos catalogue as this acts as a key price controller in the sector.

Buying groups

There are two both owned and controlled by their members:

Toymaster Ltd.
Victoria House
Newport Pagnell Road West
Northampton
NN14 7JJ
Tel: 01604 674477

AIS/Playroom
Sheward House
Cranmore Avenue
Shirley
Solihull
West Midlands
B90 4LF
Tel: 0121 713 4487

Both offer membership of the Association at a discounted rate. We believe most retailers of toys will only survive as part of a buying group

Promotion

Toy shops should be bright and attractive, displaying popular goods in the window. It will also help if the premises are accessible by public transport with parking facilities. Staff should be helpful, as many first-time buyers will seek advice on what toys are suitable. The business should offer a higher level of personal service than the multiples to encourage word of mouth promotion. Leaflets should be distributed to target potential custom, e.g. in ante-natal clinics, nurseries, doctors’ and dental surgeries and mother and toddler groups. The shop should advertise in Yellow Pages/Thompson and the local press in the run up to Christmas. Manufacturers usually provide colourful catalogues for customers and point of sale material.

Membership of the Toy Retailers Association will be very beneficial, as this is the recognised professional body intent on improving the standards of toy retailing. It is also recommended to attend toy fairs such as the British Toy Fair to keep abreast of developments in the trade.

Start Up Costs

The largest cost to be met will be purchasing or leasing premises. This will depend upon size and location, so a small independent toy shop may prefer a small outlet in a side street rather than high street premises. As substantial space may be required for storage and display, this will also affect property prices. The building may require sizeable investment to refurbish the workspace and comply with fire regulations. A till point is essential, and most shops use EPoS (electronic point of sale) systems to monitor supply and demand. Ongoing costs will include promotion, insurance, electricity and heating.

The cost of developing a core product range will depend on the target area of the children’s market, as this will determine the goods in stock. Pricing margins will be dictated by the competitors’ pricing strategy and the level of hype. Businesses are advised to consult the British Toy and Hobby Association’s (BTHA) Source Book www.btha.co.uk for a comprehensive list of suppliers (manufacturers, importers and wholesalers), or the British Toymakers’ Guild for hand-crafted or wooden toys. To survive competition in the market, it is recommended that independents join a buying group.

Training and Qualifications

No specific training or qualifications are required to operate a toy shop. The National Association of Toy and Leisure Libraries runs one day and three day courses for example, Learning Through Play which includes modules on Child Development and Toy Choice, Toys and their Play Potential and Play for Children with Differing Needs. NVQ’s/SVQs are available in Retail Operations, but these are unlikely to be industry specific. With the toy market being so crowded, only professional retailers with business acumen are likely to be able to overcome current trading difficulties. Various on-line courses are available through the Association and through the Retail Industry Sector Training organization SkillSmart.

As advising customers is an essential part of the job, staff should be friendly and approachable with a basic knowledge of children’s play for various age groups. This should cover exploratory, constructive, energetic, modelling, pretend, social and skilful play. It is also important to have a genuine love of children, endless patience, tolerance, energy and a sense of humour.

Legal

All businesses are subject to a wide range of legislation and will be affected in different ways. This section is intended as a starting point and it is important to seek professional legal advice before business decisions are made.

Relevant legislation is developing continuously for retailing, employment and Toys, including the European Toy Safety Directive. Specialist advice is available to members through the Association which cover everything from materials of manufacture to age specific safeguards, electrical devices, environmental protection and Home Office legislation on Toy Guns. Much is obvious and common sense - there should be no sharp points or rough edges on toys likely to be in contact with young children, and soft toys should have well-sewn seams and secure eyes, noses and ears but some is highly specialized such as the use of plasticisers in moulded products. Products failing to meet standards may be withdrawn from sale. The BTHA introduced the Lion Mark scheme to indicate that toys are safe and conform to current British and European Safety Standards. The TRA Approved Lion Mark Retailers ensures all Members obey a strict code of practice on selling safe toys. All toys on sale in the EC must be tested and have the CE mark to indicate conformity with the Toy Safety Regulations. The manufacturer should provide a test certificate from a recognised body to prove the product has undergone appropriate testing. Any instructions for use of the product should also be checked, and there must be adequate user information for the correct age group. All toy retailers should have Public and Employer’s Liability insurance is also required.

There are also strict regulations governing television advertising of toys and games aimed at children under 15 years old. This relates to content, timing and misleading advertisements, and affects both manufacturers and retailers.

Consumer legislation includes the Sale and Supply of Goods Act 1994, and the Consumer Protection Act 1987, Workplace (Health, Safety and Welfare) Regulations 1992. We recommend all retailers to use their Trading Standards Office, Chamber of Commerce and Business Link as sources of advice in these non-specialist areas but many will need a legal review at start-up at least.

Suppliers

British Toy & Hobby Association – BTHA Handbook
80 Camberwell Road
London
SE5 0EG
Tel: 020 7701 7271
Email: admin@btha.co.uk
Website: www.btha.co.uk

(Contains a comprehensive list of manufacturers and suppliers)

British Toymakers Guild
124 Walcot Street
Bath
BA1 5BG.
Tel: 01225 442440
Email: info@toymakersguild.co.uk
Website: www.toymakersguild.co.uk

(For hand-crafted and predominantly wooden toys)

EQUITOY (previously the British Toy Importers Association)
Somers
Mounts Hill
Benenden
Kent
TN17 4ET
Tel: 01580 240819
Fax: 01580 241109
Email: info@btia.org.uk
Website: www.btia.org.uk