The Future of online skill toy retailers

Posted by Jeremy McKay on

I’ve had a few conversations lately with different online skill toy retailers. What I’ve been hearing is something I’ve been experiencing as well.  It’s becoming harder to make an online skill toy retail store work. There are a number of challenges, old and new that are faced by online retailers.
Inventory choices are the biggest challenge. It’s very difficult to decide what to stock.  

1. Competition: Do I only stock major brands that have brand recognition?  If I do, then I’m competing directly with every other online retailer to sell a product that doesn’t have limited availability. Or do I focus on smaller hard to find products?  Then I’m in the position of doing the leg work to help a new or small brand get recognition that they can’t do themselves on the off chance their stuff will sell.  It’s hard because I want to support start up brands, but have limited funds to tie up in products.

2. Unpredictability of sales:  I have had products from one supplier sell out in a weekend, only to have their next release sit on the shelf for months.  No idea why.

3. Shipping and volume: Generally the markup for retail is 40% in the yoyo world.  Which is less than half of what you are seeing if you go buy a pair of shoes at a retail store.  
What doesn’t get taken into account with that number is overhead.
-cost of freight to the online store 
-taxes, duties, paypal fees
-cost of running the website
-shipping costs (very few yoyo retailers actually charge what it costs to ship including labour and packaging)
-promotional costs

4. Dead stock: When I order skill toys for the store, I have to do the mental math of “If I buy 10, at a 40% markup minus shipping and taxes I need to sell 6 or 7 to break even”.  If I only sell 4 initially then I’m sitting on funds that could have gone elsewhere, and often are sitting on my credit card accruing interest.

5. Employees:  Do I do it all myself or hire help?  I don’t have any actual Employees, but I occasionally hire one of the kids from the local club to come in and help with small jobs.  I have paid graphic designers for imagery and support for promotional strategies.  The bonus packs that go into every box that ships out have a cost that varies.  The concrete costs of the bags, stickers and candy are easy, but the time it takes me to package them together is harder. It’s tricky to work all of that into the cost of yoyos, but it is yet another chip away at the 40%.

I think the biggest challenge going forward is that it is so much easier to sell products online than it was even 5 years ago.  I recently switched the store over to Shopify because of how complex yet simple it is. All of the finances, inventory control and shipping are in the Same place.
This means that manufacturers large and small are more likely to sell direct.  Their fans are (quite reasonably) more likely to buy direct rather than through a retailer because they want to support the creative end.  But it makes choosing what to stock a challenge.  I happily stock MonkeyfingeR design begleri because their initial releases include retailers.  Aroundsquare releases direct first then sells to online retailers, which makes it harder to move their products.  Both brands have solid followings that will buy direct first before they look to Return Top Shop.  This is pretty consistent across the board.

So where to next?  I’m finding myself in a position of having a few brands I know can sell, a few products that I am willing to spend time promoting and sticking to those.  I know I can sell yoyos that retail for under $30.  Over that, brand recognition is required, and a scarcity market (sells out quickly elsewhere) helps. 
Do I put money into bringing more brands in to draw customers?  Or do I put that money into creating original products with Rain City Skills?  Do I switch tracks and put more time and energy into building the local yoyo scene through school demos and public workshops?  Or do I need to put some money and time into advertising?
Either way, it’s a learning experience that I’m really enjoying!
Feel free to let me know what you think in the comments.  
-Jeremy “Mr Yoyothrower” McKay

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