The toy industry is facing a downfall worldwide but in Pakistan it has been minimally affected. According to an unofficial source the number of containers of toys being imported in Pakistanis more than many of the western countries.
Procurement
In Pakistan, toys are not manufactured but purchased from China. China being the largest toy manufacturer supplies toys to the whole world including the western countries.
Pakistan cannot purchase toys in bulk directly from China. European countries and U.S.A. have contracts with China which prohibits them to supply toys to developing countries including Pakistan. Suppliers in Pakistan have to buy the Chinese toys from Singapore and sometimes Dubai. Even if the toys are bought from China directly through any source, they are cheaper and the quality is low. Usually the suppliers have their representatives who buy the toys from the local markets of China or Singapore in bulk and then ship containers to Pakistan. Then the suppliers sell the toys to the local retailers. Some suppliers and retailers directly buy the toys through the internet but the prices are sky high. There was a time when Karachi was the hub for toy suppliers but now Lahore has become the focal point for the suppliers. All the major suppliers are in Lahore who are importing from other countries.
Duty Structure
The duties on each item vary depending upon its size and the type material used in it. For example toys with electronic batteries have more duty on them. On average the duty on toys is 50% of the price which means that if one is purchasing a Barbie Doll of Rs. 4000 from Singapore, after paying all the duties, it will cost around Rs. 6000 in Pakistan.
Profit Margins
Once the business is settled, the profit margins are relatively high in the toy business. The margin on every toy varies. In Pakistan, customers usually bargain. It is up to the shopkeeper or sales person that how much discount he offers.
A single toy can be sold at different prices to different customers. A good shopkeeper can earn from Rs. 1 lac to even Rs. 3 lac a month depending upon his relationship with the customer. A shopkeeper has to have good relations with the suppliers and complete market knowledge of the new and the latest products. If an experienced person starts a new shop with an initial investment of Rs. 5 million, he can breakeven within a year. On the other hand a new trader with no experience may take even 5 years to reach the breakeven point. It all depends on the market information (demand) and the relationship with the customers.
Customer Relationship
The success of the toy business depends totally on how you deal with your customers and how you meet their demands. If an item is not available in your store, try to arrange it for them. You have to interact with customers by making them loyal for the future.
Marketing
The toy business requires marketing through brochures and other means of advertisements but the long lasting marketing technique in this business is the relationship with the customers. Word of mouth plays a major role in increasing the sales of the toys. Other marketing technique varies from location to location.
Major Issues
The key concern these days are the reduced margins but the overall toy industry of Pakistanis still better as compared to the other countries. The major issue faced is that many retailers do not have the complete understanding of the customers’ choice. One general problem faced by all the traders is the high duties that they have to pay while importing which increases the cost.
New Entrants
The toys business requires a complete knowledge of the industry, sale and purchase procedures, maintaining relationship with the customers and most importantly the working of the toys. These days if an investor wants to start a toy store, a minimum initial investment of Rs. 5 million is required which includes almost all the initial expenses and the shop rent for a certain time period. A prior experience in this field is necessary. It is advisable that new entrants should work in this industry for at least 6 to 12 months before investing in it so that they are acquainted with the buying procedures and the demand of the customer. Location of the business matters significantly. Shops located in posh areas always earn more because of the high margins. Some consider that Islamabad is a better market for a toy shop as compared to Lahore and Karachi markets. Nevertheless, the business in Lahore and Karachi is also very good if you know the market well.
