Subscriber Q&A
You asked, I answered.
Hey friends,
As mentioned in last week’s Weekly Wrap Up, I wanted to take questions from subscribers and put them into a Q&A article. I get a lot of messages about stuff that is definitely worth answering, but wouldn’t exactly be a full article worth of content. So, now that we’re a couple of months into the Toys to Retirement newsletter, I feel like I’ve received enough questions for this to warrant a post. Let’s go!
How do you handle prep?
How do you handle storage?
How come you tell us specifically what you’re buying with LEGO, but not with other toys?
How do you decide how deep to go on a purchase?
How do you decide when it’s time to sell an item for a loss / break even / low profit?
Where do you buy most of your toys? Do you ever pay full MSRP?
How do you reverse engineer your profit goal?
I’ve seen you mention profit per square foot. What does that mean?
What are the best toy brands for beginners?
Will you ever start an investment lead list?
Are there any toy brands you avoid?
How do you feel about debt?
What are the best tips you have for someone new to toy investing?
Aren’t you afraid you’ll be restricted in LEGO?
How do you handle prep?
To start, I polybag everything. If you haven’t, I highly recommend you watch this video. It showcases how Amazon receives and ships our products. As amazing as it is, you can clearly see how many different bins, conveyor belts, and hands our products have to pass through before reaching our customers. Not to mention the possibility of weather affecting our products like rain. The last thing you want is our toys being tossed in the same bin as a spilling shampoo or melting chocolate and not having your item in a polybag. As someone who believes account health is priority, the last I want is to give customers a reason to say an item was ‘used sold as new’ because it was covered in some random gunk or fluid. I also cannot state how many good reviews I have received simply for polybagging something. It’s simple. It’s effective. It’s worth the time and cost.
For reference, I use polybags from www.ilovesupplies.com. It’s a family-owned business and John, the owner, is a great guy. His site even has sales tax exemption (talk to your accountant first though!). I use both the UPC blocking polybags and the regular clear ones, depending on if I’m shipping to Amazon or Walmart.
When items start to reach the $75+ range and I deem the packaging collectible, I’ll use bubble pouches if possible. For example, items like the LEGO Star Wars helmets or expensive action figures that come in displayable boxes. Put yourself in the customers shoes. If you are paying a premium for a collectible, you expect it to come in great condition. Think about how annoyed we are when Kohl’s ships stuff and it’s smashed. That’s us paying MSRP. Now imagine being a customer paying 3x MSRP. Do the right thing. Don’t sacrifice the customer experience and risk account health for convenience. We are running a business, after all.
The main bubble pouches I use are 15x17.5 and 9x12. I buy them from The Boxery on eBay. There are likely more cost effective ways to purchase these in bulk, but they take up a lot of space and I value that space more for product.
For larger LEGO sets that aren’t quite oversize but still larger than the usual sets we buy, use your own discretion. You can bubble wrap or box, but for those not-quite-oversized sets I haven’t found it necessary since they aren’t really collectible/displayable boxes. For example, LEGO sets like 31120 Medieval Castle I’m comfortable with a tight polybag (sometimes I tape the seal with packing tape just so it’s tighter and has less of a chance of ripping).
How do you handle storage?
There’s a lot of answers to this one, all depending on your workflow and setup. Here is what I have done historically:
When doing a regular shipment into Amazon FBA, I’ll add a single unit of the item I want to store to a batch in inventoryLab. This is a shipment that I intend to actually send out full of OTHER products, I just add the single unit for now. Basically, I’m doing two different unrelated processes at the same time (sending a shipment into FBA and getting the item I want to send to storage listed in my Amazon inventory).
When it’s time to input my box contents, I delete the item I want to store from the batch. I finish the rest of the shipment as normal and send it out. Don’t forget to delete the single SKU from the batch!
When this batch was submitted, Amazon added the single item to your inventory and created your FNSKU. Now, anytime you add this item to a batch in inventoryLab, it will ask you to replenish.
When I am ready to pack a box of this item for storage, I will simply make a batch, replenish the item, and print out the labels.
I try to case-pack everything, it just makes life easier. I try to find boxes that have the minimal amount of dead space when case-packing the products. This impacts my purchasing also. For example, I know I can fit 34 units of LEGO 71790 NINJAGO Imperium Dragon Hunter Hound into an 18x18x16 Lowe’s box perfectly. So I attempt to purchase items in this size in quantities of 34. You will begin to learn which boxes fit which size products the best.
Then I polybag, label, and put the products into the box. I print out an extra label with the FNSKU to stick on the box, and write the item, quantity, and weight on the outside of the box. Then I seal it up, and track in an excel sheet the box dimensions, weight, and box contents.
Once sealed, I take the box to my storage unit. Items that I intend to sell sooner stay at my home in my spare room/garage/office. Items that I expect to be longer holds go to my storage unit. When looking for a storage unit, I recommend finding one that has dimensions that work optimally for the box sizes you use the most so that you get the most value per square foot and don’t have a ton of dead space.
When it’s time to ship out the case-packed units, I can simply look at my excel document, submit a new batch in inventoryLab, print out the labels, slap them on the box, and they’re good to go.
NOTE: You can also use inventoryLab’s ‘Unlisted Inventory’ feature. I’ve just never used it myself, but it’s the same concept.
TIP: Do not use regular Lowe’s boxes for storage. Regular Lowe’s boxes should only be used for shipping immediately. Heavy Duty Lowe’s boxes are able to withstand more weight and can be stacked higher in storage. Regular Lowe’s boxes will crush. You can use regular Lowe’s boxes for storage in limited quantities, as long as they are always on top.
Times are changing though, and I’m not sure how much longer I’ll be using this system. Why? Because Walmart’s prep requirements are different.
So right now I’m debating switching from pre-boxing everything to going to full-on shelving, because a lot of product I am not sure where it will end up in a year — Amazon or Walmart? Walmart does not require a label, so all I have to do in that case is just put the items in a polybag and then box or shelve them. If I decide I want to send them to Amazon instead, then I can print out a label. Still figuring out how I want to approach this, but it’s definitely something to keep in mind if you plan on selling on Walmart. If not, then the above system works just fine.
How come you tell us specifically what you’re buying with LEGO, but not with other toys?
Great question. First, I believe LEGO is the most accessible and forgiving form of toy investing. It is really hard to lose money investing in LEGO, even when you make mediocre buying decisions. I feel secure in knowing that even if people followed all of my LEGO picks blindly, they’d come out ahead. On top of that, even though saturation doesn’t help the after market, I do believe LEGO’s sales volume on Amazon is so large that me sharing some LEGO picks won’t negatively impact the market significantly (for now). On top of that, not everyone that reads this newsletter is buying all the same stuff as me, only a small percentage actually follow through. Everything you learn with LEGO investing can be applied to regular toy investing.
Compare that to non-LEGO toys, I find myself taking a lot more risks. The reason I take these risks is because I am comfortable with the franchises and intellectual properties that I invest in. I am a firm believer that the best toy lines you can invest in are ones you understand and care about. If I shared my picks and people blindly followed, they would not have the same success that I do because they may not necessarily be into the toy lines that I like. I don’t want to take responsibility for that. I prefer to show people how to source toy investments, not just tell people what to buy.
I also believe that the non-LEGO toy market can be more fragile than the LEGO one. Stuff doesn’t sell as fast, and tankers can really ruin it for everyone if there are an excess of them. That’s why I really try to preach about understanding toy life cycles and why certain toys are performing the way they are. The more confidence everyone has in their products and pricing, the less likely they are to fearfully drop their prices. I want to show how, not what.
How do you decide how deep to go on a purchase?
Here are some factors that push me to purchase a LOT of a product:
I have a compelling amount of evidence that a product is discontinued
I have a compelling amount of evidence that the market (my competitors) don’t currently have or have access to a lot of supply
I have a compelling amount of evidence that I am likely getting the best, or one of the best buy costs possible
I have a compelling amount of evidence of what amount of supply could potentially be available on the marketplace
I have a compelling amount of evidence that the current demand will remain consistent or increase in the future. Sometimes demand slightly lowering is okay.
My worst case scenario is unlikely to lose me money
The more of those things that are true, the more likely I am to purchase an extreme amount of an item.
The more of those where the opposite is true, then the less deep I am likely to go (if I purchase at all).
If I decide I am going to make the purchase, then I try to purchase in quantities that will case-pack into boxes for storage with as little dead space as possible.
It is also important to be realistic with how much an item sells. If an item shows that it sells 50 times per month, but you plan on jacking the price up — expect less sales. That means it’ll sell 600-1,000 times per year TOTAL across all sellers (a little bump for Q4), so you probably shouldn’t buy 2,000 units (unless it’s a monstrously good deal).
How do you decide when it’s time to sell an item for a loss / break even / low profit?
It happens to the best of us. For me, toy investing is a constant process of buying and cutting my losers. Unfortunately, my capital isn’t unlimited. So when new opportunities arise for really good product, I often have to take a look at what I’m currently holding and cut my weakest links.
Weakest links can be determined by the toy taking too long to trend in the direction I want, big players coming onto the listing with a supply that just won’t deplete in a reasonable amount of time, a figure being reprinted excessively, or various other reasons that just completely halt the progress of the price.
Remember, toy investing is speculation. Ideally, we make picks that all have potential for explosive growth and where our worst case scenario doesn’t lose us money. We cannot avoid losers though, it happens. But as long as our losers don’t lose us money (that often), then when we do hit grand slams, it’ll carry our business forward.
It’s all about having a lot more wins than losses.
Don’t become emotionally attached to your toys — use logic and data.
This is very prevalent in November/December when there are lots of high ROI opportunities and capital is low. Is it really worth holding another month to get 10% more ROI, or is it better to sell now, take that capital and invest it into something that will get you 70% ROI in six months?
I’ll give a real world example.
This Q4 I invested about $50,000 across five SKUs from the same toy line. Long story short, after a series of things going wrong with them, they aren’t pacing for what I was expecting them to. The potential was there to be good Q4 investments, but it’s just not panning out in the time I wanted. After looking at the amount of sellers, the velocity, and how many units are currently at FBA, I predict I can maybe get an extra 10-20% ROI over the next month if I’m patient.
Meanwhile, there are lots of 50-100% ROI opportunities in front of me ripe for buying.
Capital isn’t unlimited, so if I want to take advantage of these buying opportunities, I need more cash. Since I don’t believe these particular SKUs are going to skyrocket any time soon, I made the hard choice to start selling them with my minimum at $1-2 profit each.
It sucks. But it’s just a speculation that didn’t work out. The good news is, I knew my worst case scenario would be this sort of situation — so I was prepared for it in case I needed to let them go early. I have the data that these will only be returned 3% of the time or less, and I still am snagging sales that net me $5-6 bucks on occasion because of my repricer. I’m also holding some units back for later down the road since I know they will eventually be much more profitable. It feels bad now, but zooming out it’s not as bad.
Now I have cash to buy these better toys!
Where do you buy most of your toys? Do you ever pay full MSRP?
I have a hard time paying MSRP for any toy. It takes a lot for me to do that. I prefer to wait for online sales, great cash back, or work with distributors. If you live in a more rural area, you will likely have more success with retail arbitrage than someone like me who lives in a city. Use your location to your advantage and hunt that in-store clearance.
How do you reverse engineer your profit goal?
This is an important topic that everyone should spend some time doing. I will consider myself a very happy camper if I can eventually NET $450-500k a year. I believe in aiming higher than my actual goal, so that I strive for more and if I fall a little short, I will still be close to where I want to be. So let’s say I need to NET $550k per year to reach my goal.
I am pretty comfortable prepping 200 units per day, five days a week. Some days will be 800, some days will be 0, but on average, I think 200 units prepped per day five days a week is pretty reasonable and safe. If we math that out, that’s 52,000 units per year. In reality though, last year I sold more than 52,000 units, and this year I am pacing for more than that as well.
But let’s plan for worst case scenarios and assume I only sell 52,000 units.
What’s 550k (my goal) divided by 52,000 (the number of units I prep per year)?
10.57.
With my stretch profit goal and the amount of units I prep per year, I need to average $10.57 profit per unit that I prep to reach my goal.
Remember, that’s just gross though, not net… because it doesn’t factor in things like supplies, software, returns, etc. That’s part of why we exaggerate our net profit goal.
But it also doesn’t count things working FOR us though either. Cash back can actually equate to tens of thousands of un-taxed profits that can go straight into your personal account. What about non-Amazon profit? Other side hustles, in my case for example, my newsletter.
To simplify, I determined I need to profit about $9-10 per unit and keep selling about the same or more amount of units than I currently do per year to reach my goal.
I like how much I work. I like my setup where I don’t need a prep center or employees. I like that I don’t commute.
That’s how I found my goal, and that’s how I try to strategize what I buy. Now I just need to work on getting my average profit per sale up!
I’ve seen you mention profit per square foot. What does that mean?
Like cash, space isn’t unlimited. There comes a point where we need to be a bit pickier about the items we’re investing in and putting in storage because that space starts to become more valuable the more of it you use up.
To put it simply, how can you make sure you’re squeezing the most amount of profit you can per square foot of storage you have available to you?
It mostly comes down to picking items that give you the most profit for their size.
For example, last year I purchased a couple hundred of LEGO 10972 at around $15.99. I didn’t really pay attention to how awkwardly shaped the box was, and that Amazon’s way of calculating dimensional weight for fees would really hurt how much money I could make on it. They were such an irregular shape compared to most other LEGO, that I could only fit 9 of them in a 21x15x16 ($144 buy cost) or 13 in a 24x18x18 ($208 buy cost). There was a lot of dead space in these boxes.
Meanwhile, look at LEGO 42119. The same buy cost of $15.99, but I can fit 20 of them pretty snug in an 18x18x16 ($320 buy cost) — even more in a 24x18x18.
Not only can I fit more buy cost worth of the Monster Truck, but I will also profit more per sale because the dimensional weight is less.
While the DUPLO set is a profitable investment, I likely would have been better off just allocating all of the money from the DUPLO set towards the Monster Truck set instead. It would have saved me some space and ended up making me more money.
As space becomes more limited, you need to start taking these things into consideration so you aren’t robbing yourself with sub-optimal storage habits.
What are the best toy brands for beginners?
LEGO for sure, since we have confirmed data of what is retiring. On top of that, LEGO provides CPC documents on their website so the odds of any listing getting taken down are very low. They sell fast, it’s hard to lose money. You really can’t beat LEGO for learning toy investing.
After that, it’s not so much a brand as it is a sourcing strategy: clearance toys.
It’s hard to lose money on toys that are on clearance at Walmart or Target if you hold onto them for long enough. They don’t even necessarily need to be clearance — discontinued toys from Ross and Marshall’s also can be great ways to learn.
Aside from that, I will always recommend that you start with brands that you care about. It’s much easier to understand why something is popular or profitable if you enjoy it too.
Will you ever start an investment lead list?
It seems very unlikely right now. First, I really hate the idea of committing to X amount of leads per week. I think it forces the lead list owner to post sub-optimal leads and exaggerate how “good” something is just for the sake of hitting a promised threshold.
If I were to do it, it’d be extremely limited and very expensive. Probably the most expensive Amazon group on the market to be honest.
The way I’d envision it is a close knit group of 5-10 people where I share everything that I’m purchasing with proof (so you’d know I’m not fluffing the list). It’d also include leads that could be interesting but maybe don’t meet my criteria, but they may meet yours.
I have the proof to back it up that my model works, and for me to share specifically what I’m buying, in theory, is worth a LOT of money.
I always joke with my friend Steve that if we just let people view our text messages for a year, they’d profit six figures.
I just don’t know if I’m ready to do that yet, if ever.
Are there any toy brands you avoid?
I tend to stay away from stuff that seems to constantly be in production. All toys aren’t created equal. There’s a big difference between Bluey action figures and Marvel Legends.
Kids don’t really care what Bluey they have as long as it’s Bluey. The manufacturer just wants to get Bluey in as many hands as possible, and will print the same figure hundreds of thousands of times for years if necessary. On top of that, kids grow out of Bluey.
On the flip side, Marvel Legends are limited in production by design. Hasbro understands that collecting and scarcity breed demand, and it keeps the entire industry exciting and active with consumers. That’s more our kind of toy.
Aside from non-collectibles, I tend to avoid any toys that tend to have intellectual property issues like Fao Schwarz.
I don’t sell LEGO that isn’t already retired (must say Retired Product on the website or Builder App OR must be ‘Sold Out’ and Jan. 1 or later of the retirement date).
I don’t do as many plushes for Amazon anymore due to dimensional weight.
These days I also tend to steer clear of luxury level toys on Amazon (Figuarts, Mezco, etc.) because customers expect perfection and even the slightly scuff mark results in a return. I’m a bit more lenient with Figuarts if it’s a lower price point, but those $75+ figures can get a little scary with the returns. They are meant for gentle play and posing, but parents will buy them for kids who don’t understand they can easily break.
I tend to stay away from items from Shop Disney unless they have a year of sales history. They are often CPC’d since Amazon themselves never carries them.
Model kits were fun to sell for awhile, but the quality control is never guaranteed and can result in a lot of returns. For that reason, I’ve kinda gotten over Gundam and Pokemon model kits. Was a fun run, but I’d rather put my money towards other stuff. Bandai production can be weird.
If the product has a battery in it and Amazon has NOT sold it before, I tend to stay away.
I only do Transformers if the ROI is higher than I would usually settle for. They tend to have higher return rates than other toys (just slightly), because some kids just can’t figure them out.
Basically, experiment and see what brands work for you. But also be cautious with the lesser known brands. Check Keepa, do some Googling, etc. Your experience with these sub-categories and brands may be different than mine.
How do you feel about debt?
I have leveraged debt my entire time selling on Amazon. I believe it is a powerful tool as long as you are honest with yourself.
Are you responsible enough to manage it?
You need to look at yourself in the mirror and ask yourself how you’ve handled debt in the past. Do you frequently find yourself paying credit card interest? Overspending money you don’t have? Then I definitely don’t recommend it.
But leveraging 0% interest credit cards, Amazon loans, lines of credit through your bank, and more, are all great ways to grow exponentially — as long as you’re responsible. I wouldn’t do it if you’re new. I wouldn’t do it if you don’t have a ‘base business’ that is constantly bringing in cash. I wouldn’t do it if you don’t have a plan for how you’re going to spend the money. I wouldn’t do it if you don’t have emergency funds to survive on. I wouldn’t do it if I only had one outlet to sell products (that’s why I like toys, we can sell elsewhere if we’re temporarily suspended).
But if you have all of those things under control, it’s definitely worth a consideration! Capital has been my bottleneck since I started and even five years in. There’s always stuff worth investing in.
What are the best tips you have for someone new to toy investing?
Immerse yourself into more fandoms. Once I started actually consuming the content of the stuff I was selling, I started making a lot more money. That’s why I preach invest in things you like, it makes it easier to absorb the media. You’ll never be able to watch everything, and it’s definitely tedious, but understanding why our customers like something results in better buying decisions.
When you’re new, buy less than your impulse tells you to. I was, and still am, very guilty of getting over-excited about trying a new toy line and thinking I just found the ‘next big thing’. I promise. It’s better to end up too few of something than too many.
Don’t be afraid to let go of weak inventory for better opportunities. What we do is mostly speculation. No one is right 100% of the time. It’s okay to cut your losses for a better opportunity. There is no shame in being wrong, as long as you learn from it. When you find yourself doing this a lot, that’s when it becomes a problem. But too often I see people holding onto an item for two years just for 20% ROI. Sorry bud, you should have sold that last year for a 10% loss and re-invested the capital.
Aren’t you afraid you’ll be restricted in LEGO?
Not really. LEGO is a big part of my business, but far from the majority of it. It would suck, but I don’t see a world where Amazon and LEGO both want discontinued LEGO off the platform. I could see maybe a world where non-retired sets are restricted — but not discontinued ones. Even if they did restrict LEGO on Amazon, I always preach how great we have it with toys that we can move the product on eBay, Walmart, BrickLink, locally, and elsewhere. There is always a market for LEGO somewhere, and the consumers will follow it. There may be speed bumps, but it will never destroy us completely.
Alright guys, let’s wrap this first Q&A up here. I don’t think I forgot any questions from the week, but if I did please message me and I can update this! I’d like to do something similar every couple months, so please keep forwarding questions no matter how big or small they may seem. Remember, please message me on Substack, Twitter, or Instagram — don’t respond to this email, it can’t receive mail.
Hope everyone has a happy Thanksgiving and don’t forget soldiers — our Superbowl is this Friday. Good luck out there.
I have been doing the price alerts on amazon but when they hit only a limit of three and many times not offered on Biz account. How do you work around the AZ limits?