Business Plan - Toys 2 U - Team 3

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Business PlanToys 2 U

Online Toy Rental Service

Owners (Team 3)

BA 6020

Bradley Dyke -- fk1246Mike Faehner -- cu0057Amol Jadhav -- fb8918Dong Ho Lee -- fd6142Alicia Pendleton -- ac6543June 24th, 2013I. Table of Contents1I.Table of Contents

2II.Executive Summary

4III.General Company Description

8IV.Products and Services

9V.Market Research

II. Executive Summary

As any parent of an infant can tell you, clutter around the home builds up quickly. Cribs, changing tables, bottles, clothes, dressers and toys can quickly overtake every corner of your living area. Of course it makes sense; every parent wants the best for their child. Having the latest and greatest developmental toy, safest car seat, and most ergonomic bottle seems like a must. The problem, with buying all of this, is that children grow up fast, especially in the time frame from birth to 12 months. Basements and garages pile up with toys and furniture that have been slightly used, just collecting dust until the next garage sale or mom-to-mom sale, where you, the parent, receive pennies on the dollar for all items you purchased just less than a year ago. So, what is the solution to all this clutter and unrecoverable expenses? The answer is Toys 2 U, the innovative and exclusive infant online toy rental service approved by the National Education Association.

Toys 2 U partnered with the NEA to develop a line of toys to be rented in a newborn package that will provide your newborn child with the best early childhood developmental toys to stimulate their rapidly developing brain. Toys 2 U is committed to providing our customers children with not only the best early childhood developmental toys, but also the cleanest, with our revolutionary cleaning process called The Germinator. Through our cutting edge and patent protected process, Toys 2 U is able to clean and sanitize all of our toys upon receiving them to guarantee that they are 99.99% free of bacteria, viruses and pathogens. No other toy rental services or toy manufacturers can make such a claim.

With the childrens toy rental business seeing startups all across the internet, we at Toys 2 U have decided to focus on a subset of the overall market, toys for children under the age of one. Through our research, we have found that this age group utilizes more toys at a faster rate than children of an older age. By focusing on toys only for children up to the age of one, we will be able to limit our inventory. In addition, we are able to focus more attention on the developmental needs of children in that age group. The other subset of customers that we will focus on is first time parents. Our goal is to be a trusted advisor for first time parents going through a very stressful time in their lives. Having your first child brings with it a plethora of questions and our goal is to help answer some of those questions with our pre-designed, first time parent, toy packages. These packages will include the essentials that we at Toys 2 U have developed through research and working with the NEA. Each package will provide toys and developmental tools designed to stimulate all children in our target demographic.

At Toys 2 U, we have developed a tiered monthly rental structure to meet the needs of all of our potential customers. We have three different rental plans, with each plan allowing for a different number of toys to be rented at any one point in time. This multi-tiered plan allows our customers to decide how many items are best for them at any one time. Selecting toys to rent could not be easier, thanks to our industry leading, easy to use website. Toys are divided into categories and toy packages can easily be created virtually. Once our customers have chosen their toy(s) to rent, they are shipped to them in one convenient package. Returning toys is quick and easy too! Once done using a toy, the customer just puts the toy in the prepaid packaging that came with the toy originally and its shipped right back to the source. Its just that easy.

Thanks to the backing by the NEA and our patented Germinator cleaning technology, we believe that Toys 2 U holds a competitive advantage over our competitors. Private investors who are now responsible for 40% of the initial costs were impressed by these advantages. The remaining balance of financing will be done by bank loans. The private investors whove contributed capital during the startup period will be offered an opportunity to obtain an equitable interest in Toys 2 U. While the online toys rental business is quickly becoming a competitive market, we at Toys 2 U feel we are strongly positioned to capture a large percentage of the market share thanks to our competitive advantages:

The Germinator cleaning and sanitation process

The NEA seal of approval as a provider of exceptional early childhood developmental toys

Our industry leading, easy to use website

Our multi-tier rental structure

Combining these advantages with exceptional customer service and our commitment to constantly improving our customers experience, we at Toys 2 U expect to capitalize on this ever evolving, ever growing market. With new potential customers being delivered every day, we at Toys 2 U see a bright future.

III. General Company Description

Who we are and what we do

We will be the leading online newborn/infant early childhood developmental toy rental company. We will specialize in providing high quality, clean, safe, educational, and fun toys for children from birth to 12 months. Parents will create an account on our easy to use website, select items for their child, and have them shipped directly to their home for a reoccurring monthly fee. When done with the toys, parents can insert the toys in the prepaid packaging that came with the toy and send it back to our distribution center where they will be cleaned and sanitized with our state of the art cleaning procedure. Our sanitation process has been custom designed for our business and is on the cutting edge of safety, removing 99.99% of all residual bacteria, virus, and pathogens. We also have partnered with leading early childhood development professionals to create customizable packages of toys that are designed to maximize the childs learning experience. In addition, we partnered with some of the industrys best early childhood development manufactures (Baby Einstein, Fisher-Price, and Carters) to provide our customers with the highest quality toys and educational equipment on the market. We offer a three tier rental plan (basic, choice, elite) to accommodate any budget. We also offer a parents forum to share success stories about toys they have rented in the past, helping draw in new customers with testimonials that just feel like good advice, parent to parent.

Mission StatementWe are the leader in online toy rental for children of ages one and under. We focus on providing toys that will enrich our customers childrens lives, and help them to develop a foundation of learning that they will build upon. We guarantee that our products will be safer and cleaner than any toy on the market because of our custom toy sanitizing process that removes 99.99% of bacteria, viruses and pathogens.

Vision StatementTo help develop and enrich the minds of future generations through educationally rich toys and make parents lives a bit easier. Goals To revolutionize the way our customers think about rented toys

To be the leading online toy rental company in the domestic market place

To be viewed by our customers as a trusted advisor in the early childhood development stage

To have the highest customer rated website for online toy rental

To provide our customers with toys that meet the toughest of cleanliness standards

To give our customers a forum to share what worked, and didnt, for their children through our website

Objectives To have 1,000 customers by the end of the first year of operations

To develop the number one rated online rental website, as voted on by JD Powers and Associates

To complete patent protection on our sanitation system: The Germinator

To achieve endorsement status from the NEA for early childhood development

Business PhilosophyThe goal of our company is to develop a large customer base that will allow us to carry a diverse inventory of early childhood developmental toys and equipment. We plan to purchase these toys directly from the manufacture to maximize a discounted price because of the order size. After the initial rental of the toy(s), we will sanitize and repackage it to be sent out again. The objective is to rent any one toy for an average of 6 months to one customer. Upon returning, our goal is to rent the toy out 3 more times, for a total of 2 years worth of renting.

Example: a baby crib mobile costs us $20 to purchase. We rent it out to a customer as a part of a 5 toy package, so for this item we would receive 1/5 of the monthly rental fee. Monthly rental fees vary, but for this example we will go with the $30 per month rental plan. After 6 months of use, this item has generated $36 [$30/month x 1/5 of monthly fee x 6 months]. We use the mobile 3 more times at 6 months per rental, and that item has generated $144 in revenues.

Our business will focus on first time parents and we will position ourselves as experts who can lend them assistance during a time when most people feel overwhelmed by all the changes that are happening. By receiving the stamp of approval from the NEA and other early childhood developmental programs, we will gain an advantage over other online rental businesses that lack any official backing. We will market to parents the advantages of renting, including:

Space saving at home. Less toys to clutter up the home

Going green, recycling of toys with other creates less packaging waste

A simple monthly fee, no surprising unaccepted cost

Getting advice from other parents on our website about what toys they liked best

By renting from us you receive a toy that has passed through our Germinator sanitation process, which makes our toys cleaner than new ones from the factory

The Industry

Online toy rental companies have been popping up, but most seem to be small scale operations. The biggest road block for baby toy rental companies has appeared to be the threat of, or the potential for the spreading of germs and other contagions. We will overcome this based on the Germinator sanitation technology, and our concentrated effort to market this competitive advantage to our prospective customers. We believe that this technology will allow us to succeed where all others have failed. It is our number one competitive advantage. Our efforts to partner with educational and medical professional associations will also give us a competitive advantage over other rental companies. It will show our customers that we want to be an active participant in the educational growth of their child, not just a company online that sends you toys.

Financing

To generate the capital needed to purchase inventory, warehouse space, fund the sanitation machinery and purchase marketing/advertising services 60% of financing will be produced through bank loans, with the remaining 40% from private investing. Our plan is to start small, purchasing enough inventories to support 100 customers. As we bring on more customers, we will increase inventory to meet demand. We would accept, and have planned for a negative net income in the first year of operations. This is due to the startup cost of purchasing inventory and machinery for sanitizing our products. Through aggressive marketing/advertising we will grow our customer base, and will be able to realize gain based of recycling the inventory we purchase to new customers.

SWOTHelpful

In reaching objectiveHarmful

In reaching objective

Internal

Factors I can controlStrengths

Germinator Sanitation System

Backing from NEA

Award Winning Website

Free Shipping

Limited Scope (ages 1 and under)

Large inventory to meet all customers needs

Weaknesses

Startup business with overhead cost Large shipping cost that will need to be rolled into monthly fee Logistics and keeping inventory of a large supply of toys Finding correct price point to be competitive

External

Factors I can not controlOpportunities

The go green movement, we will capitalize on recycling The Germinator technology positions use as an industry leader The success of Netflix changes peoples perceptions of the value that comes out of renting vs. buyingThreats

New player in industry, have to play catch up

Perception that rented toys are unclean, not safe

Perception that newer = better As more players enter the market, monthly fees will go down

IV. Products and Services

We will not produce/manufacture any items. We will act as a conduit for educational toys manufactures and parents of young children. The value we provide to our customers comes in these forms:

One stop shop for all your under-the-age of one childrens toys

A onetime monthly fee that allows you to try out and keep toys as long as you would like

Once done, return the product to us. No clutter, no mess, just different toys to try out

An easy to navigate website that give suggestions and advice on toys to fit customers exact needs

Our Germinator sanitation process allows us to deliver toys to our customers that are the cleanest in the industry

Free shipping for all items

A 3 tiered rental program, to fit all budgets

We will also offers starter kits to first time parents who feel overwhelmed by the entire process. These packages will be designed to provide your newborn with all the essential items a newborn would need. This is a great starter tool to get parents engaged in our service, and from there they can customize what toys they want from our expansive inventory of toys.

V. Market Research

Basic Demographics

Our goal is to sell across the United States. With that being the case, our demographics would be any expecting parent, and any parent with children under the age of one. But we feel our sweet spot is first time parents. The thought being that if you already had one child, you most likely would have infant toys from your previous child, so you would likely reuse them. Since this isnt always the case, we will not necessarily rule those people out, but first time parents dont have the necessities. The goal would be to get first time parents to buy into our service before a baby shower. That way they wouldnt register for the items that they are going to be renting.

Economics

Market size: From the annual birth rate date, we can project and estimate a potential market size. Summation of both of the graphs figures will give us market size which is close to 4 million. Assumption: 1. Born children stay in USA for year span 3 years2. Trends of infant deaths are not taken in to consideration

Source: National center for health statistics Current Market Demand: Shown in terms of selling to infant/preschool toys only USA region

Source: NPD group Market Trends in global and USA market: Annual selling data of all kinds of toys

Source: NPD groupRevenue Trends of market region-wise:

Source: NPD groupBarriers in entering this market:

Competition due to existing players

Market capturing

How to change customers thought process of renting rather buying

Customers perception about hygienic concerns

External forces that change our business:

Toy manufacturing brings a better scheme for buying toys at a cheaper rate and avail renting options Epidemic diseases are increasing

Customer changes his interest to different types of products

Product

This would be a page on our website, Frequently Asked Questions, FAQs, which would help customers understand the toy rental process and how we do it compared to our competitors.

FAQs

1. What types of toys are available for rental?

We market our service to parents with children under the age of one, and focus much of our marketing to first-time parents.

2. What are the membership options and how much do they cost?

We offer three tiers of memberships that you can choose from that best suit your needs: Membership TypeDescriptionCost per Month

Basic Club3 Toys Rented at Any One Time$19.99

Choice (First Time Parent) Club6 Toys Rented at Any One Time$29.99

Elite Club12 Toys Rented at Any One Time$44.99

3. How would you describe your sanitation process that is used to disinfect the toys? Our Germinator sanitation process has been custom designed for our business and is on the cutting edge of safety, removing 99.99% of all residual bacteria, viruses, and pathogens. We guarantee that our products will be safer and cleaner than any toy on the market. 4. What age groups are your toys for?

Our toys are for children under the age of one. We have partnered with leading early childhood development professionals to create customizable packages of toys that are design to maximize an infants learning experience. We also have partnered with some of the industrys top early childhood development manufacturers (Baby Einstein, Fisher-Price, and Carters) to provide our customers with the highest quality toys and educational equipment on the market.

5. How long is a typical waiting period to receive my toy?

Typically, if we have the toy in stock, the wait time for a toy is one week.

6. What is the typical rental period for a toy?

You may keep the toy for up to six months after receiving it.

7. What if I dont receive the toy I ordered?

Typically, orders should arrive within 3 5 days. Please contact our customer service department via our website to let us know if you have not received your toy after 7 days of your order.

8. What if a toy that I would like is not available?

We make every attempt to keep enough stock to meet customers demands. However, if by some chance your toy is not available, be sure to add the toy to your wish list and we will send you the toy as soon as it becomes available.9. How easy is it to return the toy?

Just return the toy in the prepaid packaging provided that was sent with the toy and drop it at your nearest post office.

Customers

Age Range: 18-40. Gender: Male or Female Location: United States Access to the internet a necessityCompetition

As stated earlier, there are a number of childrens toy rental businesses showing up online. Most of these competitors have the same barrier and no solution: toy cleanliness. We possess the one thing they dont, the Germinator sanitation cleaning system. Our toys are cleaner then the same toy from the factory. We ship nationwide and provide free shipping to and from our customers homes. Other companies have some combination of this, but not all of it. We also have the backing of the NEA for earlier childhood developmental toys, where our competitors do not. Listed below are a few online toy rental companies and a brief description of how they operate their business:

Baby Plays Online Toy Rental (Est. 2007)

Website: BabyPlays.com

Description: BabyPlays.com, the world's largest internet toy rental company, is reporting that many families are becoming BabyPlays members because they see renting toys as a very cost effective alternative to purchasing toys - PRWeb Toys Age ranges: Newborns to 4+ Years of Age

Rental Policy

Single Toy - $2.99 to $8.99 plus s&h

$19.99 Membership Four toys every other month

$32.99 Four toys a month

Keep Toys up to 30 Days

Return in Original Box

Info from competitors website: BabyPlays Policy Competitor in the news: The New York TimesToyconomy (Est. 2010)

Website: www.Toyconomy.com

Description: You choose the toys you would like and then pay a fee to rent it for 30 days. Non-members can rent too, but the prices on the toys are higher. Toys on the site are organized by age, category and brand and you can choose as many toys as you like. For a small fee, TOYsurance can be added to the rental of each toy, which protects you if a toy is damaged or if a piece is lost. All toys are sanitized and shipping is included in the price of the rental.

Rental Policy:

Pay by the Toy

Non-Member: Rent any product for 30 days with no recurring fees/commitment. Pay $8.99 flat shipping with every order. $25 minimum order.

TOYMember: Pay low monthly fee of $9.99 with no due dates or minimums

Competitor in the news: Southern Yankee MixSpark Box Toys

Website: www.sparkboxtoys.com/

Description: The most rapid physical, emotional and mental growth takes place during a child's first 5 years of life. At each stage of this development period a child needs different kinds of stimulation, enhanced by different kinds of toys and different play strategies. Come learn about your child's stages of development, the major skill categories and how they learn.

Offers educational toys to fit a certain age group, 0-5 months, 6-8 months, 9-11 months, 12-17 months, 18-23 months, 2-3 years old, 3-4

Rental Policy

4 High Quality Educational Toys in every box

A Box every 8 Weeks - $23.95 a month

1 Box Every 6 Weeks - $28.95 a month

1 Box Every 4 Weeks - $35.95 a month

$249 for 12 Months for the 8 Week Plan

$299 for 12 Months for the 6 Week Plan

Info from competitors website: Spark Box Pricing Plan Competitor in the news: Spark Box Toys Learning FrameworkNiche

We are a knowledge based, online toy and early childhood developmental item rental business that provides our customers with the cleanest toys available. We market our service to parents with children under the age of one, and focus much of our marketing to first-time parents. Our service is for people who understand that their child will develop rapidly in the first year of their life, and that a lot of the crucial items that they will need in that time will not serve a purpose once they have out grown them. Our customers see the value in recycling toys to other children, and feel good about contributing to a greener planet.

Strategy

Our marketing strategy will be to focus our attention to first time parents and parents of newborns and up to 1 year old children. Online marketing through email and website banners on popular parenting sites would be the preferred method to market our company. The seal of approval from the NEA will also allow us to advertise through their publications, and we will be a sponsored supplier on their website. We also understand the importance of search engines hits (Google, Bing, etc.) and we will focus our attention, and a sizable portion of our marketing budget, to this form of marketing. Our goal is to ensure that when our potential customers search for toy rentals in the most popular search engines, we will be listed on the first page.

Promotion

Word of mouth will be very important to help ease peoples initial concerns. But we will need to advertise first to generate customers. A one month free trail would seem to be the best approach. It would allow people to experiment with our service for no initial cost, but much like Netflix, and when they see the value we provide they will be willing to pay for this service. Advertising online to will our major form of advertising (as oppose to TV, mail). New parent magazines will also be an advertising avenue that we will explore. The key will be the one month free promotion to drive people to our website and check us out.