Pros & Cons of Different Sourcing Methods / Toys

Hello friends,

Here today to chat a bit about the pros and cons of the various methods of sourcing toys as well as some differences in the types of toy investments we can be making. I receive questions about this all the time, so I hope I can cover a wide range of questions here.

There are more types of toys than those listed below, such as die cast vehicles, model kits, roleplay items, etc., but I am only going to speak on the niches I am knowledgeable on.

Lastly, an important thing to understand is that these sourcing models are not mutually exclusive. Most experienced sellers operate a hybrid model. For example, someone might primarily source wholesale, but still deploy capital into LEGO retirements, Pokemon sealed product, or occasional retail arbitrage opportunities.

Think of these as different tools in the toolbox, each with their own risk profiles, capital requirements, and learning curves. Ultimately, pick the ones you enjoy the most, and you will find success.

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Retail Arbitrage

Retail arbitrage is arguably the ‘best’ sourcing method when it comes to separating yourself from the herd of competitors. Your local stores that you have access to are going to be a completely different ecosystem than the ones across the country.

Pros:

• Localized inventory and deals that can give you competitive advantages via supply and price others don’t have access to. Because of this, this model often has higher margins than other models.

• Can network with store managers in person and build personal relationships that enable even more unique deals

• Takes more ‘real’ work than any other model, which scares off a lot of competitors

• Often able to stack online deals with in-store deals so you can ‘double dip’ on savings. For example, price matching an online price on the retailer’s website while taking advantage of another deal.

• Access to inventory that is not available online via discount stores like Ross, TJ Maxx, Ollie’s, etc.

• ‘Cook groups’ typically don’t focus on this model, also resulting in less competition

Cons:

• Have to physically drive around and shop. If you want to optimize, involves leaving your local area to find ‘honey holes’ but results in really strong margins.

• Bit of a ramp up period to ‘learn’ your region and how to optimize your sourcing routes, but no different than other models that also have a learning curve.

• Vehicle/fuel costs

• Depending on where you source, prep can take longer if you need to remove stickers

• Harder to track receipts/invoices than just searching your email

Ultimately, this is the model I recommend for anyone just getting started. It’s a great way to get ‘in the field’ and in front of thousands of different products right away. When you hit a home run, the margins are typically a great way to grow your bank roll quick, especially if you’re new and operating with limited capital.

At a higher level, you can begin to outsource retail arbitrage to shoppers or outsource your prep so you can shop more.

For me personally, these days I’m typically just doing RA during clearance season and when there is a killer deal at Target where the product isn’t available online (like LEGO clearance or Black Friday deals which are limited).

Most of my retail arbitrage for the last few years has been LEGO from Target and LEGO from the LEGO store (to stack more GWPs), but plenty of people are absolutely crushing at discount stores like Ollie’s and Dollar General, I just don’t have those in my region.