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Business Plan

Toys 2 U
Online Toy Rental Service

Owners (Team 3)
BA 6020
Bradley Dyke -- fk1246
Mike Faehner -- cu0057
Amol Jadhav
-- fb8918
Dong Ho Lee -- fd6142
Alicia Pendleton -- ac6543

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June 24th, 2013

I.

Table of Contents

I.

Table of Contents..........................................................................................1

II.

Executive Summary......................................................................................2

III.

General Company Description......................................................................4

IV.

Products and Services..................................................................................8

V.

Market Research...........................................................................................9

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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-tomom 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

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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.

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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 Statement
We 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 Statement
To 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

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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 Philosophy
The 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

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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.

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Harmful

In reaching objective

In reaching objective

Internal

Strengths
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

Opportunities
Threats
The go green movement, we
New player in industry, have to
will capitalize on recycling
play catch up
The Germinator technology
Perception that rented toys are
positions use as an industry
unclean, not safe
leader
Perception that newer = better
The success of Netflix changes
As more players enter the market,
peoples perceptions of the
monthly fees will go down
value that comes out of renting
vs. buying

Factors I can not control

Factors I can control

Helpful

External

SWOT

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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.

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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 years
2. Trends of infant deaths are not taken in to consideration

Source: National center for health statistics

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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 group

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Revenue Trends of market region-wise:

Source: NPD group

Barriers 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

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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 Type
Basic Club
Choice (First Time Parent)
Club
Elite Club

Description
3 Toys Rented at Any One Time
6 Toys Rented at Any One Time

Cost per Month

$19.99
$29.99

12 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?

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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 necessity

Competition
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
o Single Toy - $2.99 to $8.99 plus s&h
o $19.99 Membership Four toys every other month
o $32.99 Four toys a month
o Keep Toys up to 30 Days
o Return in Original Box
Info from competitors website: BabyPlays Policy

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Competitor in the news: The New York Times

Toyconomy (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:
o Pay by the Toy
o Non-Member: Rent any product for 30 days with no recurring
fees/commitment. Pay $8.99 flat shipping with every order. $25
minimum order.
o TOYMember: Pay low monthly fee of $9.99 with no due dates or
minimums
Competitor in the news: Southern Yankee Mix
Spark 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
o 4 High Quality Educational Toys in every box
o A Box every 8 Weeks - $23.95 a month
o 1 Box Every 6 Weeks - $28.95 a month
o 1 Box Every 4 Weeks - $35.95 a month
o $249 for 12 Months for the 8 Week Plan
o $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 Framework

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Niche
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.