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Small Toy Stores Fight Big Boxes, Internet

6 min read

The American toy industry is huge – according to the Toy Industry Association, $21.8 billion huge – and somewhere buried in there is the small, specialty toy shop market. It’s almost a miracle that it exists, but it does, and it’s fighting a battle that has lasted for decades.

Take the Heights Toy Center in Little Rock, for example. It’s one of the oldest of its kind, having survived a migration from downtown and the rise of department stores, mail-order catalogs, big-box retail and the Internet. Owner Greg Bonner’s parents purchased the store in 1966, and by then it was already generations old.

During his years at the Toy Center, Bonner has seen small shops come and go, and he constantly alters his inventory to dance with the increasingly powerful big-box and online retailers. Still, he and other toy stores in Arkansas fight on.

"Actually, Arkansas probably has a larger amount of specialty toy stores than most states, for the size we are," Bonner said. "Of course, we all know each other."

Indeed, Arkansas’ toy stores form a close-knit community. Case in point: Bonner trained Richard and Jill Jernigan when they started J. Christopher Toys & Gifts in Jonesboro. The Jernigans later trained Colleen Perry when she decided to open Ooodles of Toys in Hot Springs. Now Perry is waiting for her acolyte.

Despite their prevalence, however, all toy stores are waging the same war against the Internet and big boxes. Of the two, the former is the more cunning foe, Bonner said.

"It’s hard to compete with the computer right now," he said. "They have no overhead; they have no employees; they don’t have to pay insurance on employees. If we could get rid of all our overhead we could do the same thing Amazon is doing."

One problem, Bonner said, is how connected everyone is. Some customers still come in to browse, but they have ulterior motives. They’ve got their smartphones out and are comparing store prices with Amazon prices.

"People are using our stores … as showrooms," he said. "They say they can get it online for 20 percent less, or whatever. It’s very tough to compete with that right now."

"I see people coming in with their phone and taking pictures as well," said Perry in Hot Springs. "But I don’t know – a lot of people want something right away; they want to bring it home."

The answer, Perry said, is to offer an alternative to the selection available at Wal-Mart, Target and Toys "R" Us: specialty toys.


Finding the Niche

That zone of individuality is one every small toy store seeks. Shop owners spend time searching for the newest toys that bigger retailers haven’t noticed yet. The "specialty" in specialty toy stores refers to toys with what the shop owners see as greater play value and more emphasis on learning. In other words, fewer action features, electronic gimmicks and batteries-sold-separately; more puzzles, building and reading.

This is what Mary Horne, who bought J. Christopher from the Jernigans in 2007, does in her free time. "When we go to markets … we’ve got good enough eyes that we can tell what could be, and what will be, trend makers," she said.

Horne and friends try to look beyond the big names like Hasbro, Mattel and Lego. Horne tries to make sure the trendy toys are already in her store before they get noticed.

"They’re found online," she said, "just by doing nightly searches. I don’t sleep. I’m always looking for the next big thing, something unique and different. I shop with specific kids in mind. I shop with specific moms in mind."

For example, Horne recalled buying a whimsical board game called Quelf from the game’s creator. A few years later, the game was picked up by Spin Master Games, which also produces Would You Rather and Battle of the Sexes, among others. At that point, Horne stopped carrying Quelf.

When the bigger toy companies come in, that’s usually when specialty toy stores bow out. There are two reasons for this, Horne said. First, the big boxes have marketing budgets. "I don’t have the ability to promote it, financially, in the way a big-box store does," Horne said.

Second, specialty shops get priced out. Horne used Radio Flyer as an example. "So they’re a longstanding, stable company, an American icon, and so on," she said. "That’s great, but when I order the product, it’s $50; that’s my cost. But then you go to a big-box store, you can buy it for $45. That makes me look extremely overpriced."

Big retailers can make a profit on this by way of volume pricing and discounts. Smaller shops don’t have that option.

"When somebody invents a toy and starts it out, most of the time, somebody in the specialty market picks it up," Perry in Hot Springs said. "We start with it; then when it goes mass-market, we drop it and pick up something else. Not all of them, but many, many, many things start here. Some never hit us and go right to the big-box stores."

Some toymakers work with specialty shops by marketing specifically to them – like Ty Inc., creator of Beanie Babies – and others use tactics like minimum advertised pricing. "It’s when someone allows people to sell their product online, but they have to sell a minimum advertised price," Perry said.

This prevents Amazon-style deep discounts and creates a window for smaller shops. "It keeps a good name on their products," Perry added.


Steep Challenges

For some, the war between bricks and cyberspace can prove too intense to be worthwhile. The shops in this story didn’t care to release their sales numbers, but they made it clear it’s a tightrope walk between profit and breaking even.

Melody’s Choices in Fayetteville and Rogers is a gift shop that’s been open for more than 40 years, and in 1999 the owner, Steve Melody, turned one of his shops into a toy store. Thirteen years later, the toys have taken a backseat to the gifts.

"What I’m finding is places like Amazon are impacting the independent, specialty toy retail in a bad way, in a big way," Melody said. "We saw people coming in all during the Christmas season with smartphones, then ordering online because they could get a better price."

The online competition is too stiff, Melody said, because Internet retailers with no physical presence don’t have to charge sales tax. "It’s just not right," he said. "You’ve got your brick-and-mortar independents paying a lot of rent if you’re in a mall. You try to give the best customer service. But time and time again … they say, ‘We appreciate your time,’ and they don’t buy it, because they’re going to buy it online."

Poor margins in toy sales kept the shop from staying in that business, Melody said. "Everything is sales driven," he said. "If sales start to drop off … then you’re going to want to replace it with something else, something new and fresh."

Then, he said, when sales slumped, he would end up with an overstock of toys that big-box stores had already purchased – and were selling for lower prices. "So customers went back to support the big-box store," he said.

Toy safety laws have also made it difficult for vendors to make new products, said Horne in Jonesboro. "That makes it even more challenging to find the unique things," she said. Horne herself has had to extend her business into other areas to make ends meet.

"It’s absolutely difficult for any independent business to stay open," she said. "I have to reach out not only to carry toys, but carry gift items for moms; I’ve expanded off into invitation printing and party planning. I’m not too ashamed to admit that if you’ve got something that needs to be done, call me. If I can make a dollar doing it, I will."

That uphill trudge is what kills a lot of the smaller stores, said Bonner in Little Rock. "It’s just hard to run a mom-and-pop shop anymore," he said. "It’s not that they don’t do OK; it’s just tough. We’re all worn out. I’ve known a lot of really good families shutting down because they’re just tired."

But some march on.

"I guess everything works out somehow," said Perry in Hot Springs. "We’ve managed to do well for eight years, and we’re still here."

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