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An Overlooked Pandemic Casualty: Independent Toy Stores

Jan 26, 2021 by Maurie Backman
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Mom-and-pop shops have long been struggling to compete against big-box stores and online retail giants like Amazon (NASDAQ: AMZN). But the coronavirus pandemic has made the problem exponentially worse.

Sales at toy and hobby stores declined 26% between mid-March of 2020, when coronavirus-related restrictions were first implemented, and late October, compared to the previous year, reports Womply, a software platform for small businesses. That's in spite of millions of Americans being cooped up at home for the better part of the year. And while vaccine rollouts could eventually allow stores to operate as normal, the big question will be whether independent toy stores can hang on until then.

A dying breed?

It's not just the pandemic that's causing independent toy stores to struggle. Operating stores costs money -- a lot more money than fulfilling online orders through warehouses and distribution centers. This explains why even well-known brands like Toys R Us couldn't survive in the wake of giants like Target (NYSE: TGT) and Amazon.

But if there's one advantage independent toy stores have over big-box stores and online mega-retailers, it's customer service. Parents can walk into a small toy store and get advice on great games for their children depending on age. In some cases, employees may be able to demo certain products so customers can see how they work before committing.

And shopping at toy stores is a fun experience for kids, too. A toy store outing can be an event for a family in need of entertainment, whereas sitting on the couch browsing on Amazon doesn't hold the same appeal.

But the pandemic has largely killed the in-store experience for toy shops. Many of these stores don't have the square footage to allow for normal capacity, so they've been forced to limit customers. And given the state of the pandemic, bringing a child to walk around a toy store is a risk not worth taking for many parents. Throw in the fact that millions of Americans have seen their income decline since the pandemic first took hold, and many simply can't afford to pay more for toys and games that can be purchased at a cheaper price point online.

As such, it's fair to say that a frightening number of independent toy stores won't survive the pandemic -- especially those that were struggling to draw in customers before the outbreak began. That's bad news for commercial landlords, because while these smaller shops may not occupy the same amount of square footage as an anchor tenant like Target, they're a revenue source nonetheless. And losing small tenants could put landlords in a cash crunch at a time when replacement stores aren't exactly rushing to open.

Of course, independent toy stores aren't the only at-risk tenants landlords should monitor. Mom-and-pop clothing stores, salons, and other independently owned businesses could also shutter in the wake of the pandemic, especially if it drags on much longer.

But losing small toy stores doesn't just hurt from a real estate standpoint -- it's a hit to nostalgia. Many people mourned the closing of Toys R Us, even if they hadn't set foot in a toy store in years. And the loss of well-loved independent toy stores could be an even bigger emotional blow.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.