This raises a serious question. Are there any brick and mortars to compete with Toys R Us other than Walmart? I mean strictly a toy store? In Connecticut, no. How `bout where you are?
I live in a heavy urban location so there`s not enough space outside malls for huge toystores like walmart and toys r us. At best we have specialty hobby stores and the toy department in a local dept. store or mall.
I`ve heard good things about folks that can leverage their online social networks or blogs into online-order cottage businesses. A lot work off of eBay or LiveJournal, which is a good place if you`re particularly strong at making custom soft toys.