Kits & Kaboodle founder back at it with Mass Ave store

Toys are one of the most bruising sectors in retail, and local toy-store owner Natalie Canull has the scars to prove it.

In the late 1970s and through the 1980s, she ran the premier independent toy store in Indianapolis, Kits & Kaboodle. But after she expanded to a larger location in Carmel in 1999, her business struggled, ultimately sliding into bankruptcy. Efforts to rebound with a location at Glendale Mall faltered.

But now she's back on her feet with a bustling store on Massachusetts Avenue that's narrowly focused on upscale toys–a niche that keeps her out of the path of mass-market heavyweights like Toys "R" Us and Wal-Mart.

"The store is small and offers unique toys. I edit [the kinds of toys in the store] for the customer. That's what they come for," said Canull, whose Mass Ave. Toys opened in October 2006 on the lower end of Massachusetts Avenue near Old Point Tavern.

The 1,300-square-foot shop offers an array of domestic and foreign-made items–from boiled-wool purses shaped like elephants from Denmark and plush stuffed animals from Germany to origami sets from Japan and vinyl cushions from Morocco.

With an average cash register sale of about $45, Mass Ave. Toys is targeted toward a wealthy, educated consumer, Canull said.

"I pick all the toys," said Canull, whose last name was Mack before a 2005 marriage. "What I bring in is totally different from what you'd see in Target."

That's a wise strategy for small, independent toy retailers, said toy industry expert Richard Gottlieb, president of the New York-based consulting firm Gottlieb and Associates.

He said the United States is seeing the "beginnings of a renaissance for the independent toy store"–a resurgence fueled in part by fallout from the succession of toy recalls announced in recent months by major manufacturers. Many of the recalls were of products containing lead.

"If you are a parent concerned about the safety of a product, you want to go where you can find accountability on the local level," Gottlieb said in his blog, "Out of the Toy Box," which appears on the Web site of Playthings magazine.

"You are going to find it in the face of your neighborhood toy retailer who personally chooses every product in their store and is becoming the face of toy safety. They are for all [intents] and purposes the only expert with whom a consumer can actually speak."

Narrow focus

Canull's narrow focus may give Mass. Ave Toys an edge in what overall is expected to be a lackluster retail holiday season.

The National Retail Federation predicts a 4-percent increase in holiday spending, which is below the 10-year average of 4.8 percent. It would be the lowest increase since 2002, which had a spending increase of just 1.3 percent.

NRF analysts said the most vulnerable retailers are those that cater to low- and moderate-income buyers, such as discount stores.

To spur early sales, Wal-Mart in early October cut prices 10 percent to 50 percent on about 100 toys. Two weeks later, it slashed prices on 15,000 items throughout its stores, including some toys.

"In a market where lowest price is what drives decision making, the big discounter wins," Gottlieb wrote. "In a market where safety drives decision making, the local toy retailer prevails."

Canull, an enthusiastic woman with bright eyes behind metal-framed glasses, has seen plenty of ups and downs since opening her first Kits & Kaboodle store in the Fashion Mall at Keystone in 1978.

She found herself at a crossroads in 1999, when mall officials opted not to renew her lease because they wanted to make way for a Gap store.

Canull decided not to move her 5,000-square-foot store to another site within the mall. She admits she was "intimidated" by the Zany Brainy toy store that had opened a few years earlier across 86th Street in Fashion Mall Commons.

Instead, she opted for a much bigger location–7,500 square feet–in the newly redeveloped Merchants' Square shopping center in Carmel.

The timing could hardly have been worse. The market for upscale toys and educational gifts was being squeezed by Toys "R" Us, which itself was struggling against retail mammoths like Target and Wal-Mart.

Zany Brainy was feeling pinched, as well. The Pennsylvania-based company filed for bankruptcy court protection in 2001 and later shuttered its Indianapolis store.

Around the same time, Canull slid into bankruptcy with debt totaling more than $700,000, most of it owed to toy vendors and her Merchants' Square landlord.

By then, backed by a group of investors, Canull had moved to a smaller space in Glendale Mall. The landlord recently had completed a multimillion-dollar renovation in an attempt to revive the mall, but it continued to struggle.

The owners of Glendale had offered her a good deal, said Mark Perlstein, the principal partner of Sitehawk, a retail real estate firm, but "it was a tough location."

Canull ran the store until 2005, when it moved to 146th Street in Carmel. The same year, she said, the owners "decided to go on without me." She has no affiliation with the Kits & Kaboodle store that continues to operate there.

Canull acknowledges some of those past struggles were her own doing.

"Retail is like theater. You should keep changing, keep entertaining your customer. You don't get lazy, which I may have done in the past," she said.

Turning point

It was the first time she had been out of retail in her adult life. During the hiatus, she got married to a contractor, bought a house that the couple worked on and sold, dabbled in landscape design, learned something about computers, and took an intensive Bible study class.

"I learned a lot about life that I previously had not had time to do," Canull said.

Then, in 2006, her sister approached Canull about opening a small retail shop on the first floor of the building the sister owned with her husband.

Using bank credit to purchase her stock, Canull opened Mass Ave. Toys 13 months ago. Used to having several thousand square feet of space, Canull made do with 122 square feet–roughly the area of a large dining room rug. She covered all the space and stacked merchandise toward the ceiling.

She stocked handmade wooden toys and other merchandise from around the world. Her best-seller last year was a tutu like what a little girl would wear in a "Nutcracker" performance. It came with a music box that played the ballet's music.

"In the course of not having a store, I did research. And I went back to the classics," Canull said.

In artsy Mass Ave, the idea worked. Because of the limited space, customers sometimes had to stand outside waiting for room to come in.

She had about $75,000 in fourth-quarter sales last year and sold out virtually her entire inventory. She was able to pay the bills and had money left in the bank.

Canull this spring expanded her space to 1,300 square feet. She said sales so far this holiday season have been strong, and she's optimistic that for the full year they'll top $500,000. In November, she added a second register to handle the increased business.

Canull is determined not to stumble this time around. Most important, she said, she is selling the right products–items that distinguish her store from the pack.

A few months ago, she discovered she was selling four items that also were available at Target. She immediately slashed their prices to unload them.

Customers say that mind-set is what draws them in the first place.

"This is the best toy store in Indianapolis," said east-side resident Sara Bales. "They have a unique range of quality toys. They are the best non-commercialized toys in the city–toys you couldn't find anywhere else."