I think their main advantage is not the curation but the availability. You can plan a trip to the toy shop, agree to a budget, go and play with toys, choose something in budget, and go home with a toy. This is a way better parent-child bonding experience than scrolling through pages of licensed junk together & then waiting 2-3 days.
Re curation: most good toy stores have the same sort of stuff. Most 'boutique' 'niche' ones have expensive crap for idiots with money. Protip: your kids will play with toys until they break, don't buy that miniature replica Miele vacuum cleaner toy for $200 unless you don't mind throwing it away in 3 months.
Museum shops seem to follow the 'specialized, curated selection of unique merchandise' of children's toys.
When we are looking at the generic market, nowadays people go to a store, look at something and then go on their phone to see if they'll find it cheaper anywhere else, as local stores tend to overprice stuff to make up their marginal costs.
On a tangential matter, I disagree with avoiding opportunities for teaching children delayed gratification in such a high impact way.
Think about it this way: every time you rightfully don't give your child something they want due to their bad behavior, you're giving them an effective lesson and improving their future life.
It's cruel to intentionally create situations that trigger a child; it should happen organically. It doesn't take long for children to adapt to understanding they won't get their way and start adopting appropriate self control.
Especially with modern research showing the damaging effects of corporal punishment, parents should take opportunities when they arise to discipline their children in a way that is meaningful to the child: withholding a toy they desire or another form of leverage.
My comment on 2-3 days? That’s too long for a child to make the connection between behaviour and outcome. I love delayed gratification and would ask that we wait to play with the new toy until after we get home, eat, tidy up, etc. I hope that they make the link between waiting, being praised for doing a good job with something else, then playing.
Did you know? The 2-year-old will tantrum regardless where you are, and buying online means you don't have a quick out on hand (either getting the toy almost immediately after calming down and ensuring enough separation between the tantrum and getting the toy, or some stopgap alternative toy that's a tenth of the price).
If they have any kind of success and are visible - the chinese will have copies flooding the market within weeks. Small shops play a game to sell - but don't become too big.
You also overestimate the delta between the Amazon price (if the product is carried by Amazon) and that of the brick & mortar price. Often the brick & mortar price is identical after shipping costs.
The competitive advantage of a good mom & pop toy store is a specialized, curated selection of unique merchandise.
Perhaps Etsy can compete in this category, but I am in doubt that Amazon is there yet.