PERPETUAL CHRISTMAS: A Durham startup promotes sustainability, sharing and fun with regular toy deliveries.

• Author: Gentry, Connie

Traditional toy retailers depend on October to December as their make-or-break holiday selling season. For customers of Durham-based Tiny Earth Toys, it's like Santa shows up every two months with a delivery of age-appropriate playthings, through the startup's subscription service.

Founder and CEO Rachael Classi launched this unconventional purveyor of fun in early 2021. It now employs 16, has annual revenue topping $1 million, is nearing profitability and has backing from a notable N.C. investment group. Sales continue to climb, even in summer months.

Tiny Earth has several thousand subscribers, who live in every state in the continental U.S., with a 92% monthly retention rate. Toys are delivered every two months: five toys cost $35 per month; eight for $48; or 10 for $65. Roughly 60% of customers have a child under the age of 2, which should lead to a lengthy relationship with most customers.

"Traditionally, July is slow for the juvenile industry, but we hit 110% of our sales goal when we were only 77% of the way through the month," says Classi. It was a record sales month for Tiny Earth with about 1,500 packages shipped.

Classi is a Spokane, Washington, native who came to North Carolina to attend Duke University s MBA program in 2012. She envisioned the toy subscription service concept in the fall of 2020.

The pandemic had prompted her to leave her job as vice president of strategy and marketing at Teamworks, a Durham-based digital software company serving athletic organizations. She wanted to stay home and care for her daughters Donna and Lucia, then 3 years old and almost 1, respectively.

She encountered problems faced by many families with children under age 6: a never-ending cycle of toys becoming obsolete as kids progress developmentally. Her home became a repository of plastic clutter.

"Since we were no longer in classrooms or a daycare center, I was spending a lot of money to create an enriching environment in our home, but it was constantly a mess, and there was a lot of waste coming in and out," she says. Ever a problem-solver, Classi started a toy exchange with other neighborhood families.

One parent offered her money to buy more toys and create an ongoing community sharing of resources.

"Somebody has got to be doing this already," Classi thought. Nobody was.

So she and her husband, Peter, dipped into savings to buy inventory in September 2020 and create a website. (He's an executive at United Therapeutics in Durham.) Ten...