I just thought i'd pop in and add my 2 cents to this one.
Over here in Ireland, we've been quite lucky that some nice 'generic' .ie domains can be registered, and it's getting easier all the time after periods of over-regulation. For instance i've managed to get my hands on quite a few (Compare.ie, Sports.ie etc) which one by one i'm commercialising.
However, it IS important to cover yourself when purchasing domains to protect your brand, especially when your brand name COULD be considered generic - 'Children's Rooms' is a fairly generic term - so if it was me, i'd have gone through all the variants to cover registration of childrens-rooms.co.uk, childrensrooms.co.uk, childrens-room.co.uk, childrensroom.co.uk when setting up the business initially (It's easy to just 301 them to one core domain name for seo purposes so I wouldn't worry about content duplication or anything like that).
Not only do you protect your brand, you also protect your type in traffic which would result from word of mouth referrals. Elaine, looking at your site you seem to have heaps of testimonials from happy customers which is excellent - but people are people, and they can forget the exact domain name or business name from which they purchased something. Think of your happy customers who told their friends they got a great product and great service from 'childrensroom.co.uk', which isn't your site.
There is no harm in spending a few hundred quid to buy up domains with a view to looking at the extra sales you could make simply by having them. You should, in my opinion, look at buying childrensrooms.com - looking at your delivery information page, you mention you may shortly ship to more places than just the UK & Ireland and in that case the .com variant would be an excellent buy and will help you branch out and make more money longer term.
I don't think it's worth £500, but you should look at covering competitors coming into the marketplace and dining out on your excellent reputation, as you've not got a registered trademark from what I can see, so you'll have no comeback if someone decides to do this.
Finally, thanks for the inspiration i've just gotten from your website - I know now what i'm getting my 8 year old niece for Christmas! :tup
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