Merran Fane believed in Father Christmas until she was 14. She still believes in fairies. It is a belief that has strengthened in the past two- and-a-half years, as she has seen the profits of her business, The Faerie Shop, grow and grow.

"When we started the business friends thought we were mad. I think the bank manager gave it a few months," said Merran, an effervescent Australian mother of four.

After a slow start the shop, tucked away in a yard off the High Street in Marlborough, Wiltshire, made what Merran describes as "staggering profits" in its first year: "People now come from all over the country for our fairy costumes, dolls, fairy cakes, pictures, fairy nightlights, model fairies, stationery, cards, jewellery, purses - there are about 150 lines in all.

"For the present we have decided against another branch but we have licensed the name to a couple in Truro who are great fairy people and we are acting as consultants".

Merran started the shop when it became increasingly hard for her husband Andrew, to support the family from his business as a paper conservator, specialising in restoring watercolours. They chose Marlborough because it was the nearest town to their home.

"The idea came from my mother, who happened to mention that there are at least 20 fairy shops in Australia. I had never done any retailing before but I thought it would be a good idea to start Britain's first fairy shop."

The shop has two floors. The first floor is a gallery that encircles the building. Most of the fairy pictures are displayed here. Classic fairy artists like Cecily Mary Barker, Arthur Rackham and Molly Brett loom large. This floor also houses the most unusual feature of the shop - the fairy bower, with a fairy ring of red and white-spotted "toadstool" cushions on the floor, and walls and ceiling decorated with mystical woodland scenes. Here the Fairy Queen can be hired to tell stories at birthday parties or on other special occasions.

"The children sit entranced. The boys, up to the age of about 10, go in sceptical and come out gobsmacked," said Merran. "The smaller ones often ask if they can stay the night, but point out that fairies get very mischievous in the dark and start scattering about the fairy dust that is all over the shop as well as getting up to all sorts of other naughty tricks."

There may be naughty fairies but there are no evil fairies at The Faerie Shop. "I prefer to avoid the dark side. All is light and bright and cheerful here," Merran said. "I try to make it a place that is uplifting and upbeat, where people come to cheer up. The other day a lady came in who had just left her dog with the vet for an operation. She just wanted to relax and have a chat."

If by any chance you feel on less than effervescent form on entering the shop you will be unable to restrain yourself from responding in some way to the shocking pink and purples in the tulle fairy dresses in the window, the racks of sparkling fairy shoes, the large polystyrene Pegasus welcoming you by the door or the decor of stars and moons with fairies and castles in cloudy landscapes.

Those that respond positively ascend the magic staircase to view the gallery and fairy bower. It consists of a steel spiral swathed in branches of the contorted willow tree (salix contorta) for which the Fanes advertised in a local newspaper, before Andrew went out with a saw to the garden of the respondent.

"Most of the purchases are by adults for children," Merran said. "However we have our fair share of adult believers, like the lady from Hampshire who recently spent three hours in the shop and left having signed a cheque for pounds 650.

"Of course we do get a handful of customers who want to fall about laughing over it all, but I usually manage to take them down a different path," Merran said. "We also get some gay couples who like the masks and the jewellery. They also love the ornaments we sell.

"However to me the most important thing is that by bringing back the fairies into people's lives we are fulfilling a need. As a little girl I found the world of Disney was magic. Today the whole idea has been merchandised and pummelled to death.

"We are trying to recreate this sense of childhood magic and mystery. I think this is tremendously important in an age of which poor little innocents are so often bombarded with violence and the horrors of war.

"We feel there is a need for shops like this right across Britain in order to put a sense of wonderment back into the lives of modern children. We looked at London but it was too expensive. Franchising is not the answer either. The shop is too much a projection of my own character. You can't put that into a franchising manual.

"Besides this is now more than a business. I can't have anybody running a branch of The Faerie Shop. It is too much of a responsibility."

The Faerie Shop, 22 Hughenden Yard, High Street, Marlborough, Wiltshire, SN8 ILT. Tel: 01672 515995. For a free mail order catalogue, tel 01672 871001.