From iconic large stores like FAO Schwarz and Toys “R” Us’ Times Square, to independent shops that have been open for more than 75 years, toy store closures have become a cruel reality in the world of play. Like all facets of the bricks-and-mortar retail landscape, e-commerce has drastically changed the art of selling toys—not to mention the perspectives of licensors and licensees.
In Canada, while online retail has been a bit slower to take off than in the US (which grew by 11.4% last year), e-commerce sales are predicted to grow from 6% of all retail spending in 2014 to 10% in 2019, according to Forrester Research. But Canada’s Mastermind Toys seems to be bucking the fate of fellow bricks-and-mortar businesses. In fact, the Toronto-based independent retail chain is in the middle of exponential and rapid growth, having just opened its 50th store in a short period of time—it’s come a long way from the company that originally started out selling computer software designed for children.
The expansion started small, with two new stores added in 2011, followed by 33 new locations in the following four years. Now, the retailer is opening another 11 stores in 2017 (in Alberta, Ontario and Atlantic Canada), with plans to open more than 80 additional outlets in the next three years. While Mastermind is sticking to the Great White North for now, going global isn’t off the table.
“We’ll be up to seven provinces and 60 stores, so we’re definitely moving from a Greater Toronto Area-based footprint to much more of a national presence,” says Mastermind Toys president Humphrey Kadaner, adding that the key to his chain’s success is in the art of getting personal.
“What makes us different as a specialty retailer is that we have a unique tailored selection of both toys and books. We carry more than 6,000 toys and 4,000 books, and that combination is not common at all,” he contends, referring to the fact that Mastermind’s stock of both categories is almost equal. “You won’t find many of our products in a typical big-box or merchant store. And sales are supported by a knowledgeable and helpful staff.”
Some of the products that Mastermind stores stock include rare Lego sets available on only two retail sites (including Mastermind’s), life-like Hansa plush animals, Brio train sets and old-school Kapla wooden blocks.
Another element that helps differentiate Mastermind from its competitors is shelf space, contends Kadaner. In larger big-box stores, each product needs to earn its spot on a shelf, and underperforming SKUs are quickly jettisoned. But at Mastermind, the items are so specialized that Kadaner says it’s not the biggest issue if one product doesn’t sell, since it’s part of a larger story that the entire store is telling its customers.
That being said, the store carries some runaway hits.
“Lego is the biggest brand in the toy world and we are substantial sellers of Lego products,” says Kadaner, who for competitive reasons won’t divulge specific details on Mastermind’s top-selling items. “Because Lego falls into construction, it is our biggest category. But from there, the next six or seven categories are all within a percent of one another, so we have a relatively diversified product offering and we aren’t dependent on a single category.”
While there’s no shortage of toy stores that sell Lego, it is the specialty Lego sets and other hard-to-find products that gives Mastermind a particular foothold in the market. Most big-name toy stores rely on licensed products and big summer movies to drive sales, while those toys play a very small role at Mastermind. The store stocks some branded items like Star Wars and Batman Lego, along with Ravensburger Disney-themed puzzles and Playmobil’s NHL-themed items, but overall licensed items make up a very small portion of sales.
“We also carry Thomas and Friends and PAW Patrol, but beyond that, we don’t really have licensed merchandise in our stores. That is not what our consumers are looking for from us. They want to find a quality, tailored selection of unique toys,” says Kadaner. He also says, even with more adults buying products like collectibles and fidget spinners, the ultimate recipient of a Mastermind toy is still most often between the ages of two and 10.
And that strategy is paying off. While Kadaner remains tight-lipped on exact financial growth numbers, he says store sales have grown five-fold over the last five years. And year-over-year sales increases are solidly in the double digits.
Although it’s the opposite of what most businesses are seeing, the web has contributed significantly to Mastermind’s bricks-and-mortar growth. The company launched its first website in 1994 and has continued to improve its e-commerce operations since. A huge part of its business is driven by customers looking for specialty gifts, so the website has a tool to help people find unique gifts they may not have thought of. But Kadaner admits the web tool will never be as good at finding the right specialty toy in a store. So often people browse online and then head into the physical store to make their purchase.
“What we’re trying to do now is provide customers with the omni-channel option, which is to let them choose how they interact with us,” says Kadaner. “So we’re giving them a physical option as we expand to more markets, and of course we’re continuing to build up our digital and web options.”