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To succeed in today's retail toy world, you need a place that is 'really enchanting to take a child with you, and we’ve got that part,' says Jon Levy, co-founder of Mastermind Toys.

The Globe and Mail

It’s the tale of two toy stores. Mastermind Toys, opened by brothers Jon and Andy Levy in North Toronto in 1984, has been in the midst of a massive cross-country expansion, from 11 stores in 2011 to 67 today. Meanwhile, rival Toys "R" Us experienced turmoil in recent years, going through bankruptcy protection in Canada and having its U.S. parent shuttered.

We spoke with Mastermind’s Jon Levy, who will be a keynote speaker at The Globe and Mail Small Business Summit on Tuesday, about the lessons he learned while building his company and why Mastermind continues to grow despite intense competition.

Why did you originally decide to launch a toy store?

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We actually started as Mastermind, the educational computer store. We basically took a tiny little shop – like a shoe repair business, 300 square feet on a side street – and fixed it up all by ourselves. It was a little specialty shop to sell educational computer games for the first home computers coming onto market, like Commodore 64 or Atari. It didn’t take long for it to dawn on us that we would like to show other things that weren’t computer related, for instance, really nice puzzles or science kits or board games.

Mastermind is known for its strong customer service. Staff recommend products and wrap presents for customers. How do you instill a strong focus on customer service in your staff?

We understand that a person who works in your business will do a great job when they know exactly what it is they’re supposed to do. A number of years ago, we created a learning tool to help educate our sales associates and managers to understand the basics of Mastermind. We call it the Mastermind Academy. One module might be about the way in which we like to speak to our customer. Another module is on how we would like our sales associates to approach a customer in a store. And of course, one of the most important elements is to help a sales associate understand there are different ages and stages that kids go through and the kinds of toy products that fit a child at each age.

Why have you thrived while Toys "R" Us has stumbled?

Toys "R" Us is a category business and we are a niche business. Being a category business means you are everything to everybody and in order to do that credibly you need to be 25,000 to 40,000 square feet. We are 4,000 to 6,000 square feet. Our ability to be nimble as a smaller retailer is one of the strategic advantages. We can change our product emphasis for what is relevant in the marketplace pretty quickly. We don’t have as much overhead as a big-box retailer, obviously, so we can put more emphasis on marketing online, we can put more emphasis on having more staff in store. Toys "R" Us didn’t evolve themselves well, they didn’t change, they weren’t nimble. They stayed that really broad category monster and that came to be matched by other big retailers.

How did you develop an online strategy to fit with your retail strategy?

Today’s world, the digital world, in order to have a retail store that is successful you have to create a place where people enjoy going. You have to have a place that is really enchanting to take a child with you, and we’ve got that part. To compete online, you have to help the customer understand what it is you have, how it’s different than other retailers and if it’s in stock or not. You might not be able to get to a store right away, so you might want to have it set aside and pick it up in the store. Of course, some customers like to order products and have it delivered to their house. Later this year, we’re launching Perks Plus, which will be a small paid loyalty program like Amazon Prime. You will get a number of benefits like shipping or other things. Being digitally connected in all elements of your business is the only way you can really be competitive in today’s world.

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Do you plan to keep expanding Mastermind?

What we learned was that expanding in other parts of the country was going to be pretty straightforward as long as we could run stores reliably and with the same principles and values as we did here. We’re sitting at 67 stores today and I would say there’s a fair bit of expansion left that we can do. We think that 90 to 100 stores in Canada is what supports Mastermind without going into markets that would be too small for us. So we’ve begun to create a smaller store concept that potentially opens up another 30 stores for us. We can take 2,000-foot stores in the smaller markets and that would allow us to grow to 130 stores.

This interview has been condensed and edited.

The Globe and Mail Small Business Summit will give you practical ideas to grow your business. More information at tgam.ca/sbs19.

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