ADVERTISING & MARKETING : Beanie Baby Statement Could Backfire on Ty : Toys: Manufacturer’s enigmatic handling of news that it will retire line this year could alienate consumers.
The toy industry is infamous for rationing products to stir demand, but few are as adept at it as Beanie Babies maker Ty Inc., which raised the stakes once again by announcing on its Web site this week that “all Beanies will be retired” at the end of this year.
Ty’s cryptic statement left many toy industry observers scratching their heads, unsure if the company really means to end production of the popular plush toys and wondering if it may have gone too far this time in manipulating its customers.
The privately held company based in suburban Chicago did not return calls seeking comment and had withdrawn its announcement by Wednesday, further frustrating loyal Beanie fans who posted messages filled with anger and confusion on Ty’s Web site.
“Me and my best friend were in TEARS when we heard about the anocement (sic),” wrote an 11-year-old girl. “So mr.ty, i hope u r happy for ruining all these collectors lives! (well, not LIVES, but you know what i mean.)”
Another fan titled a message: “Oh NOOOOOOOO!”
The announcement immediately drew a variety of interpretations by fans and industry executives. The message came after a list of new Beanies--the last of them a bear ominously named “The End.”
Some industry insiders suggested that Ty and its reclusive owner Ty Warner are unorthodox enough to stop production of a strong-selling toy that is in the waning days of a fad.
Others accused Ty of toying with its customers, noting that Ty regularly “retires” products in the line and suggesting that “The End” refers to the end of the millennium.
Either way, Ty’s gambit has the potential to backfire, several people said, regardless of whether Ty really means to withdraw the toys.
“I don’t know if anyone has tried to pull one of these; that’s why it’s kind of shocking,” said Cliff Annicelli, managing editor of the trade journal Playthings. “It certainly doesn’t do anything to endear people to the toy industry, because there will be a lot of children who are upset by this--as well as a lot of adults who are upset that their children are being manipulated.”
The idea of holding back, “retiring” or otherwise shutting off supply in toys is nothing new. Think back to any holiday season when hordes of parents chased after that year’s hot toy.
What’s more, toy makers have long sought to shake up the market for products that have seen better-selling days by stemming their supply.
Last year, Mattel Inc. said it would no longer issue its once-phenomenally popular Holiday Barbie, sending the collector’s markets into a frenzy even though the dolls in designer dresses had ceased to be a hit.
And Walt Disney Co. regularly advertises that one or another of its beloved movies will be available on video only for a limited time.
But retail experts said that until now, no one has ended production of a toy that was as popular as the Beanies are. Nor has anyone in memory made this big of a threat only to flip-flop on it later, they said.
That means that if Ty intends to merely change the size or the animal type and call it a new Beanie Baby, it is taking a risk, said Margaret Campbell, an assistant professor at UCLA’s Anderson School and an expert in manipulative marketing.
Doling out products in dribs and drabs is something more associated--and tolerated--with luxury goods, such as wine. Vintners regularly hold back and consumers often respond by snapping up whatever bottles are released and bidding up the rest of the supply.
But toys aren’t wine, Campbell said.
“Consumers understand what the intentions of marketers are, and they don’t like it when it is to harm consumers,” Campbell said. “That’s the biggest risk; people will say, ‘Why are you doing this,’ and the answer is ‘Because you think you’re going to make more money off us, the consumers, by doing this.’ ”
Ty, however, has always done things a bit differently. Since it introduced the palm-size animals in 1993, Ty has fueled a budding collector’s market by regularly stopping production of some creatures when others were added.
Consumers, mostly adults, responded by bidding some of the $5 “retired” Beanies into the several-thousand-dollar range. Many of the toys sell on the Internet and through other auction and collectibles channels for hundreds of dollars. The toys took on the cachet of rare baseball cards. But recently, that market has begun to decline.
At a time when many children were turning to expensive electronic toys, Ty made hundreds of millions of dollars selling something that was as cheap and low-tech as anything on the market.
It broke other bits of modern toy wisdom as well, eschewing television advertising, licensing and the nation’s biggest toy sellers, Wal-Mart and Toys R Us. Ty aggressively enforced its no-markdown rule and refused to appease the big discounters, as most manufacturers do, by creating a separate product line that wouldn’t compete with specialty toy sellers.
Ty’s owner has much to do with the company’s brilliant marketing and unusual decisions, several people said.
“Ty Warner has become the Howard Hughes of the toy industry,” Annicelli said. “No one sees him; they only hear strange tales of his various and varied activities--buying hotels, producing exclusive Beanie Babies just for employees. Apparently he makes decisions that only a few people in the company know about, and the rest are kept in the dark.”
The fad Warner created, however, went well beyond the normal life for “hot” toys, Annicelli said, even though its popularity has waned in recent months as children have moved on to Pokemon and yo-yos.
The company’s revenue was estimated at $1.7 million in 1995 but had ballooned to $674 million by last year, according to NPD Group Inc., a market research firm. That was enough money for Warner last winter to pay $275 million for the Four Seasons hotel in Manhattan, adding to speculation that he was moving on from the beanbags that built his fortune.
“If it were just about any other company, I would say it’s a clever and cynical approach to spurring demand for a new product,” said industry analyst Sean McGowan at Gerard Klauer Mattison in New York. “I don’t know what his thoughts are. Perhaps the American success story is ‘Come up with a great toy, make a gazillion dollars and get out.’ ”
If Ty does end its Beanie Babies business, analysts note, it will be freed up to work on producing the next big thing.
“It might be kind of a smart way to get out while the getting is good, before it dwindles down to something people don’t want anymore,” UCLA’s Campbell said.
* COLLECTORS REACT: Region’s Beanie Baby fans have mixed feelings. E2
