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It's a Beanie Baby world

It's been four years since the cuddly toys hit stores and they have shown amazing staying power

Sunday, September 06, 1998

By Teresa F. Lindeman, Post-Gazette Staff Writer

"Irrational exuberance" might be a good way to describe the great Beanie Baby craze of the last few years.

Cash cows and ducks and pug dogs, too? (Post-Gazette Photo Illustration)

How else could someone describe a market that allows anybody who bought a small stuffed animal named Peanut the royal blue elephant for $5 in 1995 to demand $4,700 only three years later? That's a pretty impressive return on investment.

Some bearish analysts predict a crash could be just around the corner. Optimists say a recent slump in Beanie resale value - more than 7 percent by one estimate - constituted a market correction and the only logical way to go from here is up.

"If you're a collector, it's like you're playing the stock market," said Jan Smith, at the Stamp On It store on Forbes Avenue. "It's up and down."

Since the first members of the Beanie Baby menagerie began showing up on the shelves of specialty retailers about four years ago, an entire economic system has developed. From the manufacturing plants in China to the collectors who can't get enough animals and on to the entrepreneurs using Beanies to pay the bills, this food chain is dependent on the whims of a very private Illinois company that has already managed to push demand beyond most observers' expectations.

The next few months could be critical, as millions of Beanie Baby buyers wait for another touch of marketing magic from Ty to spur new interest and as the company moves to take greater control of the market that its toys have created. Observers are also trying to assess the possible impact of growing competition from smart operators like Disney and Warner Bros.

 
  More about Beanie Babies:

Beanies on the 'Net

How much is your Beanie worth?

   
 

"So when will we know for sure?" asked one online Beanie sage. "If prices inch upward in the October-November period ... then what we've seen this summer may well be a function of seasonality and market correction.

"On the other hand, if values continue to descend through that period, it may well be time to sell off Spotless Spot."

From the Charlotte Observer, July 2: "A former McDonald's manager was charged Wednesday with stealing more than 700 Teenie Beanie Babies bound for the restaurant's Happy Meals, police said. The Beanies were peddled at local yard sales and flea markets for about a buck apiece, Hickory police investigators said. Complete sets of the 12 Teenie Beanies can sell for $200 each, collectors said."

By this time, most people have heard of Beanie Babies. Might even be sick of hearing about !xoz%#!!! Beanie Babies. Certainly, a large portion of the population believes the craze for these toys has come and blessedly gone just like every other fad that turned people into obsessed acquirers - Tickle Me Elmo, Cabbage Patch Kids and Pogs.

If the thrill is gone, how does that explain the fact that Mary Beth's Beanie World Monthly magazine is selling more than a million copies every month? Sales continue to grow for the year-old publication that started out with 100,000 copies in August 1997, according to editor Mary Beth Sobolewski.

Pittsburghers are still waiting in lines to be the first to buy new animals. One sports card dealer in Robinson estimates he's sold 25,000 Beanies since he got into the business a year ago.

In the last week, at least two Beanie Baby shows were held here - one in Monroeville, the other at the Days Inn on Banksville Road. Vendors estimate they can attend as many as six shows a month, all in the Pittsburgh region.

One unemployed Ingram woman has made $2,000 in the past two months selling Beanie accessories such as tiaras and sleeping bags and collars with the Beanies' names on them. She's hoping the business will allow her to work out of her home and be more available to her 10-year-old daughter.

"The whole thing has just gone beyond any of our imaginations," said Sobolewski, who said her Chicago-based magazine started out as a quarterly. "Wouldn't you have thought that everybody had enough Beanies already?"

Post-Gazette story on June 3: "A burglar smashed the front door at Sports Card Etc in Pine, stealing 16 Beanie Babies. Owner David Pfaff estimated the toys' value at $10,000."

The man who started this whole thing is Ty Warner, the reclusive head of Ty Inc. in Oakbrook, Illinois. His private company was known for selling quality stuffed animals, but none of its products really took off like a Barbie or a Power Ranger.

The Beanie distribution strategy was different from the start. No mass marketers - Kmart, Wal-Mart, Toys "R" Us - were allowed accounts. Only specialty retailers - which seems to have included everyone from Hallmark stores to corner gas stations - could handle Beanies. At about $5, the toys were within reach of kids using their allowances to buy.

The line might have continued to build quietly among the young ones, if Ty hadn't added another twist to capture consumer interest. The manufacturer began implementing unannounced retirements. One day, Steg the stegosaurus was just another fuzzy guy on the Hallmark shelf. The next day he was a dinosaur headed for extinction.

Ty's marketing plan continued to play out. The company stopped taking on new accounts and began restricting how many Beanies stores could order each month. The current levels allow about 36 of each animal per month, according to dealers.

And the company kept quiet. Ty operates a little like the imaginary Willy Wonka's Chocolate Factory. It lists no address and no phone number for its headquarters. Production numbers are top secret, forcing fans to seek out "sources" and pore over the company's Web site for clues.

Pittsburgh-area stores report Ty doesn't tell them when deliveries are coming and usually doesn't fill the whole order. One store owner said she checks her credit card account to figure out if they've billed her yet. The delivery usually comes at that point.

"They're trying to create an atmosphere of shortage," said Eugene Fram, a marketing professor in Rochester Institute of Technology's College of Business.,

OK, so Ty has created an attractive commodity that appears to be, if not always rare, then limited. Even that might not have put Beanies into a marketing class of their own.

The final touch may be one borrowed from the sports card market - the idea of having a collection. "It's very addictive," said Sobolewski, who started out as a collector herself and now has 600. People have lists. "You can't stop until they're all checked off."

According to the official Ty site, there are 14 new Beanies, 54 currents and 88 retired toys. The collectors' guides break those groups down even further because of color variations and tag differences.

Collectors who just need one or two more to complete that list have been willing to pay stunning amounts on the secondary Beanie market. "If I had that much money to invest, I would be putting it in money market funds," said one collector who has done a little buying and selling but considers herself a small-time operator.

Marketing tactics out of Illinois have continued to pump up demand. A massive McDonald's promotion this spring put the toys into the hands of even more children - and collectors. Sports promotions, which started last year at a Chicago Cubs game, have taken off with a vengeance. Even the Pittsburgh Penguins plan Beanie giveaways this fall. On Friday, the Pittsburgh Pirates planned to catch the wave by handing out a bean bag-type doll, although it is not a Ty product.

"There are real men who were just into sports," who have gotten hooked, said Sobolewski.

Widespread rumors now call for another wave of retirements in October and some new Beanies early next year. Almost everyone who has bought into the business is hoping Ty Warner's got another, er, rabbit under his hat.

A joke circulated on a Beanie Baby Web site: "You know you're addicted when the UPS security staff asks you to stop stalking their trucks."

As inhabitants of Russia are well aware, when demand for a product outstrips the supply, the market finds a way to compensate. Since Ty is stingy with its Beanies, all sorts of creative pipelines have developed.

Some collectors report that their friends at stores call when a new supply arrives. Several Hallmark operators, who get unsolicited offers of help in unpacking UPS shipments, have been running lotteries to make the Beanie adoption process as fair as possible.

Others complain the incessant phone calls, intermittent fights and general unpleasantness that Beanie Baby love sometimes inspires makes them sympathetic to account holders who just sell most of their stache directly to a dealer willing to pay a little more.

One dealer in Western Pennsylvania, who asked not to be identified, said he's paid a half-million dollars this year to a Ty account holder who had paid the manufacturer about $50,000 for the product. Ty charges $2.50 for each Beanie and requests its account holders sell them between $5 and $7, threatening to cut off the supply to those who fail to do so.

This summer, the company asked Web site visitors to tattle on stores charging more. Sobolewski said Ty had to cut off the survey after 100,000 tales flooded in.

Frank Turkaly doesn't hold a Ty account but he does sell Beanies. The vendor operating a table at the Days Inn show has been dealing in dolls for two decades. Over that time, he's built up relationships in Europe and imported many toys. These days he's also bringing in Beanies and the new Disney toys.

Ty has tried to keep Beanies from crossing the borders, at one point reportedly allowing each person to bring only one into the country. Although that has apparently eased somewhat, tales of heavy-handed customs enforcement efforts circulated at the recent Days Inn show, including one rumor that two Beanie bear heads had once been - gasp - cut off by an official at Pittsburgh International Airport.

"We're right up there with the marijuana dealers," joked Kathie DeMutis, who doesn't actually sell Beanies but has started a small operation selling accessories. She and her daughter, Danyel, got hooked as collectors in May just after DeMutis lost her job as a bookkeeper. She's hoping the business could help her be a stay-at-home mom.

Frank Cusic, a 13-year-old who'd rather not say where he goes to school, has learned a lot about the business world this summer. On the plus side, he sold 19 Beanies for $240 and made a nice profit. Things weren't so pleasant when some grown-ups got "ignorant" with him as they all waited together in lines for a Beanie lottery.

Undaunted, Cusic and his family plan a day trip in the next couple of weeks in search of Maple, a white teddy bear only sold in Canada.

For those who can't drive to the north country, vast supplies of Beanies can be found on the Internet, where Sobolewski estimates at least six auctions keep bears, hippos and giraffes flowing around the country. One site claims one million hits in five months and at least $143,000 worth of merchandise available.

These non-Ty approved suppliers are quite concerned about yet another group of entrepreneurs, the counterfeiters who have also decided to help out on the supply side.

From the Wichita Eagle wire services on July 31: "The U.S. Customs Service is doing battle against people who try to smuggle Beanie Babies in from Canada ... Also caught have been little girls who innocently carried their collections into Canada and headed back home, only to see the toys being carted away by uniformed officers. "We look like ogres," lamented Customs officer Bob Blanchard."

Big brother, in the form of Ty, is also concerned, but not just about counterfeiters. The company is taking a hard look at this little market chugging merrily along under its nose.

Books, magazines, loads of protectors for the important heart-shaped Ty tags are just a few of the items that capitalists have developed in support of the Beanie fan. The September issue of Mary Beth's Beanie World ran almost 250 pages, with enough advertising to make any publisher drool. Most of the ads include pictures of Ty products, along with disclaimers about the trademark.

"Ty didn't do anything about it for a long time," said Sobolewski.

That is changing. She has heard that the company brought a new lawyer on board this summer and many entrepreneurs are waiting to see what happens next.

"He's starting to take a very aggressive stance," confirmed Steve Murphy, new business development director with Cyrk. Cyrk is a marketing firm in Massachusetts that has begun developing products for Ty. Because Cyrk is a public company, its representatives often end up discussing the Beanies with companies trying to set up Ty promotions or with reporters looking for information.

"A lot of people have made a lot of money illegally off his marks," said Murphy.

In addition to the crackdown, the Ty company hopes to make some money of its own off its Beanie Baby trademarks. Earlier this year, Cyrk launched the Beanie Babies Official Club and more than a million people have signed up already. New products coming soon include Ty-approved tag protectors and Beanie Baby calendars.

"It's the biggest brand in the [plush toy] industry," Murphy said.

That too could change. Disney started selling similar toys last fall and has begun following the retirement strategy. Warner Bros. and others are also sending out cute little emissaries trained to capture market share.

Turkaly sees potential there. "A lot of people are doing Disney instead of Ty."

That might seem shocking to fans like Kathie and Danyel DeMutis. The two adore their collection of 90 Beanies, which Danyel claims she'll never sell. Her mother holds up a soulful puppy that always cheers her up. "How could you be upset with a face like that?"



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