Build-A-Bear Workshop Inc

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Build-A-Bear Workshop Inc.

1954 Innerbelt Business Center Drive
St. Louis, Missouri 63114
U.S.A.
Telephone: (314) 423-8000
Toll Free: (888) 789-2327
Fax: (314) 423-8188
Web site: http://www.buildabear.com

Private Company
Incorporated: 1997
Employees: 1,800
Sales: 170 million (2002 est.)
NAIC: 451120 Hobby, Toy, and Game Stores

Located in upscale, family-oriented shopping malls, Build-A-Bear Workshop Inc. owns and operates more than 150 stores in 35 states in the United States and three provinces in Canada. Retail store developments in Europe and Asia occur through franchise agreement. Build-A-Bear Workshop offers a unique retail entertainment experience in providing children of all ages an opportunity to participate in the creation of a personalized teddy bear or other stuffed animal. Customers, referred to as Guest Bear-Builders, walk along The Bearway and stop at stations in a process of teddy bear construction. At the Choose Me station customers select a toy animal "skin" from a variety of colors and sizes. At the Hear Me station patrons can choose to have a sound microchip placed inside the stuffed animal. The next stop is the Stuff Me station where they decide on stuffing firmness or softness and use a foot pedal to operate a machine that the Master Bear Builder uses to stuff the plush animal. After choosing a small, heart-shaped, red satin pillow, customers are encouraged to rub and kiss the heart, make a wish, and then place it into the toy animal before the Master Bear Builder closes loosely embedded stitches. The stuffed animal can be fluffed and groomed under an air blower at the Huff Me station.

At the Name Me station, a childlike voice accompanies the process of entering the name of the new friend into a computer. Customers choose between a birth certificate signed by Chief Executive Bear Maxine Clark or a storybook about how the toy is made. Personal information is used to track owners of lost teddy bears through a corresponding barcode placed inside each plush animal. At the Bear Boutiques shoppers can choose from a wide variety of teddy bear clothing and accessories, including formal and casual attire and clothing for specific activities or holidays. Choices range from tuxedos and wedding gowns, to denim skirts and pants, camouflage pants, sweaters, t-shirts, flannel shirts, underwear, and pajamas. Special interest clothing includes tutus, sports and cheerleader uniforms, and nurse, doctor, and firefighter uniforms. Accessories include miniature athletic equipment, shoes, hats, sunglasses, and "fur-niture." The new attire can be put on the stuffed animal at the Dress Me Station. Customers pay at the Take Me Home station where the toy is lodged in a Cub Condo, a cardboard house.

Inspiration and Early Success

Twenty-five years of experience in retail management prepared founder Maxine Clark for the creation and successful implementation of the Build-a-Bear Workshop concept. Her career began in 1972 when May Department Stores hired her as an executive trainee. She worked in numerous capacities at May, but found children's marketing to be her greatest strength. At Hecht's department store Clark created a children's department called the "The Land of Ahhs." As executive vice-president of marketing and merchandising for Venture Stores she assisted in the original development of children's character licensing for store merchandise. In 1992 Clark became president of Payless ShoeSource, another May subsidiary, and transformed the company into one of the leading providers of licensed children's footwear in the country, earning a place on Discount Store News' list of the "30 Most Powerful People In Discount Store Retailing" in 1995.

Clark resigned her position as president of Payless in January 1996 in order to establish her own retail business. In pursuing entrepreneurial success, Clark sought to bring creativity into the retail environment and to involve children in a fun, tactile, and interactive retail experience. The inspiration came from Clark's own childhood memories of the fun and magic she experienced at certain stores. For example, Burdines department store in Clark's hometown of Coral Gables, Florida, held fashion shows in the tea room, Christmas carnivals on the roof of the store, and other exciting events. Clark wanted to provide children with similar memorable experiences.

In the process of developing a retail entertainment concept for children, Clark visited toy factories and children's retail stores, put together a list of ideas, then consulted the experts: children. Clark consulted first with the children of a friend, then formed an advisory board of 20 children, ages six to 14, and showed them three of her ideas. The decision to pursue the Build-A-Bear concept emerged from the board's enthusiasm, combined with Clark's personal preference for teddy bears and the high profit margin for stuffed animals.

Clark then hired design consultant Adrienne Weiss Co. of Los Angeles, using 80 percent of her $750,000 personal savings investment, to develop the Build-A-Bear concept. Clark collaborated with consultants in developing every detail, including artwork, employee costumes, store design, and company logo. The logo features a teddy bear being measured, stitched, stuffed, and groomed. All lettering is similar to children's printing.

Every element of the store design was intended to delight children under the age of 12. The store entrance is flanked by two life-size bear figurines, a boy and a girl; they hold large sewing needles and wear thimbles for hats. Vibrant yellow-gold and red-orange colors dominate the store interior and bins holding the toy animal skins are shaped like spools of thread. At the Stuff Me station, children can see white stuffing being fluffed by a turning, open-spoke wheel and feel the downy texture of the extra stuffing stored in a canvas hamper. The store design was inspired in part by the Little Shop on Burdines' roof, featuring counters and displays at an appropriate height for children.

The first Build-A-Bear Workshop opened in the St. Louis Galleria in October 1997 with immediate success. The toys were popular with teenagers and young couples, as well as families with children. During the Christmas shopping season, the store was so busy children had to take a number and wait their turn. With each animal toy priced at $10 to $25 and clothing at $3 to $10, sales of $377,600 exceeded projections for 1997.

By providing numerous clothing options and other supplementary bear-themed merchandise, Clark hoped to attract repeat business. "Bearaphenalia" included greeting cards, stationery, candy, stickers, jewelry, and t-shirts stating, "Never settle for the bear necessities." At an in-store photo booth, customers could have their pictures taken and reproduced on a sheet of stickers.

Expansion in the Late 1990s

From the start Clark planned to implement the Build-A-Bear concept as a retail chain. To facilitate growth, she obtained all appropriate copyrights and trademarks before the first store opened, such as for Cub Condo and the company's slogan, "Where Best Friends Are Made." In developing Build-A-Bear into a national chain, Clark planned to open three to five stores in 1998, six to ten stores in 1999, and to operate 100 stores within five years. The St. Louis Galleria provided a model for market demographics, as a location with many families and a family friendly environment in an upscale regional mall. Clark considered prime family-oriented entertainment and tourist retail venues as other options.

The cost of opening a new store ranged from $500,000 to $700,000, but with annual sales estimated at $2 million per store, Clark easily found capital investment for expansion. Kansas City Equity Partners invested in the company, leading Build-A-Bear to open its second store in Overland Park near Kansas City, Kansas, in August 1998. A $4.5 million investment from Windsor Capital funded the opening of two stores in the Chicago area. With four stores in operation sales reached $3.3 million in 1998.

The charm of the Build-A-Bear concept coupled with its uniqueness earned Clark and the company industry recognition, including Chain Store Age 's Best New Retail Concept award. Playthings Magazine, the publication of the Toy Industry Association, gave the company a Merchandise Achievement Award for "Best Category Marketing."

Build-A-Bear continued to charm investors and the company found financial support for expansion through Walnut Capital Partners, which invested $5 million in 1999. Build-A-Bear Workshops opened in Indianapolis; Atlanta; Houston; Orlando, Palm Beach and Miami, Florida; McClean, Virginia, near Washington, D.C.; Myrtle Beach, South Carolina; and Scottsdale, Arizona. With 14 stores in operation, the company sold almost one million teddy bears and sales reached $18.6 million. Sales averaged $700 per square foot of retail space, an enormous success in contrast to national mall averages of $350 per square foot. While Clark expected to meet her operational goals, she did not expect immediate popularity with the public and the resulting sales.

Company Perspectives:

Build-A-Bear Workshop Foundation is committed to improving communities and impacting lives through meaningful philanthropic programs that support causes for children and families. One focus of the Build-A-Bear Workshop Foundation's mission is to raise funds through Nikki's Bear programs to support children's cancer research and treatment programs. The Build-A-Bear Workshop Foundation and Nikki's Bear programs are driven by the inspiration and spirit of kids helping kids and the central messages of courage and hope. Courage for all kids who face cancer today. Hope for a brighter future tomorrow through cancer research and treatment.

One aspect of successful sales involved the company's responsiveness to customer feedback. Build-A-Bear learned about customer preferences and changed the product mix accordingly. New products focused more directly on the workshop experience, eliminating the greeting cards and the photo booth, and adding fresh choices to an expanded line of teddy bear-sized apparel and accessories. The company diversified its product selection by offering different animals, including horses, dogs, cats, and turtles, as well as limited-edition animals for holidays and nonprofit fundraising. A changing selection of prerecorded sound chips fit product offerings. In addition, the company introduced sound chips that allowed customers to record personal messages. Build-A-Bear released CDs with bear-themed music, including songs like "Root Bear" and "Teddy Bear Boogie."

The Beary Newsworthy newsletter kept customers abreast of new products and the BuyStuff program gave frequent buyers $10 off purchase after spending $100 on merchandise. The company web site, with a simulated trip through the Build-A-Bear assembly process, proved to be a very successful means of attracting new and repeat business.

The Cub Advisory Board played an important role in product development, holding meetings quarterly to discuss product ideas, making decisions about what animals to offer, fur colors, clothing styles, and accessories. Clark took the board's opinions seriously—if the board did not approve a product idea, the company did not use it.

Accelerating Expansion in 2000–01

With additional investment funds Build-A-Bear accelerated expansion, as Clark aimed to meet her goal of operating 100 stores in 2002. Walnut Capital Partners invested more than $60 million to fund new store development in 2000 and 2001. The St. Louis Galleria continued to provide a model for ideal store locations. Build-A-Bear opened units in New York, New Jersey, Connecticut, Massachusetts, Maryland, Alabama, Virginia, Tennessee, Michigan, Ohio, Pennsylvania, Colorado, Utah, Oregon, and California.

Although Clark's preference for premier, regional shopping malls directed expansion, Build-A-Bear expanded in an organic way as well. For instance, information obtained from the store in Myrtle Beach, a popular tourist destination, showed an unusually large number of visitors from Columbus, Ohio. While the company included Columbus in its long-term growth plan, the strong response from residents prompted the company to open a store in that area earlier, in April 2000. In addition, the company received an unusually large number of requests for a store from residents in the Dallas area, prompting Build-A-Bear to open a store in Arlington in May 2000, followed in late summer by stores in Frisco and Fort Worth.

The company's low-key marketing approach involved print advertising in community newspapers and parenting magazines, rather than television or major city newspapers. Promotion involved direct mail marketing to customers whose addresses were obtained at naming stations during visits to stores in other cities. Build-a-Bear used information from the Find-A-Bear ID program to promote Build-A-Party birthday party planning as well. The most successful marketing, for new and existing stores, occurred through the enthusiasm of children who told their friends about their memorable experience at Build-A-Bear.

Build-A-Bear continued to develop and change the merchandise mix at its stores and the clothing line expanded to more than 100 outfits. Build-A-Bear entered its first licensing partnership for co-branded products with Skechers footwear company. The Skechers for Bears line provided paw-shaped athletic footwear for teddy bears. The line was modeled on the company's Sportline of Energy joggers and featured metallic accents. With the purchase of bear footwear, customers received a coupon for $5 off a pair of Skechers adult or children's footwear.

During the company's new store expansion, Build-A-Bear obtained a space at one of the premier tourist locations for families, at the Downtown Disney District at Disneyland Resort in Anaheim, California. The store is located in a fee-free area outside the theme park, in a dining, entertainment, and shopping district. The store opened in fall 2001, the company's 32nd store opening that year, for a total of 72 stores in 30 states. Sales reached $107.3 million in 2001.

2002 Teddy Bear Centennial and Other Marketing Highlights

Throughout 2002 Build-A-Bear celebrated the Teddy Bear Centennial, the one hundredth anniversary of the creation of the teddy bear. The toy derived from a hunting trip taken by U.S. President Theodore "Teddy" Roosevelt, when he chose not to kill a bear cub. A Washington Post cartoonist immortalized the act, then a toy maker commemorated it with the creation of the first teddy bear. Centennial events included the Bearriffic Bear Story writing contest. Winners received a family trip to New York City for Thanksgiving, where Build-A-Bear debuted a float at Macy's Thanksgiving Day Parade.

Build-A-Bear coordinated centennial celebrations with new store openings. Children's parades, fashion shows, and charity events became regular features. Events culminated with the company's 100th store opening in Roosevelt Field, New York on September 19. Highlights of the Teddy Bear Centennial Charity Gala included live music, a Furry Fashions Show, and an auction of collectible teddy bears to benefit the Simon Youth Foundation. The next day a children's parade, led by company mascot Bearemy, took celebrants to the new store where Build-A-Bear held a birthday party.

Key Dates:

1996:: Maxine Clark leaves position at Payless Shoe-Source to start her own business.
1997:: The first Build-A-Bear Workshop opens in St. Louis; sales are near $400,000 in less than four months.
1999:: The success of the retail concept attracts venture capital for expansion; Build-A-Bear opens ten new stores.
2001:: The National Retail Federation names Build-A-Bear the Retail Innovator of the Year.
2002:: Build-A-Bear Workshop celebrates the 100th anniversary of the teddy bear along with the opening of its 100th store.
2003:: International expansion begins with new locations in Canada and England.

After successful collaboration on fashion shows during the Teddy Bear Centennial, in late 2002 Build-A-Bear announced a licensing agreement with Limited Too, which created a line of bear clothing based on the popular styles found at Limited Too stores for girls. Several Build-A-Bear customers requested the clothing styles for their toy bears. New attire included shorts and matching tops.

Build-A-Bear formed a similar licensing partnership with the National Basketball Association and the Women's National Basketball Association. WNBA uniforms and t-shirts for seven teams and authentic NBA jerseys for 14 teams were available in markets appropriate to each team.

Through a master-license agreement with Hasbro, Build-A-Bear intended to expand its market beyond its retail stores and web site. Under the agreement Hasbro would develop and market a special kit for building teddy bears at home as well as a line of stuffed animals and clothing accessories. These products would extend Build-A-Bear sales to mass market retailers beginning in late 2004.

The excellence with which Build-A-Bear executed its retail formula attracted the attention of children's product marketers and authors of four books published in 2003 dedicated whole chapters to the company. Authors cited the company's attention to every detail of the retail experience as directed toward its target market. In Brand Child renowned marketing specialist Martin Lindstrom lauded Build-A-Bear for its effectiveness in meeting the needs of children between the ages of seven and 14 to express themselves, to be unique, to have fun, and to involve their friends. The authors of Creating Customer Evangelists credited Clark with creating a memorable retail experience that prompted word-of-mouth sales.

Although Clark intended to take the company global from its inception, concrete plans did not begin to take shape until late 2002. In November Build-A-Bear signed a franchise agreement with Japan, held by Tech R&DS Co. Ltd. The company also began a search for locations in the United Kingdom. These countries were chosen in response to requests from customers who had visited stores while in the United States or had visited the company's web site. A high number of addresses in the Find-A-Bear ID database for these countries indicated strong interest in the Build-A-Bear concept.

The opening of the company's first international locations occurred in Canada, however. In May 2003 Build-A-Bear opened at malls in Edmonton and Calgary, Alberta, with additional stores opening in Mississauga, Ontario, and Coquitlam, British Columbia, later that year.

In October 2003 the company signed a franchise agreement with Amsbra Limited for exclusive rights to open and operate Build-A-Bear Workshops in the United Kingdom and Ireland. The first overseas location opened in November in Sheffield. Amsbra prepared for a second store location to open in South London in spring 2004.

International franchisees planned several store openings in 2004, including a location in Tokyo and an undisclosed location in South Korea during the spring. In Europe plans called for stores to open in Denmark and France, in spring and summer, respectively. In addition, a company-owned store was expected to open in Toronto, Ontario Canada, in fall 2004.

Expansion in the United States for 2004 involved new stores in Franklin, Tennessee; Wichita, Kansas; Hobart, Indiana; Dublin, Ohio; Sugarland, Texas; West Des Moines, Iowa; Poughkeepsie, New York; Little Rock, Arkansas; and its first store in Hawaii, in Honolulu. Build-A-Bear's goal is to operate 250 stores in the United States by 2007.

Principal Competitors

Applause LLC; The Boyds Collection Ltd.; The Basic Brown Bear Factory; Enesco Group, Inc.; Maine Bear Factory; Russ Berrie and Company; Ty, Inc.; Vermont Teddy Bear Company.