9

Ty’s Big Idea

In late 1993 Warner summoned Bill Harlow, the quilting store operator he’d met at a trade show who was by then the exclusive distributor for Ty products in Canada, to his office in Oak Brook, Illinois. Warner had considered a handful of people as partners for the Canadian business, many of whom had much more experience than Harlow and some who were better capitalized. Warner, however, had conditions. He wanted someone who would focus exclusively on Ty products full time; he wasn’t interested in wrapping his line in with a sales organization that sold dozens of other gift products.

He also didn’t want anyone who brought a lot of his own ideas and strategies to the business. “He wanted someone he could mold,” Harlow remembers. “Someone he could control. I knew nothing about plush toys at all, and I learned everything about it from him. I was young, I was full of energy, and I was moldable. I knew nothing and had no preconceived notions. Ty is the closest guy I’ve met to someone who understood every facet of a business: the design, the manufacturing, the sales. Everything. He was my mentor.”

The Ty Inc. world headquarters and distribution center that Harlow beheld consisted of a few thousand square feet and fifteen employees. The warehouse and the office were all in one building, making it a terrible place to host visitors—which was fine, because in those days no one much worth impressing went there anyway. The furniture and office supplies looked like they’d been assembled from the leavings of dozens of yard sales; nothing matched. Ty’s promotional items from trade shows were stacked all over the office because they’d have gotten too dusty in the warehouse. There was a big Dry-erase board with a calendar for all the trade shows the company went to each year, and the office was filled with messy wires and arts-and-crafts decorations put up by Warner’s secretary—much to the annoyance of his more corporate-minded head of sales, Karmen Kohlwes.

Harlow sat across from Warner, who reached into his immaculately organized desk filled with plush prototypes. He pulled out the first factory sample for the first Beanie Baby—Legs, a frog with little detail and, competitors soon snickered, a serious problem with under-stuffing. He placed it in Harlow’s hand. Warner was always excited about his products, but he was particularly enthused about Legs because Legs didn’t have much stuffing—a little in the legs, a little in the head, and a little everywhere else, but mostly what you noticed about Legs was his beans and his floppiness. Legs was the platonic ideal of what Warner had been searching for since his drop-ins at the Dakin product office in the 1960s. He’d started his own business with under-stuffed cats with beans in the feet, then moved on to beans in other stuffed animals. Now, Warner had made beans the defining characteristic of his plush; the stuffing was incidental. The result was incredibly floppy and “poseable,” that word Ty had liked enough to trademark back in the 1980s.

“From now on, every penny you have goes into this,” he told Harlow.

When Harlow first told me about the conversation, my reaction was Oh, come on. He did not really say that. It just sounded like an obvious turning-point line in a bad version of Citizen Kane—a cocky line from a cocky entrepreneur ready to put it all on the line for the thing he’d concocted and believed in with everything he had.

However, the conversation probably did happen exactly that way. Everyone who was in Warner’s life at the time remembers how entirely absorbed he was with excitement over the creation of Legs the Frog. McGowan’s daughter Jenna, then in elementary school, recalls the first time Warner showed Legs to her. He was ecstatic, she says, because of how little stuffing it had, and he kept pointing that out to her—how floppy Legs was, how you could toss him into the air and he’d land with a satisfying plop. Jenna’s sister, Lauren, also remembered Ty’s excitement over the new animal. He tossed Legs to her and smiled. “See!” he told her. “It’s fun to play with!”

In consultation with Faith McGowan, who had no official role with the company but with whom Ty discussed everything, he changed the original dark green color to a lighter, more child-friendly shade. He was ready to introduce Legs, along with eight other Beanie Babies he had painstakingly designed to complete the collection: Brownie the Bear, Chocolate the Moose, Pinchers the Lobster, Spot the Dog, Squealer the Pig, Splash the Whale, Flash the Dolphin, and, not coincidentally, Patti the Platypus—“Patti the Puss!” Ty told Faith.

_______

Beanie Babies were first introduced at Gatlinburg, Tennessee’s Smoky Mountain Gift Show in November 1993. Always prepared to build hype, Warner had only two of the Beanies available for sale at that event: Brownie and Patti. The other seven were on display, but he told retailers they couldn’t be ordered just yet. He had thought up the line, in part, to have an affordable impulse item on hand to get his foot in the door with retailers at trade shows. Sell them the cute, colorful, completely irresistible low-priced beanbags, he thought, and then he’d be able to upsell them on his full line of more traditional plush. Warner was wary of novelty items: the problem with trying to chase or create trends was that they could evaporate quickly, leaving you with a lot of worthless inventory and no steady, sustainable business. He thought that traditional animals like bears, rabbits, cats, and dogs were the way to go. The Beanie Babies were mostly a means to an end: not expensive enough to be much of a cash machine on their own but so perfect that they were destined to be a hit.

“For the first year—at least—they just didn’t move,” says Lina Trivedi, who worked for Ty at the company’s trade shows in the early and mid-1990s. She remembers walking buyers through all of the larger animals, clipboard in hand, taking their orders for cats, dogs, rabbits, and gorillas—but when she got to the Beanie Babies, they passed. Gift shops were more interested in traditional teddy bears and animals with stuffing, not beans, and certainly not more beans than stuffing. And the thin pile and bold colors had some retailers worried that they would cheapen the look of their stores. Some told the Ty sales force that the inexpensive Beanie Babies would cannibalize sales of higher-priced products. Whatever the reason, almost no one ordered them. Warner was originally soliciting orders for Beanie Babies in twelve-packs of each style, and the company’s former sales reps remember calling the head of sales seeking permission to split the twelve-packs and accept orders for six. Warner was hesitant: If he couldn’t sell a store twelve beanbag animals at a wholesale price of $2.50 each, why even bother at all?

This was the opposite of what Warner was used to. In the past he’d sometimes told buyers that they could only purchase a maximum of twelve of a stuffed cat, then watch in astonishment as a buyer who was probably going to buy only eight bought twelve instead. There’s some research suggesting that limiting order sizes can promote the idea of scarcity and lead to larger purchases. A 1995 study, “Framing the Deal: The Role of Restrictions in Accentuating Deal Value,” found that advertising limited quantities leads consumers to associate the limited-quantity brands with higher quality.

Warner agreed to accept orders for six pieces. Ty’s sales for 1994 climbed to $28 million, which was more than double the previous year, but that was driven by his traditional plush lines and a new brand he named Attic Treasures. The Attic Treasures were modeled after antique stuffed animals—some were designed by artists, all had textured fur, and many of them were jointed. They were selling well in gift shops to adult collectors, and seemed like they might be the future of the company.

Still, Warner wasn’t ready to give up on the Beanies. In June 1994, more than six months after their inauspicious launch, he introduced a bunch more: Ally the Alligator, Blackie the Bear, Bones the Dog, Chilly the Bear, Daisy the Cow, Digger the Crab, Goldie the Goldfish, Happy the Hippo, Humphrey the Camel, Inky the Octopus, Lucky the Ladybug, Mystic the Unicorn, Peking the Panda, Quackers the Duck, Seamore the Seal, Slither the Snake, Speedy the Turtle, Trap the Mouse, and Web the Spider, along with a teddy Beanie that was available in brown, cranberry, jade, magenta, teal, and violet.

On January 7, 1995, he released Nip the Cat, Tank the Armadillo, Tusk the Walrus, Zip the Cat, and Valentino, a Valentine’s Day–themed white bear. He also added wings to Quackers and changed the design on the colored teddy bears, making the faces less flat and, incidentally at the time, creating the first discontinued Beanie Babies that anyone looking to build a complete set would have a hard time finding. Soon “New Face Teddy” and “Old Face Teddy” would be household names among collectors, and a pair of Old Face Teddies would be worth enough to pay for a semester of college. For the time being, though, Beanie Babies were selling poorly enough that most traditionally minded businesspeople would have considered scrapping the whole line.

The future of the company changed with a lamb named Lovie.