11

The First Collectors

“When I look back, the one thing I remember so much about Beanie Babies was how they made people feel so warm and fuzzy inside,” Mary Beth Sobolewski explained from her home in Naperville, Illinois. She’d been one of the first collectors in the Chicago suburbs—chasing Beanie Babies with her kids and trading with other mothers in the area to get the harder-to-find ones. “It was so much fun.”

She paused as her mood darkened. “Then it just became people who saw dollar signs—that was by far the majority of it at the height of it.”

By early 1996, following close to two years of weak sales, Beanie Babies were a popular toy for children, just as Warner had hoped and predicted. Demand was strongest in the Midwest, where Ty Inc.’s suburban Chicago headquarters gave it an in with local stores, and the low-priced toys sold well on impulse. Kids who grew up in Naperville remember trading them in the first half of 1995, close to a year before the rest of the country had heard of them, and a few teachers had banned Beanies from their classrooms because they’d become a distraction.

One sales rep remembers that when the product was first building a following on Chicago’s North Shore, the company was shipping more than half of all Beanie Babies to stores in Illinois. Merchants had disagreed with Warner at first about the potential of Beanie Babies, but as he once wrote in a Steve Jobs–like note to an employee, “Most retailers don’t know what they’re doing. When retailers are angry with you, it means you have a good product.” Warner thought that the play value of a stuffed animal with mostly beans and a little stuffing would appeal to kids, and he also thought that a stuffed animal that could be slipped into a backpack would spread through word of mouth far more quickly than one that required at-home play dates. He was right on both counts.

On December 9, 1995, nearly two years after the Beanies’ launch, J.T. Puffin’s in Madison, Wisconsin, placed one of the first newspaper ads for them: “Beanie Babies: At Puffins, on Dec. 6, we had 27 different styles of Beanie Babies. At only $5 they disappear quickly. Puffins, trying hard to be your Beanie Baby Boutique.” On December 7, Crescent Bear & Bath Boutique advertised “Beanie Babies Bean Bag Animals. Only $3.99.” On February 27, 1996, the Wisconsin State Journal reported on their popularity: J.T. Puffin’s had sold out of forty-eight Bongo the Monkeys instantly and was ordering more as quickly as Ty could ship them. A nine-year-old told the newspaper, “One of the things I like is they’re really soft. You can like toss them up. I just find it kind of fun to watch them when they’re coming down.”

A local newspaper story in April 1996 noted that a few had been retired, but no collectibles craze was mentioned. In June 1996, Playthings gave Beanies their first bit of industry trade press, mentioning that two gift shops had singled them out as a fast mover in a recent survey. Other papers in the Midwest began reporting on the popularity of Beanies in April 1996, tracing their rise to the 1995 Christmas season. “I had a few in October [1995],” one retailer told a reporter. “They weren’t selling. Then in mid-January [1996] they took off like crazy.”

No one was talking about an emerging secondary market, and there were no references to rare pieces. Occasionally, a reporter noted that retailers had explained that certain Beanie Babies were being “retired,” but with no further discussion of any impact on values. A couple of midyear stories mentioned that some parents were willing to pay $10 to $20 each for Beanies they were having trouble finding—but that wasn’t out of the ordinary for an in-demand toy whose supply hadn’t yet caught up with demand.

The beginning of the Beanie Baby’s transition from children’s toy to adult obsession was a product of the 1990s relationship between mothers and children—a connection that was often centered on shopping. The term “soccer mom” entered the lexicon in 1995, a year before the Beanie craze began. In her 2010 paper, “Public Choices, Private Control,” Boston University professor D. Lynn O’Brien Hallstein writes that America’s soccer moms are part of an ethos that “encourage[s] consumerism as the solution to the work/life struggle.” Quickly, though, at least in suburban Chicago, the mother-daughter toy collecting hobby was taken over by the mothers.

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Becky Phillips of Naperville, Illinois, started collecting Beanies with her daughter in early 1996, just as they were catching on with other kids in the neighborhood.

Becky’s daughter lost interest quickly—but Becky was just getting going. Already a devoted collector of Disney memorabilia, she was also a Type A elementary school teacher who was intensely focused on organization. When I met with Becky at the Coldwell Banker office in Naperville, where she now sells real estate, she was prepared with two boxes full of carefully filed, pristine documents from her days first as a Beanie collector, then as a Beanie maven.

In mid-1996, Becky started noticing which ones were harder to find and which ones had been discontinued. The first Beanie Baby to be retired, with no announcement or reaction, was Humphrey the Camel in mid-1995. With four long legs, he was difficult to pose, and his tan color wasn’t particularly appealing; kids didn’t buy him, so Ty stopped making him. Slither the Snake, Web the Spider, Peking the Panda, and Trap the Mouse were retired later that year for similar reasons. Other Beanie Babies were redesigned because Warner was constantly looking for ways to make them cuter. Becky was trying to sort through it all. She devoted days to tracking down the differences between Old Face Teddy and New Face Teddy—and she was the one who first noted the distinction for the benefit of other enthusiasts.

For a compulsive collector with a desire to create order and organization, there was a lot to do. Becky Phillips roped in her friend Becky Estenssoro, and they started collecting together, acquiring multiples of some pieces that they then used to trade for hard-to-find ones with the handful of other collectors they met at gift shops. It was “two Tabascos for one Kiwi,” as Estenssoro later remembered. Still, it was mostly just trading, and if parents occasionally paid more than $5 for a hard-to-find Beanie Baby, it was probably because they were trying to please their kids. No one was cataloging values, and certainly no one could see that the collecting had the makings of a speculative episode.

Not far from Becky and Becky, local children introduced Glenview, Illinois, collectibles dealer Richard Gernady to Beanie Babies. His store was named the Cat’s Meow, and he became one of the first retailers to place large orders. He also saw the collectability potential that came with the so-called retirements the Ty salespeople were telling him about. He displayed Beanie Babies alongside the more traditional limited-edition lines like Precious Moments, the Franklin Mint, and the Bradford Exchange.

Before there was an established market for Beanies, Gernady started highlighting the retired pieces for his customers and pricing them at a premium, just as the King brothers’ parents had done with Tom Clark gnomes. This would never have worked at Toys “R” Us or even most independent toy stores, but Richard had the advantage of a built-in customer base used to paying high prices for rare Hummel figurines. At first the reaction was slow, but Gernady was an enthusiastic evangelist, and he offered his customers a chance to get in on the ground floor of an affordable collectible. Sharon Altier, Ty Inc.’s general manger before, during, and after the craze, says that more than anything, it was retailers who made the product a hit. Selling to the mom-and-pops meant that Ty’s account executives could explain the idea of the retired pieces to the store owners—who were also, as often as not, the people who were interacting with the shoppers. As the Ty reps started to get stores on board with Beanie Babies, word of the retirements spread. When early collectors called the company’s office in search of information about Beanie Babies, Warner’s secretary usually referred them to Richard Gernady.

I called Gernady, who was excited to tell his story and meet with me in person. He said he could show me tapes of his TV appearances commenting on the toy craze. He also mentioned that he’d spoken with Warner occasionally and that in their initial conversations, when Beanie Babies were starting to pick up locally, Warner was nonplussed. As good as the sales were, he wasn’t sure he’d ever be able to monetize such a low-priced item in a big way. Gernady said he assured Warner that there was room to run with Beanie Babies; Gernady, it seems, believed in the collectability potential of Beanies more than Warner did.

The next time I was in Chicago, I called Gernady. This time, he was less friendly. He’d thought about it and decided that he didn’t want to talk—he was afraid of Warner’s penchant for litigation and didn’t want any trouble. “He’s cuckoo,” Gernady told me before hanging up.

Gernady’s contribution to the rise of the Beanie Baby bubble was significant. He was the first retailer to produce a checklist of all the Beanies he knew of, current and retired. Gernady had seen the power of checklists to induce collecting, and he was hoping to make that happen for Beanie Babies—at a lower entry point. Give a person who is genetically hardwired for collecting a checklist and he’ll attempt to buy everything on it, Gernady knew.

Richard and his wife brought Beanie Babies to collectibles shows, where he wore a homemade hat with Beanies dangling off the rim. They told everyone that Beanies were the next big thing. In the week before Valentine’s Day 1996, Gernady sold five thousand of them, and he made this prediction in an interview with one of the first reporters to write about Beanie Babies: they might become “the biggest thing ever in retailing—Elvis, Sinatra and the Beatles combined.”

As for the kiosk that McGowan had set up and then quickly closed at the Yorktown Shopping Center: when she and Warner got back from a post-Christmas vacation in St. Bart’s, her mother phoned her with news. The leasing manager had been trying to get in touch because the mall had been overwhelmed with chatter about Beanie Babies. He wanted to know if McGowan would be interested in reopening the booth. At Toy Fair in February 1996, a stranger approached Warner and offered him $2 million for the Beanie Baby line. Warner replied that he’d consider $100 million—which at the time was just a gibe. But it would soon represent less than one month’s sales. The biggest toy craze of all time had begun.

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It’s tempting to view the market that was developing for Beanie Babies as something entirely apart from the product itself: a greed-fueled lust for objects that might have been anything. However, like few other things, the stuffed animal is completely entrenched in the childhood experience of the Western world, and its place in our lives often lingers into adulthood. According to one British survey, 25 percent of men bring a stuffed animal along when they travel—and the deep, strange, and seldom-discussed connection between people and plush toys is a not insignificant part of the answer to the question “Why Beanie Babies?” Stuffed toys’ popularity has risen and fallen over the years, and the business model has certainly changed. Yet almost from the day they came into existence, they’ve captured our imaginations and driven us to do things we wouldn’t ordinarily do.

In 1880 a German polio survivor named Apollonia Margarete Steiff used the proceeds from teaching zither lessons to buy a sewing machine. She started making elephant-shaped pincushions as gifts for her friends and relatives. They were probably always intended as toys or ornaments, but calling them pincushions assuaged the nineteenth-century guilt that came with making something frivolous. Steiff had grown up in a well-to-do but dour and toy-less family and later recalled her gratitude at being allowed once to play with a pile of lentils, which she poured between cups. Whatever her initial intent, Steiff had created the first stuffed animal. On December 29, 1880, she went into business selling her elephants, and in 1886 she sold 5,170 of them; a line of dogs, lions, camels, and monkeys followed in quick succession.

It was a struggle. Steiff’s grandniece writes of the challenges that a polio survivor faced in starting her own business: “School was easy and fun for her, but learning to sew was not. . . . When she realized that she should learn to use a sewing machine—a new thing then—it again seemed to pose a special problem: the wheel that gave the machine its impetus was on the right, and her weak right hand simply could not turn it. . . . But then she had a great idea: she would turn the machine around and learn to sew everything backwards!” In the beginning Steiff employed almost exclusively the physically disabled—people who were then considered unemployable—based on her belief that gratitude for the opportunity would inspire them to overcome their obstacles.

Margarete Steiff’s introduction of stuffed animals revolutionized the world of toys. Up until then, toys had been hard; there were dolls, but their heads were generally made of porcelain, and the bodies might have been stuffed, but the fabric was coarse. The sales side also left room for improvement. Before Steiff, dolls were grouped by material type (primarily bisque, wood, and rubber); creepily, the body parts were often sold separately. This was possible because when parents made purchasing decisions without the input of children, sentimentality could (it was thought) be stripped from the sale.

The rise of teddy bears paralleled the rise of industrialization and the rise of the child as a person seen as worthy of pampering. Between 1880 and 1910, the percentage of the American labor force that worked in farming fell from 49 percent to 31 percent, and as the population moved away from the realities of life with animals, it romanticized them in its children’s toys. Steiff’s company was growing rapidly; then she got lucky.

On November 14, 1902, President Teddy Roosevelt was in the South to mediate a dispute over the Louisiana-Mississippi border and took a few days off to go hunting. He hadn’t shot anything in four days; his hosts, feeling sorry for him, found a bear—an elderly female according to some accounts, a bear cub according to others—and tied it up so that Roosevelt would have something to kill. Roosevelt was offended and refused to shoot—although the fact that a member of his party subsequently slit the bear’s throat with a hunting knife has been dropped from the popular recollection.

The story—or, rather, a romanticized version of it—was immortalized by Washington Post cartoonist Clifford K. Berryman, whose cartoon “Drawing the Line in the Mississippi” depicted Roosevelt standing indignantly, refusing even to face the leashed bear being offered by an eager local. By the end of the month, the phrase “teddy’s bear” had entered the lexicon (although the phrase didn’t appear in the cartoon), and toy sellers had begun peddling teddy bears.

Many later retellings of this incident—especially the dozens of children’s books about it—neglect to mention that the bear had been tied up, which changes the connotation significantly, substituting a pleasant myth for a darker reality. The popular version says that Roosevelt refused to shoot the bear out of pity; actually, Roosevelt refused to be patronized. For an industry that was to become as cutthroat and tinged with tragedy as the cuddly business of stuffed animals, it’s perfect that the teddy bear’s genesis—and the birth of the stuffed animal as a popular toy that was linked, from the beginning, with President Roosevelt—was an act of pride misconstrued as an act of mercy. Yet while Roosevelt might have been the spark that ignited the teddy bear boom, the popularity was really driven by the uniqueness of the product: its softness was unheard of in toys up to that time.

Margarete Steiff introduced her first stuffed bears in 1902, and sales skyrocketed. Steiff was also among the first toy companies to build a brand and sell its products as something other than an easily substituted commodity. The Knopf im Ohr (Button in Ear) was Steiff’s signature bit of branding, and the company fought hard against knockoffs and counterfeiters. By 1906 teddy bears were a full-blown phenomenon that approached, without the speculative element, the mania that enveloped Beanie Babies ninety years later. An ad in Ladies’ World magazine that year advised that a teddy-less child “now-a-days is quite out of fashion.” Even then, it wasn’t just children. A story in Playthings from the same year advised that “the Teddy Bear fad has not confined itself to children. . . . If the German toymaker who invented these new playthings had been told, when he [Steiff avoided publicity, and it was generally assumed that a man was behind the company] put them on the market, that grown women would be making a fad of them, toting them around, he probably would have remarked ‘Ach, himmel! Nein!’—‘Oh, heavens! No!’” The story added that teddy bears were especially popular among New York’s wealthy and cited a Newport, Rhode Island, socialite who always kept one with her in her carriage.

Playthings predicted that “any toy in the shape of an animal will have a good sale in 1908,” but that didn’t happen. Contrary to its bullishness of a year earlier, Playthings reported in 1908 that “the so-called craze for them has entirely subsided, that is, as far as women carrying them around is concerned.” Steiff remains the most prestigious stuffed-animal maker in the world, but it never again shipped more bears than the 975,000 it sold in 1907. The real decline in the relevance of teddy bears—and all traditional toys—came forty-five years later.

Hasbro launched the first seasonal television toy commercials in 1952, and Mattel followed with the first year-round commercials in 1955. They were the first two toy companies to take their marketing directly to children. Those first ads were wildly successful and reshuffled the ranks of toy companies in America: Hasbro and Mattel, once also-rans, became the two biggest toy brands.

The business of toy selling became corporatized; the big companies that failed to jump into TV saw their sales dwindle, and the start-up toymakers who lacked the resources to advertise found themselves shut out of an industry that had once had few barriers to entry. As Michael Lewis wrote in Next: The Future Just Happened, “Without the television, there never would have been Tide or Rice Krispies or Alpo, but fifty smaller versions of Tide and Rice Krispies and Alpo.”

Close to half a century later, the market for consumer goods was still driven by television—and toys were more dependent on TV than any other industry. That Ty Warner’s Beanie Babies were able, without the benefit of a single ad, to outpace the combined annual profits of the largest toymakers in the world for even a few years was an astounding and unprecedented achievement. That he did it in spite of the interpersonal drama that reentered his life right as the toys were taking off is perhaps equally impressive.