Maxine Clark, the CEO of St. Louis-based Build-A-Bear Workshop (BBW), is no teddy bear when it comes to business. Since launching her custom stuffed-animal concept in 1996, the energetic, no-nonsense Clark has defied the odds. While big-brand toy stores such as Toys 'R' Us, KB Toys, and FAO Schwarz have struggled mightily, Build-A-Bear has thrived, growing to 176 North American stores, plus a handful of overseas franchises.
The retailer boosted sales 41%, to $301.7 million, in 2004, while net income nearly tripled to $20 million. Build-A-Bear shares have soared 22%, to $29, since the company's initial public offering in October. The bear now sits in spot No. 25 on BusinessWeek's Hot Growth list of the fastest-expanding small companies.
Clark, a veteran of May Dept. Stores (MAY), has a simple approach to retailing. Ever since she heard her mentor, former May Chairman Stanley Goodman, say in 1972 that retailing is entertainment and the store a stage, she has focused on making sure customers have fun. "That's when they spend more money," she says.
Clark shared more nuggets of wisdom with Roger O. Crockett, BusinessWeek Chicago bureau's deputy chief. Here are edited excerpts of their conversation:
Q: How did the concept for Build-A-Bear Workshop start?
A: The opportunity came for me to rethink my career, and I wanted to do something more fun. I don't have children of my own. But I love kids, and kids have a way of looking at the world that gives you a renewed faith in everything. My neighbor had two children, and we used to go to the neighborhood toy store together.
I looked on the Web to see if there were businesses...that I could buy that would give me a launching pad for making stuffed animals. There were a couple, but those business owners didn't think it would work.
Q: You didn't listen.
A: If I had listened to all the reasons to not do this, I never would have done it.
Q: Why did you decide to locate most of your stores in malls?
A: I'm a mall rat. I think they're great places. I thought the mall was being negatively promoted, especially during the Internet boom. The problem is that kids wanted more things to do there. There wasn't very much imagination there. Build-A-Bear could do that.
Q: But toy stores from KB Toys to FAO Schwarz haven't done well in malls. Why have they struggled while Build-A-Bear has survived?
A: Sometimes you get to [the point of] oversaturation. If you build stores in the right amount, in proportion to the population that wants your products, you can thrive.
Q: Other animal toys lost their popularity pretty quickly. Can your stuffed animals continue to thrive as a concept?
A: I did a lot of research on this category of plush animals. Target (TGT), for example, treats it seasonally. They sell some during Easter or the holidays, when they throw it between the shelves. There's no real brand in the stuffed animal category.
Q: But the buzz over Beanie Babies and Cabbage Patch dolls has withered.
A: Beanie Babies weren't as huggable and lovable [as our bears], even though they were stuffed. You wouldn't give one to your grandchild as a gift. But we learned from them that you can create a brand.
Q: What was the original business model, and how has it evolved?
A: Our concept is based on customization. Most things today are high-tech and hard-touch. We are soft-touch. We don't think of ourselves as a toy store -- we think of ourselves as an experience.
If we were just a toy business, we would fit more into the gift-giving routine and peak in the fourth quarter. But our business is equally distributed across the year. We let people give someone a teddy bear instead of flowers or candy. We let them have control, and that's what customers have been looking for. You can make it as you like it, and there's no bad art in our store.
Q: Why is your concept more than a fad?
A: The concept is not a fad because stuffed animals are not a fad. We might sell costumes that might be trendy: A pink poodle or Spiderman. We change assortments on the floor about 11 times a year. We have a lot of growth ahead of us. We feel that 350 is the right number of stores. We'll add about 25 to 30 a year.
Q: Why did you decide to go public?
A: I was able to start Build-A-Bear Workshop because I had a nice nest egg from investing in May Dept. Stores stock. And I wanted my employees to have the same thing. I honestly felt that our culture and business was unique.
Plus, we're a venture-backed company, and those partners want to get their money out. I'm the largest shareholder of the company and intend to be for a long time. But, at some point, we will go to the market again and let it buy back stock.
Q: What do you mean when you say that you're building more than a bear workshop, you're creating an entertainment brand?
A: We have several interactive marketing strategies. We have stores in sports ballparks, such as Cincinnati, Cleveland, and Philadelphia. It's another way that we've expanded our business. With the Chicago Cubs, we do a Build-A-Bear day at the ballpark. We have lots of marketing with sports arenas and leagues, including the NBA, MLB, NHL, and NFL. And we're launching a license agreement in the fall with the NASCAR circuit.
Q: In some cases, sales from stores open more than a year have dropped. Could that hurt you?
A: I don't think any retailer anywhere owns a customer for life. The good news is, there are always more people becoming your target age group. We have a broad appeal -- 25% of our business is boys.
Q: You've filed many lawsuits to protect Build-A-Bear trademarks and patents. Why are you so litigious?
A: We don't want anybody to take our animals or copy Build-A-Bear, just like Disney (DIS) doesn't want you to copy what makes them Disney. We protect that. We don't mind competition -- we just don't want people to say they're us.
I didn't invent the idea of making a stuffed animal. I invented Build-A-Bear Workshop. We did build a brand, and your brand is a valuable asset that you protect.