From the tulip bulb craze of history to the more recent financial bubbles of internet stocks and real estate, we have been time and time again been convinced that whatever is rising in value will continue to do see for the unforeseeable future. But in recent history, nothing compares, in absurdity or perceived cuteness, the Beanie Baby bubble of the late 1990s. In The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute, Zac Bissonnette, whose previous books were more in the self-help vein, but has also written for The Wall Street Journal, The Boston Globe, and Bloomberg, now chronicles what exactly happened to turn so many thousands of people into crazed profiteers.
At the center was Ty Warner, an inveterate salesman with numerous personal quirks, some of which would aid the Beanies’ success. He just wanted to create a cheap plush with nice details and less stuffing than normal, allowing kids to have a better play experience. But the two things he did that broke the mold were retiring styles publicly, and limiting distribution to independents and smaller chains (and most notably, Hallmark franchises). What Warner never understood, was that much of what made Beanies take off was completely out of his control, and Bissonnette includes many of the key players, including the early suburban Chicago collectors who’d call around the country buying up stock, and the folks who made the guide books that spread popularity and drove up prices. I’ll never think about price guides the same way again; in the days before the internet, the price guides set the prices, and the creators knew this and kept increasing prices accordingly. Nobody wants to invest in a product (or the guides) of a collectible with stagnant or deteriorating values.
I think of myself as a cautious person and not susceptible to speculative bubbles. I didn’t invest in internet stocks, but I also didn’t have the money to invest in internet stocks. My partner and I bought a house in the real estate bubble, convinced not that it would be a great investment, but that we’d never be able to afford a house if we didn’t act. That said, they hype around home buying convinced us to make a decision that I hadn’t before considered.
But that’s nothing compared to the speculative bubble of Beanie Babies that I found myself inadvertently watching with from a very close distance, a mania that rivalled* the classic tulip bulb run-up in 17th century Amsterdam. This piece in the Economist blog argues as to whether or not this famous incident was in fact irrational, but as we can see, what seems irrational in retrospect seems perfectly legit at the time.
Ty Warner had already established his eponymous brand after leaving the once-powerhouse plush brand Dakin, when he introduced the first nine Beanies in 1993. I was the book buyer for Schwartz so I would probably not have been paying attention, but when Schwartz brought them in, I was managing the Mequon store, so I saw this strangely large shipment (we never got anything in twelves) arrive of these strangely cute, poseable plush with something like awe. I found myself immediately thinking “I am the parent to a bunch of bears, pigs, and lobsters. Folks have been asking to see a photo of me in my pony tail thirties, and here is one, arms full of Beanies. (Editor's note: I seem to not be able to get the photo ready to post. Psychological block, perhaps?)
We were probably in on the phenomenon a little early, partly because Milwaukee is quite close to the epicenter of Chicago, but eve more notably, we operated Dickens Discount Books in the factory outlet/mall hybrid called Gurnee Mills. This led to many early phone calls wondering if we had Beanie Babies, which led to us bringing in Beanie Babies.
We saw the strangely exponential growth, the order limits, and the shortages. The frantic collectors coming in, first with kids, and then without kids. We saw firsthand the misdirection by customer service, which always said that the product was just about to ship. And yes, we had a product that at one point was so valuable, that we had our product stolen from boxes on route by UPS. As the line slowed down in the Milwaukee stores (the Downer branch, now home to Boswell, probably had the least momentum of all the locations), the buyer kept them in the distribution loop, but all the product would then be transferred to our highest volume stores in Kenosha (at the Factory Outlet Centre) and Gurnee.
There’s no question that Ty put in place some of the practices that would help create the Beanie boom. By limiting distribution to specialty gift stores, working with toy chains like Zany Brainy and Noodle Kidoodle and airport stores like Paradies (unmentioned by name, but I remember seeing them there fairly early in the run), but avoid mass merchant discounters, groceries, and drug chains, and buy limiting shipments, he gave the product the appearance of scarcity, even when he was shipping out huge numbers of units. Retiring slow-selling items is a very common practice in the gift business, but he made it an art. And there’s no question that the product was very inexpensive, a good starter collectible, was cute, and had several iconic touches, like birthdays and poems for each animal. The truth, however, was that Warner got those ideas from others, and rewrote the story for his own purposes.
He also had no control over the other players in the game that made Beanies a phenomenon, the obsessive collectors, the publishers of the guides, and the media. Early players would actually buy out stock in other areas of the country and resell them in Chicago. And some things Ty did to excite collectors was completely inadvertent, like his tinkering with products, changing the faces of the early teddy bears, adding a spot to spot the dog, and most notably, changing the color of Peanut the elephant. He only did one major interview, with People Magazine, but once the story took off, the legends of price values for early discontinued or first-generation Beanies, like royal blue Peanut drove up prices for the entire line.
Ty Warner himself is no less fascinating. A singular character, with a lot of issues, his compulsive behavior led to many fascinating stories about the way his company was run. Completely hands on, he’d spend months at the factories finding exactly the right fabric for each Beanie. He might update a Beanie by changing the stitching. But things were no less strange in his personal life, with his huge wealth only exacerbating his parsimonious nature. Despite both his long-term girlfriends being heavily involved in the company, neither owned a piece. The first only made her fortune after their breakup, after she went on to run the European division of Ty, while his second, well, she got even less. Others in the game made and lost fortunes, but Warner sunk a lot of money into hotels, and as we now know, into Swiss Banks.
Slowly the fad ended for kids, who moved on to Pokemon, but unlike say Russ Berrie’s Trolls or the more recent phenomena with Japanese erasers and Silly Bandz, the momentum kept going for Beanie Babies, almost now completely adults who were sinking their life savings into huge purchases, which they’d then encase in plastic. Bissonnette chronicles a few of these stories, most notably one fellow who was previously an actor on General Hospital. You spent how much collecting Beanie Babies?
In the end, the internet helped create the Beanie boom, not just his groundbreaking website, but also Ebay, which drove interest and sales, but in the end, it probably also contributed to its demise. Many fans blame the mass retirings of Beanies in 1999, but Bissonnette notes that it’s not unusual for folks caught up in a speculative bubble to blame an outside force for its collapse. Like multi-level marketing and Ponzi Schemes, it has to collapse eventually. You simply run out of suckers to sell products to.
What a fun and fascinating read this is! On top of a great story and larger-than-life characters, there are actually some marketing lessons embedded in the narrative. For one thing, if you are creating something collectible, you really want to have a checklist. After reading The Great Beanie Baby Bubble, do I think something like this can happen again? Not this way, much as I think it’s unlikely to see, as our buyer Jason noted, another children’s series that comes along like Harry Potter. But will there be bubbles in the future. That’s one thing you can count on.
The Great Beanie Baby Bubble goes on sale today.
*I'm sad because the world has moved on to "rivaled" and I'm still stuck on "rivalled."