Beanie Babies® Background Information

Just warp the old economic standards of supply and demand, add some plastic pellets and you've got the hottest collectible on the market - or a cultural obsession.

That's how Beanie Babies hit the toy market in 1993, and collectors still haven't recovered yet. The craze was an act of marketing genius by H. Ty Warner, Beanie Baby creator and the Ty Inc. founder, who somehow spiraled a palm-sized stuffed pet into a collectible treasure with no advertising and few promotions.

Warner's entire career has dealt with stuffed toys. He graduated from Kalamazoo College in 1962 and began working with Dakin, Inc., a major stuffed toy manufacturer. In his early days at Dakin, Warner sold primarily to gift stores. "That taught me that it's better selling 40,000 accounts than it is five accounts," Warner told Forbes in 1996. "It's more difficult to do, but for the longevity of the company and the profit margins, it's the better of the two."

After working at Dakin for several years, Warner resigned and spent the next few years traveling through Europe and the Orient. When he returned to the U.S., he planted the seeds for Ty Inc. by creating four inexpensive, understuffed plush Himalayan cats: Smokey, Angel, Peaches and George. He sold the cats to his old Dakin customers.

Ty Inc.was officially formed in 1986, and enjoyed considerable success in the late '80s and early '90s. Warner designed the Collectable Bears Series, a limited series of bears with individually numbered strips sewn into their right foot, in 1991 and 1992. Warner's next project for Ty Inc. was a creative stuffed toy children could afford with allowance money and thus, after a little brainstorming, Beanie Babies were born. In late 1993, Ty Inc. premiered the first nine Beanies at a toy trade show. The initial set was comprised of Chocolate the moose, Brownie the bear, Flash the dolphin, Legs the frog, Patti the platypus, Pinchers the lobster, Splash the whale, Spot the dog and Squealer the pig.

In January 1994, the Oakbrook, Ill.-based Ty Inc. introduced Beanies to small Illinois stores. Ty has avoided the mass toy market, instead selecting retail accounts at specialty stores that range is size from Hallmarks to owner-operated gift shops. The smaller market just adds to the hunt - collectors never know what florist, drugstore or card shop they might stumble into and find a hidden stash of Beanies.

Ty introduced 36 new Beanies in June 1994. This batch included the six-color Teddy Old Face designs, which were designed later that year to the New Face version that came with a ribbon around their neck. At this time, Ty Inc. expanded their market to include specialty gift shops in southern U.S. resort areas. Sales were steadily growing, but not extrodinary.

In summer 1995, Beanie Baby sales began to skyrocket. Ty's market expanded in 1995 to the East and West coasts, and eventually to various small stores across the country. The company still didn't advertise; they didn't need to. The rise in Beanie Baby demand was strictly due to word of mouth. Beanies were originally intended for kids, but the market had rapidly expanded to include adults of all ages - it was like a fever.

Ty's strategy was simple: the less Beanies available, the more consumers will want. The formula worked. By 1996, the company's 200 order takers and shippers working out of an unassuming industrial complex in the Chicago suburbs were shipping orders directly to independent shops who often paid cash. Some retailers lucky enough to have credit accounts with Ty were allowed to pay 15 days after the shipment. Ty wouldn't have it any other way.

"If we were to sell to Wal-Mart, we would not be paid in 30 days," said Warner, in his only known interview. "This thing could grow and be around for many years as long as I don't take the easy road and sell it to a mass merchant who's going to put it in bins."

Even in those early stages of Beanie Baby collecting, some naysayers were predicting the doom of Beanies - some experts warned about the "major crash" in the Beanie market before Christmas of 1995. They couldn't have been more wrong. Ty Inc. sales increased 1000 percent. Throughout 1996, Beanie supplies ran low at Ty retailers. Ty leased three airlines to hurry a shipment from the overseas Beanie factories in time for Easter. Ty still strictly controlled the amount of each type of Beanie that went to each store. And although Ty by this time had launched the www.ty.com Web site, the company still did not advertise.

The Ty Web site proved to be a major marketing tool very quickly when Ty began retiring Beanies. Ty had previously discontinued some Beanies by stopping shipments and taking them out of the ordering catalog, but with the introduction of the Web site the company was able to publicly announce which Beanies were still being made and which were not. The first actual retirees included the Dino trio (Bronty the brontosaurus, Rex the tyrannosaurus and Steg the stegosaurus), all the colored New Face Teddies except for Teddy Brown, Bumble the bee, Caw the crow, Chilly the bear,
Flutter the butterfly, Humphrey the camel, Peking the panda, Slither the snake, Trap the mouse and Web the spider.

The Ty Web site also helped spur new collectors into buying older Beanies because, for the first time, they had a visible list of all the Beanies produced - and they set out to collect some of the older pieces they weren't even aware existed. In 1996, Ty again changed the Beanies by adding birthdays and poems to the hang tags.

In 1997, Ty swung into high gear, retiring and introducing new Beanies about every four to six months. Before 1997, new styles were announced twice a year and existing pieces were retired once a year, usually in the Spring. Ty ran into problems with an elaborate multimedia display built on their Web site to announce the New Year's Day retirement when the site was pounded with too many hits from frantic collectors -- most were shut out. Ty next used a text version of their list to shorten downloading time. The January retirement included Chops the lamb, Coral the fish, Kiwi the toucan, Lefty the donkey, Libearty the bear, Righty the elephant, Sting the ray, Tabasco the bull and Tusk the walrus.

Ty also offered its first Teenie Beanie promotion, slated to run for five weeks, in 1997, with fast-food giant McDonald's. The free-Beanie-with-a-Happy-Meal offer proved wildly successful and all five versions of the Teenies were gone within two weeks.

Ty Inc. again utilized their Web site in early May 1997 by having Garcia give clues to the upcoming retirement. On Mother's Day, May 11, Ty announced the retirement of nine Beanies and the introduction of 14 new ones. Retired Beanies include Bubbles the Fish, Digger the crab, Flash the dolphin, Garcia the bear, Grunt the razorback, Manny the manatee, Radar the bat, Sparky the Dalmatian and Splash the whale.

So far, 1998 has been a huge year for Ty Inc. - they have had two retirements and
introductions, as well as numerous special new Beanies such as Clubby the bear and Princess: The Diana, Princess of Wales bear. In fall, Ty also unveiled a new line of plush toys, Beanie Buddies, made of a special new rich, soft Tylon fabric. The Beanie Babies

Official Club, BBOC to its members, was started through a joint venture with Cyrk Inc. The response was, as usual, overwhelming. Although some collectibles critics have predicted the end of the Beanie Baby movement, sales appear to still be going strong and stores can't keep new releases on the shelves. Prices in the secondary market, which rose to astronomical heights last year, have begun to level off, as is common with collectibles of any kind, but remain high.

The 1998 summer baseball season was made even more exciting by an onslaught of Beanie Baby giveaways. These promotions gave some participating teams their biggest game attendance of the entire year. The game giveaway Beanies and commemorative cards skyrocketed in value. Other sports even got in on the game by offering fall giveaways in hockey and football, plus some spring basketball giveaway dates have been scheduled.

Ty Inc. continues to control the retail Beanie market by limiting the number of Beanies that are releases and skillfully retiring and announcing new Beanies. The company recently celebrate its billion-dollar sales mark for this year by rewarding each Ty employee with two specially-made Employee Billionaire Bears, one to sell and one to keep. The Billionaire bear is possibly the most rare Beanie yet because such a small number were made for such a specific group. As it does with any other releases, Ty hinted about the new bear on the Web site; thus the hunt was on for collectors. The first bears on the secondary market sold for more than $5,000.

1998 was also a somewhat difficult year for Ty, finally acknowledging how big this once-tiny company has become caused some growing pains. Customers and some retailers complained to the media because Ty Inc. was nearly impossible to reach. If they could find a phone number, they couldn't get through or the person at the receiving end refused to help. A number of Beanie look-alikes popped into the toy market in the mid- 1990s. Ty Inc. began aggressively pursuing the Beanie cottage industry that had grown along with the company for years, issuing cease-and-desist letters to several companies that manufactured products using the word "Beanie" in their logo. Ty actually went to court with the makers of "The Beanie Chase" game over a trademark infringement case, and won. Ty's legal trademark of the word
Beanie is still pending approval.

In October, a U.S. District court issued a prelimary injunction to stop Ty from distributing Roary the lion because Imperial Toy Corp. alleged it was too similar to a stuffed animal in their line of toys. In addition, Ty has also had to deal with the increased problem of fakes - counterfeit Beanies are getting more and more accurate-looking every day, and with the high prices collectors pay, getting fooled
can be a costly mistake.

Although Ty Warner and his booming, privately-owned bean bag company still remain very secretive, Ty Inc. makes a point of staying somewhat connected with the consumer. Retailers are warned to keep Beanie prices low, around $5-7 is recommended, or risk losing their Ty account. Ty briefly set up a link on their Web site for for consumers to report faulty retailers, but the response was so overwhelming it had to be removed.

Collectors have learned to judge the different versions of each type of Beanie by their tags and distinguishing features, which is a science in itself. They have picked up the Web site lingo, studied the changing prices, learned to navigate their way around the market. Constant changes and redesigns helps keep collectors interested in Beanies. Beanie stores, newsletters, Web sites, auction services and shows are now commonly used to link the Beanie community. Beanie trading adds a whole new element to the hunt, allowing collectors to trade up for different Beanies instead of paying high prices for every model they want.

Overwhelmingly, when asked what Beanie collectors love about collecting they say the same things: the thrill of the hunt, the excitement of retireds and releases, the overwhelming joy that Beanies can bring. And no matter what turns the market price of Beanie Babies takes in the coming years, the fun of Beanie collecting is a trend that will no doubt last forever.

Questions

1. Who created beanie babies?

2.  What year did they hit the toy market?

3. What were the first 9 beanie babies introduced?

4. What was Ty's strategy for selling beanies?

5.  What is the average price of a beanie baby?

6.  Name another Ty product

Mew your answers here