University of Chicago
Type of paper: Thesis/Dissertation Chapter
Build-a-Bear Summary Analysis
Build-A-Bear workshop stores were first established in 1996 by Maxine Clark whose influence came from former CEO of May Department Stores who had stated, “Retailing is entertainment and the store is a stage – when customers are happy, they spend more money” ( Dess, c261). Build-A-Bear’s intentions were to differentiate themselves by giving people the feeling of bringing their teddy bear to life. You could give it a heart, a name, a wardrobe and many other personal touches. Build-A-Bear is about two things, “entertainment and customization” (c261).
At the time of its introduction, following their differentiation strategy, there was not much competition for customized children’s toys. However, after the concept of customization caught on they faced competition from companies such as American Girl and Vermont Teddy Bear. American Girl was marketed to young girls who could make dolls that look like them and even buy matching clothes that the girls and the dolls could both wear. One advantage that Build-A-Bear had against American Girl was the fact that they marketed to all genders and appealed to a wide variety of ages.
Parents would bring their young children, both boys and girls in to make dolls and teenagers would bring their boyfriend or girlfriends in to make customized bears as presents. You could even build a bear for your parent or grandparent. As the Build-A-Bear company grew they faced problems, such as a changing industry and a changing market which left them losing edge in their financials. Environmental Analysis. Build-A-Bear started with a handful of stores and it grew to 150 by the end of 2003. They capitalized on the upward trending consumer demand around the holidays when they would rent space in busy malls for their pop up stores.
These temporary stores brought increased revenue and gave the company the idea for its current corporate strategies of expanding to more permanent stores. They had 344 stores in the US, UK, and Canada by 2010. They set goals that would allow a Build-A-Bear store to be within 30 miles of 75% of the US population. Though these new permanent stores usually paid for themselves within the first year their “wow factor” and financial performance quickly diminished time and time again. This no loss expansion worked while saturating the market but was not cutting it when their market further matured.
A main reason for the growth is because new stores brought in greater profits which gave the impression that rapid expansion was a wise strategy. They may have expanded too fast though. They lacked the necessary ingredient in producing repeat customers and this was becoming a major problem while strict reliance on overexpansion seemed to be clouding the fact they needed another competitive advantage in the quickly changing toy industry to stay competitive. The real question was how to increase repeat customers and/or increase profitability of their current operating stores.
We devised two solutions that could help BearFinancials alleviate the problem of their not so attractive earnings beyond the first years. Strategic Alternatives Alternative Solution #1. One option to get the finances in line would be a retrenchment/turnaround strategy in which the underperforming stores would be closed freeing up resources to explore other options for expansion into different markets. Very similar to Subway and Starbucks, Build-a-Bear wanted a store close to a large percentage of the population and expanded too far and the companies saw it hurt their finances.
Build-A-Bear has the unique features to be a thriving, profitable company for a long time but it needs to be careful not to expand too far where it cannot maintain its current culture and core competencies and this can be done by reducing costs through restructuring. Closing underperforming stores and exploring destinations like international airports where people from all over the world will see their product would be a good starting place. Since people do not frequent the airport so much as other retail establishments they could continuously capitalize on the “wow factor” because new people would be subjected to their stores every day.
By reducing fixed costs and exploring new marketplaces Build-a-Bear should be able to boost financials immediately with little investment. Alternative Solution #2. The next solution would be to fashion a new line of accessories and programs that promote repeat consumer visits. Build-A-Bear needs to be viewed as a collectible and something worth traveling for. This was not the case which was why stores started to lacking performance after being open a certain amount of time.
Accessories and maintenance programs could be a way to get people to continue to give Build-A-Bear business even f they are not actually purchasing a new bear. Implementing new programs such as wardrobe changes, where people would come back to get Bear-makeover, would bring repeat customers. These programs could offer matching apparel for the bears and the kids who own them. Children and their bears could then wear matching t-shirts which could also first time sales from consumers ‘marketing’ the product. Another idea would be a BearWash. Children can be hard on their stuffed animals and sometimes they end up getting dirty.
They could set up a “bear wash” where people would bring their furry friends in for a fur-flush and get it back all nice and clean. All of which would be geared at upselling the consumer upon return in order to maximize on that repeat visit. Initial investment would be substantial due to acquiring clothing line and additional costs to provide repeat programs. Recommendation Alternative solution #1 would be the best choice for Build-A-Bear at this time. By cutting underperformers they will save millions in fixed costs alone.
They could then use this money to expand into locations such as airports and hospitals where it will be easier to maintain that ‘new’ appeal that made the company so much money in the first place. This solution requires the least investment in a monetary sense. Underperforming stores should be closed immediately upon identification and new stores should be in operating order by the end of this calendar year. Build-a-Bear has the right ingredients for continued success they just have to strategically place themselves in markets with the most exposure to non-repeat customers in order to maintain high operating margins beyond the first years.
By reducing number of stores in operation they can concentrate on staying profitable and advancing into the future where they will then have the means to pursue other avenues such as improving repeat customer sales described in alternative #2. The focus now should be to stop wasteful spending on underperforming stores as soon as possible in order to open up more possibilities and greater flexibility in the future.