Beanie Bubble
Sure, prices are insane--but how long can they last?
The staff of Poor Richard's, a gift shop in Doylestown, Pa., call them "the vultures"--the people who stampede their store, clawing over one another to seize as many Beanie Babies as they can. "Somehow they find out within five minutes that you get a shipment and they are here," says Emma Lukens, Poor Richard's office manager. "Then the kids come in with their crumpled dollar bills and fists full of coins, and they can't find the ones they want. It's a shame."
Beanies are everywhere--in card shops, nurseries, gas stations, even restaurants. They adorn office cubicles, dominate dinner conversations, and send parents on wild-goose chases for creatures with names like Fetch the golden retriever, Fortune the panda, and Stinger the scorpion.
But the Beanie phenomenon differs from toy fads of the past, like Cabbage Patch Kids and Tickle Me Elmo. Beanies, introduced as a children's toy in 1994, have spawned a huge secondary market in an ever growing line of collectibles. The older styles are the most coveted; Peanut the royal blue elephant in mint condition is said to be changing hands for over 1,000 times its original $5 price, and predators of plush are buying up as many Beanies as they can and reselling them at an enviable profit. "Beanie Babies are more than just a phenomenon--I've never seen anything like it in my 42 years in the toy business," says Russ Berrie, head of another firm that sells stuffed animals.
Behind the hysteria is a remarkable story of clever marketing by the toys' manufacturer and relentless hype by promoters of a vigorous secondary market, fueled by books, shows, Web sites, and magazines that tout Beanies' rapid ascent in value. But speculative bubbles finally burst--and the faster Beaniemania grows, experts say, the quicker the pop.
Beanies were born at a small, privately held toy company called Ty Inc. of Oakbrook, Ill. Ty's founder, Ty Warner, who doesn't speak to the press and declined requests for an interview, had several sure-fire marketing ideas. One was to sell Beanies through boutique outlets like gift shops and Hallmark card stores while avoiding big chains like Wal-Mart and Toys "R" Us where they might lose their cachet. A second was promotional tie-ins--giving out Beanies at sporting events and McDonald's (the so-called Teenie Beanies). But the masterstroke was Ty's decision to "retire" certain Beanies--discontinue their production--while periodically bringing out new versions. Almost instantly, prices for pre-owned Beanies skyrocketed as collectors, dealers, and speculators realized some would become a rarity.
Struck by the potential for profit, people started trying to guess which ones would be retired next. Others, fearful of missing out, started scooping up every Beanie that Ty makes, including new ones sitting on store shelves ("current," as they're described by fans). "People have gotten carried away," says Vicky Krupka, a contributor to the BeanieMom Netletter (www.beaniemom.com) Web site.
Ty's next move is sure to be a winner, too. Collectors are anxiously awaiting Clubby, the first direct-mail offering of the Beanie Babies Official Club. For about $10, collectors can buy a kit that allows them to join the club and send away for Clubby, a royal blue bear, for $5.99 plus shipping and handling. "Ty Warner wanted to make sure that despite the Beanie collecting frenzy that so much has been written about, kids would still have access to Clubby the bear at the basic price," says Patrick Brady, president of Cyrk, the Massachusetts-based promotions company that is handling the club.
The excitement caused by new and retiring Beanies escalated last year when Ty started announcing retirements on its Web site (www.ty.com) instead of quietly pulling the versions from its lineup. On the secondary market, the cost of Beanies--old and new--rippled ever higher. Forget about the latest styles, which Ty conveniently announces weeks before they are available: The newest 14 releases, trumpeted more than a month ago, are already hard to find in stores and are selling for three to four times their original price on the secondary market--if you can find them.
Home run. Prices for some popular Beanies (bears are the most prized) jump out of kilter as soon as the toys appear. On July 7, Glory, a new white bear with red and blue stars, was distributed to everyone who attended the All-Star baseball game in Denver. Outside, scalpers offered $100 to $150 to anyone willing to part with the bears and the commemorative cards that came with them. Four days later, America's Store, a home-shopping channel, was selling All-Star Glories for $599.
Meanwhile, some authorized Ty retailers capitalize on the public's insatiable appetite in their own way. Some take their shipments straight to the secondary market, where dealers pay handsomely for their wares (there's no law against this). "We pay a lot in cash to people who don't want to show a paper trail," says Michael Jacks, owner of Shazam, a secondary seller of Beanies in Columbus, Ohio. Other retailers jack up prices on popular styles. A Washington, D.C., gift shop, for example, sells all its Beanies for $5.95 except Erin, a popular green bear introduced for St. Patrick's Day, and Princess, a purple bear honoring Princess Diana. Both are tagged at $90 each. Ty abhors both of these practices and says it will stop supplying Beanies to retailers who knowingly sell to the secondary market. It has told its retailers it wants them to price the toys at about $5.
Kids hate it when stores sell Beanies at a premium. In Houston, Suzy Weber's three children, ages 10, 8, and 5, got the collecting bug after the second appearance of Teenie Beanies at McDonald's in May. But it wasn't easy to satisfy them. Some stores were sold out. Others charged a fortune--or told customers they had to buy $50 worth of merchandise or five other Beanies if they wanted one of the popular ones. "After the first couple of weekends of going from store to store trying to collect them, the kids just gave up," says Weber. "Kids can't afford to pay $80 to $100 for a bear."
Tush tags. Collectors focus on minuscule details to justify paying exorbitant prices. A new Chocolate the moose costs $5 to $10, but a "first generation" Chocolate can fetch $1,000. The difference? An older version of the heart-shaped "Ty" tag on the moose when it's sold. "You will pay a lot more for the first-generation tags because you know they are the oldest versions of these Beanies," says Mary Beth Sobolewski, editor of Mary Beth's Beanie World Monthly ($59.90 for 12 issues, 800-310-7047). Beanies actually have two tags: The other one, the "tush tag" (it's attached to the Beanie's rear end), frequently carries misprints and mistakes, particularly on newer Beanies. Collectors shouldn't dwell on them--"Most of them are worth less," says Sobolewski. Still, some collectors firmly believe that a mislabeled tag is extraordinary and will pay more for it.
Ty's philosophy is that Beanie Babies are designed for children. "We take pride in creating and distributing a nonviolent, creative toy for boys and girls that they can afford to collect," Ty states. "It is upsetting and intolerable to us when the short-term greed of some of our customers takes over." But many say Ty's own marketing is feeding the frenzy, and the solution to getting affordable Beanies into kids' hands is simple--flood the market. "Eliminate any economic advantage associated with owning any particular Beanie Baby," says Harry Rinker, author of his own Official Price Guide to Collectibles (1997, House of Collectibles, $18.95).
Secondary-market selling goes on right under Ty's nose. In a guest book on its Web site, Ty warns against fakes and offers a list of typical unauthorized purveyors--flea markets, home-shopping channels, gas stations, private residences, E-mails, baseball card shops, and tables on highway offramps. Right below, the guest book carries messages offering Fortune, a new panda, for $39, Princess for $35, Erin for $45, and Peace for $20.
Shows, conventions, and Web sites devoted to Beanies all bolster the hype. So do magazines and books. The Beanie Baby Handbook, by Les and Sue Fox (1998, West Highland Publishing, $6.95), has been a New York Times bestseller for 19 weeks. The Foxes list the original price for every Beanie, plus the going rate. They also offer an estimated value for the year 2008: Slither the snake, for example, is estimated to be worth $4,000 by then. In no other part of the collectibles world do experts forecast specific values years into the future. Asked about the estimates, Les Fox said he and his co-author made it clear the figures were "strictly a guess" and added that his book was not intended to be an investment guide; if future editions continue to forecast prices, he says, they will explain that investing in Beanies is "a gamble." Meanwhile, the book recommends "putting away five or 10 of each and every new Beanie Baby in super mint condition."
Funny money. Despite the Foxes' figures, some experts question the high prices being reported in the secondary market. Since many transactions take place in private, there's no way to verify them. Transactions via the Internet are particularly suspect: "Have all these Internet transactions really occurred?" asks Ellen Schroy, editor of Warman's Americana & Collectibles (1997, Krause Publications, $17.95). "Show me the money." Compilers of Beanie price guides acknowledge that there may be a few instances of chicanery but say the overwhelming majority of transactions are credible. "We know who is reputable and who is not," says Becky Phillips, co-publisher of Beanie Mania magazine ($21.95 for six issues; 800-807-2730).
Two months ago, Beaniemania on the Web spawned the Electronic Worldwide Beanie Baby Exchange (www.ewbe.com), whose conceit is the trading of Beanie Babies like stocks on the New York Stock Exchange. One big difference between the Web and Wall Street, of course: One is highly regulated, the other is not. Beanie collectors should do their homework no matter where they buy, surveying the marketplace for price variations and questioning claims of rarity. There are about 200 different Beanies but Ty doesn't release sales or production figures, so nobody outside the company knows how many of each exist. And patience has never been more of a virtue; some collectors are finding bargains as the hype over new versions cools. "I've never paid more than $10," brags Judith Bronsther, a New Yorker who has amassed a 200-Beanie collection by scouring stores and trading on the Internet. Her greatest coup: snagging 11 Princess bears for $5.99 each at a small New York stationery store.
Parents who have been asking toy appraisers to value Beanie collections they plan to use to fund their children's college education might want to think twice about investing in a collectible. "You collect something because you want it, not because it is going to increase in value," says Greg Espinosa of Butterfield & Butterfield, a San Francisco auction house. "If you want to invest, buy stocks and bonds."
Meanwhile, there are signs that the rapacity that has overtaken Beanies is turning some collectors off. Lucia Rochelle of Norwalk, Conn., recently sold half of her collection, sick of the avarice, long lines, and hype. "I got a little nauseated," she says. "It just boomed into this frenzy of people trying to make too much money." Others are following in her footsteps. The Internet Antique Shop (www.tias.com), an online mall that tracks visits to its site, posts the most often searched-for antiques and collectibles each month: Beanie Babies snagged No. 1 last December but dropped to No. 6 in May and to No. 24 in June. Last month, however, they popped back up to No. 7.
Flagging interest in the secondary market is one sign the mania might be dwindling, say some experts. Ty also has competition: Collectors are starting to snap up beanbag toys made by other manufacturers like Disney and Warner Bros. Counterfeit Beanies are another threat; fakes have been spotted of newly released Beanies, and Ty recently set up a hot line (888-317-5489) for reporting counterfeits. But perhaps the biggest indicator of a shift in sentiment is that secondary-market prices for some of the retired Beanies have dropped somewhat over the past few months. The price of the "American trio"--Lefty, Righty, and Libearty--has dropped from $1,400 in April to $1,000, says Sobolewski. Some say that's evidence of a downtrend, but Beanie mavens say the market is just undergoing a correction because prices rose too fast earlier this year. "I promise you, in September and October you are going to see a big increase in these prices again," says Sobolewski.
For a collectible to have value in the future, it must be scarce--an adjective few collectible experts attach to Beanies. The absurdity of plunking down hundreds of dollars for a beanbag is beginning to strike many collectors. When Susan Gambino's husband in Bowie, Md., came home recently and said he'd found Humphrey the camel for $800, both of them had the same thought: They might be going overboard. The most they had paid for a Beanie was $250. "If he had paid $800 for Humphrey, I might send him to Beanies Anonymous," says Gambino.
Collectible experts say trusting your instincts like that is one way to avoid disappointment if the market sours. "Common sense says that $599 for a little, tiny bear makes no sense," says Olivia Bristol, head of the doll and teddy bear department at Christie's, the auction house. Asked when Christie's might start auctioning Beanies, Bristol chuckled and said, "Never--not for another 50 to 60 years."
This story appears in the August 3, 1998 print edition of U.S. News & World Report.