Ty Weans Itself From Beanie Babies
I have no idea whether Ty Inc.'s promise that as of Dec. 31 it will make no
more Beanie Babies is true. If it isn't, it's a great way to spur short-term
sales, since now the flagging Beanie Baby market will be enlivened by the
desire to get in while you can. (Along the same lines, a friend of mine thinks
George magazine should keep labeling each issue "the last issue of
George " for as many months as it can.)
But short-term sales aside, if Ty's promise isn't true, it should be, since
it represents a very rare thing in the business world: a recognition that
things actually come to an end. (A similarly smart decision was made, oddly
enough, by the founders of the Lilith Fair tour this year.) Over the past year
an unusual combination of oversaturation and fatigue with high prices has
weighed down the Beanie Baby market (and no, I can't believe I'm actually
writing this sentence). More to the point, like any fad it's fading out,
displaced by the latest objects of fascination for children. Ty is rapidly
reaching the point of diminishing returns. Cashing out now would be an
excellent move.
What makes such a move difficult is that although Beanie Babies may have
reached the point of diminishing returns, they probably have not reached the
point of nonexistent returns. In other words, there's still money to be made
selling Beanie Babies. It's just not enough money to justify future investment.
And the fundamental problem is that if you don't move on early enough, you find
yourself caught, believing that the only way to recoup the money you've put
into the business is to keep going in it.
Excellent examples of what Ty doesn't want to become abound, especially
within the odd industry of collectible pop culture. In the late 1980s and early
1990s, baseball cards exploded into a classic speculative bubble--there I go,
sounding like the old Alan Greenspan--to which companies responded by producing
too many cards that were too expensive. When the bubble burst, entire companies
vanished, and the major players have barely struggled to stay afloat. The same
was true of comic books, which saw a proliferation of titles and of publishers
when they were hot and a dramatic downsizing when demand faded. Unfortunately,
when the smoke clears, prices for these goods remain surprisingly high (an
average comic book is seven or eight times more expensive than it was 20 years
ago), which may have something to do with why sales growth is so slow.
All of this is almost textbook economics, of course, since any time you have
a business that is reaping sizeable profits, competitors are going to enter the
market and successful businesses are going to expand rapidly in an attempt to
sell more goods. But in textbook economics, any competitive marketplace ends
with everyone reaping no profits. That's why the discipline to move on when the
market becomes oversaturated--or, alternatively, when the market simply dries
up--is a necessary discipline. If the Ty announcement is real, then that's one
company at least that's acquired that rigor.
