BUSINESS/ Unbuild A Bear

One of yesterday’s biggest stock losers was Build A Bear Workshop, which saw its stock price plunge 20% on a disappointing earnings report. Motley Fool looks at the roadblocks the company has faced, mainly escalating costs and a general sense that the novelty of bear-building has worn off. The suggestion that someone like Disney snap up the company makes some sense, and probably a lot more sense if the price continues to drop.* When we took the kids to Citizens Bank Park last summer, they had a Build-a-Phanatic store; I would think that Disneyworld could do something similar. The good news for a brand like this is that if kids get bored with it, there’s always another generation of little ones for whom everything is new.
One thing that isn’t mentioned here but should be, though, is the rising threat of Webkinz. If you’re not familiar, Webkinz sells stuffed animals, much like a slightly larger version of Beanie Babies, but the hook is that each Webkinz can be registered on a website so that kids can then play online games with an online avatar of their stuffed character, buy things for the character (e.g., furniture for its room). The site is engaging and it’s kid-safe, in that while kids can interact with others over the site, such as by playing games with them and exchanging some canned forms of communication, there’s no way for them to actually talk to other kids on the site – and thus no way for them to talk to people pretending to be kids, either. It’s enormously addictive, and the Webkinz site has definitely drawn my kids away from Build a Bears to Webkinz.
That said, we were back at Build a Bear this weekend (much to the particular joy and amazement of my youngest, who is almost two). Why? Because Build a Bear has opened its own website, and in addition to registering all new stuffed animals on the site they are having a limited time offer to register previously purchased stuffed animals. While “Build a Bearville” doesn’t seem to be on a par with “Webkinz World,” it at least got my kids back to wanting to go to the store and check out the site.
So that’s the real story from the trenches. It remains to be seen which of the two prevails in the long run (Webkinz has the advantage of lower margins, since they don’t operate retail stores), or whether perhaps there is even an opportunity for the two companies to merge their operations (less likely). But it’s proof that even so prosaic a company as Build a Bear needs to adapt to the internet to stay competitive.
* – I should note that (a) I’m not giving investment advice, nor would anyone in their right minds take investment advice from me and (b) I haven’t checked on whether Build a Bear is one of my law firm’s many clients and I don’t personally have any non-public information about the company or any of the other companies mentioned here or in the Fool.com article.