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Toy Firms Bear a Grudge

4 minute read

It may be beloved by kids and adults around the world, but the teddy bear is no stranger to international disputes. Its genesis 100 years ago — inspired by U.S. President Theodore Roosevelt’s decision to spare the life of a cub while on a bear hunt — is subject to competing claims as to who made the first commercially successful stuffed bear. Was it the Michtoms of Brooklyn, N.Y., whose bear became the foundation of the Ideal Toy Co., or German dressmaker Margarete Steiff, whose eponymous company still churns out cuddly teddies today? Fast forward one century and zillions of bears later, and two retailers — one European, one American — are now growling at each other over the increasingly lucrative concept of stuff-’em-yourself teddy bears.

This Bear War pits Britain’s Bear Factory against Build-A-Bear Workshop of St. Louis, both young, fast-growing companies. Each has global aspirations and trades on a similar mass-customization premise: a pretend assembly line where kids (or adults) can stuff, stitch, name, dress and accessorize their own teddy. Neither company has yet ventured beyond its domestic market, but already the fur is flying. Build-A-Bear filed a trademark and copyright infringement suit against Bear Factory last December in a London court. (Simon Burke, chairman of Hamleys, the large English toy shop that owns Bear Factory, dismisses it as having “no substance.”) The concept was actually created by Basic Brown Bear Factory of San Francisco in 1985, when it began letting kids stuff bears as part of its factory tour. Other small, regional variations on that model have been around in U.S. malls for years. But Build-A-Bear perfected the formula and took it nationwide after opening its first shop in St. Louis in 1997. Build-A-Bear has 85 outlets in 34 states and expects to have more than 100 by year’s end. Its revenues last year totaled just over $100 million, and its shops earn an impressive $700 per square foot, twice the U.S. mall-shop average. “They got in first and gained credibility with kids,” says Maria Weiskott, editor-in-chief of Playthings, a toy trade magazine.

Bear Factory has also romped to success since the first one opened in Hamleys’ flagship store on London’s Regent Street in September 2000. It has 22 outlets in the U.K. and expects to have nearly 30 by Christmas. It contributed $4.2 million to Hamleys’ profits last year.

“This concept has really taken off because it’s interactive and it’s a destination for people,” Weiskott says. It’s also gender-neutral. And while the bears aren’t too pricey (Build-A-Bear charges $10 to $25 for a bare bear; Bear Factory, about $22), dressing and accessorizing can quickly fatten the final bill. Both chains offer myriad outfits, from skateboarders’ duds to cowgirls’ skirts. Accessories range from sunglasses to cell phones. Differences between the chains are mainly in their look. Build-A-Bear is brightly colored, like a Saturday morning cartoon. The Bear Factory is very British: a musty Victorian factory overseen by Ted the Tailor.

Build-A-Bear plans to invade Europe early next year, and the U.K. tops its list of likely destinations, even though Bear Factory has established itself there. That could place Build-A-Bear in the unique role of underbear. In the U.S., it’s the market leader with the brand power to easily fend off smaller rivals. Bear Factory’s Burke says if Build-A-Bear offers a different enough product in Britain, there’s probably room for both chains. Counters Harold Brooks, who heads Build-A-Bear’s international operations: “It’s not for us to differentiate ourselves from the Bear Factory, but for them to differentiate themselves from us.” But there is more at stake than Britain. Bear Factory is opening two franchises in Ireland this year, one in Stockholm before Christmas, and two in the Middle East around New Year’s.

Feedback it receives from overseas customers has convinced Build-A-Bear it can replicate its American success in Europe. But many high-flying American and European retailers have crashed trying to expand across the Atlantic. Edward Whitefield, chairman of the retail consultant Management Horizons Europe, warns that Build-A-Bear could find Europe a honeytrap. “They should forget it. They haven’t saturated the U.S. market, for one thing.” But heeding that advice could mean ceding Europe and possibly other international territories to Bear Factory. And that’s an outcome the American retailer finds unbearable.

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