Take some fabric, shape it like an animal, fill it with plastic pellets, and you've got a big business that later funds the purchase of luxury hotels. That's the lesson taught by Ty Warner, sole owner of Ty Inc., the company behind Beanie Babies and their worldwide cult following. Since 1993 Ty has produced more than 370 different Beanie Babies with colorful names such as Feder Bear (current) and Cheeks the baboon (retired). Other products include Beanie Buddies (bigger versions of traditional Beanies), Ty Classics (stuffed animals), Ty Girlz (cloth dolls), and Bow Wow Beanies (pet toys). Beanie money enabled Warner to buy a half-dozen luxury hotels (mostly in New York and California).
Ty's marketing smarts have kept Beanies popular for years rather than for a single holiday season, a la Furby or Tickle Me Elmo. The company limits production (like LEGO and Nintendo do) so that supply never outstrips demand, keeping only 40 or 50 Beanie Babies in circulation at any one time. It also pushes seasonal Beanies heavily. Ty's "retirement" of a Beanie can cause its price among collectors to skyrocket from its $5-$7 retail debut to hundreds or even thousands of dollars. Also, rather than flood the market with Beanies through the likes of Toys "R" Us and Wal-Mart, Ty sells them only through specialty toy and gift retailers.
The plush toy maker works hard to keep those who would like to capitalize on its successes at bay. Ty has filed suit against Wal-Mart, Target, and Toys "R" Us -- as recently as early 2010 -- for using its "Beanie" trademark in advertising and selling plush toys that are not made by Ty.
Historically, the firm doesn't advertise, relying instead on the word of mouth that is rampant in Beanie culture. Books, magazines, newsletters, and websites stoke collectors' enthusiasm. This collectors' market -- which Ty frowns upon (officially, anyway) -- shows signs of fading, however.
Deciding to capitalize on a new market of young consumers who likely aren't familiar with its core product, the company launched Beanie Babies 2.0. The next-generation Beanie Babies plushes come with a secret code that allows owners to access the online Beanie Baby world. The company's move is to compete head to head with Webkinz plushes, which also have a secret code and a partnering website. Knowing that online worlds for toys are becoming increasingly popular with today's youth, Ty also makes a line of cloth dolls named Ty Girlz that come with passwords to an online world where users can interact with other Ty Girlz doll owners.