Build-A-Bear Workshop: Smarter Than Your Average Toy Store
While toy stores sell products and movie theatres sell entertainment, Build-A-Bear sells both through aligned business and operating models and an innovative, process-driven approach that appeals to Mama Bears, Papa Bears, Sister Bears, and Brother Bears alike.
Founded in 1997 in reaction to a stock-out of stuffed animals at her local shopping outlet, founder Maxine Clark decided it would be better if she could create her own furry friend.[1] 18 years later, Build-A-Bear Workshop is a publicly traded company that operates 452 stores around the world, enabling customers to create and personalize their own inanimate creatures.[2]
Business Model.
Build-A-Bear was designed to deliver a personalized, fun, and inspirational shopping experience for its consumers. While Build-A-Bear earns revenue through sales of individually created stuffed animals, its unique and memorable shopping experience remains its true competitive advantage. According to Clark, “we’ve always been a customer-centric organization…I believe that we don’t sell products, we sell smiles.”[3]
Build-A-Bear’s business model necessitates operations in three sectors: company-owned retail stores throughout the US, Puerto Rico, Ireland, and the UK, international stores operated under franchise agreements, and commercial sales to business partners of various industries. Build-A-Bear achieved nearly $400 Million in revenues in 2014, of which 60% of sales were attributed to its core customers, children ages 3-12 .[4]
Operating Model.
The success of Build-A-Bear’s business model hinges on its ability to create an enduring trust and emotional attachment with its customers. This makes Build-A-Bear’s operating model particularly interesting, as it masterfully created an operating model that enables value to be captured through both its product and experience while simultaneously satisfying the demands of its consumers, employees, and shareholders. How does it do this?
An Energized Workforce
For the seventh straight year, Build-A-Bear ranked as one of Forbes’ 100 Best Places to Work.[5] Of its 4,300 employees, 3,400 work part-time.[6] This high number of part-time employees is more than a cost-saving measure. Employees’ enthusiasm and approachability facilitate the in-store environment and contribute to customers’ enjoyment. With a predominantly part-time workforce (many of which are of teenagers), Build-A-Bear helps build and maintain a sense of freshness, excitement, and job fulfilment among its people, and these qualities shine through to the consumers throughout their in-store journeys.
A Unique In-Store Shopping Experience
Upon arrival, customers are led to an interactive Build-A-Bear production line that guides them through their adventure. They bring their bears to life through an innovative and streamlined process as explained in the video below.[7]
By making this process fun and personal, Build-A-Bear helps customers attribute positive memories to their purchase, thereby supporting its business model of providing a memorable shopping experience. Furthermore, Build-A-Bear preserves the integrity of its core in-store experience by maintaining an online platform serving its older customers. Approximately 20% of revenue comes from consumers over 12 years old who purchase bears as gifts or affinity items, most of which is done online.[8] Meeting their needs in a digital environment both fulfills demand and helps keep the in-store experience pure. After all, it’s not only important to bring the “right” people in but also to keep the “wrong” ones out.
Strong Commercial Relationships
Build-A-Bear’s portfolio of strategic partnerships allows it to earn revenue throughout the year and outside of the holiday season. Disney, Major 
League Baseball, Hasbro, Sanrio, and various universities have structured agreements that feature Build-A-Bear initiatives timed with specific events, thus keeping the company relevant to its consumers throughout the year. For example, the Chicago Cubs feature Build-A-Bear on stuffed animal giveaway days and Disney launches similar promotions timed with movie releases.[9] Revenue breakdown for FY 2014 was as follows: Q1 – $98M, Q2 – $76M, Q3 – $87M, and Q4 – $131M.[10]
Along with a unique shopping experience and workforce well-versed in delivering customer satisfaction, these partnerships help differentiate Build-A-Bear from its competition (Toys “R” Us, amusement parks, and arcades), as Build-A-Bear’s business model requires it to compete for both family time and entertainment dollars.
Preventing Extinction.
The company faces risk as it attempts to expand overseas and remain relevant as retail migrates online.
Build-A-Bear maintains stable relationships with its suppliers and ships its goods from its company-owned distribution center. Because its business model and customer promise revolve around a deep trust among consumers, it will need to judiciously choose overseas suppliers and distributors as it expands. If suppliers provide products that do not meet safety standards, Build-A-Bear could face negative publicity and la
wsuits, both of which would tarnish its ever-important company image.[11]
Having strategically placed its stores in malls and locations conducive to foot-traffic, Build-A-Bear capitalizes on the uniqueness of its in-store experience. However, as consumer trends evolve, Build-A-Bear may need to further invest in its digital paw print. Initiatives such as bearville.com, home of “Bear University,” enable users to interact in a safe online forum and serve as a good start.
Works Cited.
[1] [3]Glagowski, E. Build-A-Bear Builds a Brand Around the Customer Experience. (2013, September). http://www.teletech.com/thought-leadership/articles/build-bear-builds-brand-around-customer-experience#.VlzPHqRdHIV.
[2] [4] [6] [8] [10] [11] Build-A-Bear Workshop, Inc. (2015). 2014 10-K form. Retrieved from www.buildabear.com.
[5] 100 Best Companies to Work for 2015. Retrieved from http://fortune.com/best-companies/build-a-bear-workshop-59/.
[7] Build-A-Bear Workshop Unveils Newly Imagined Store. Retrieved from http://smp.businesswire.com/pages/build-a-bear-workshop-inc.
[9] Online Extra: This Bear Doesn’t Hibernate. (2005, June 5). Retrieved from http://www.bloomberg.com/bw/stories/2005-06-05/online-extra-this-bear-doesnt-hibernate.
Thanks for the great post, Charlie. My first, and only, build-a-bear experience occurred 9 year ago and involved my two adorable nieces. We went in and they picked out $15 teddy bears and when I checked out it was over $60. The two teddy bears were certainly well dressed and had impeccable voice boxes, but I swore I would never return. You mention in your article the desire to create a memorable shopping experience, but with add-ons that carry a hefty price tag at each station, I wonder if the experience is more stressful than enjoyable for many customers.
Charlie,
Very interesting post and I have fond memories of trips to Build-A-Bear in the late 90’s! The have turned buying Teddy Bears into an experience and have created a much more personalized experience for every child.
My concern is around the stuffing machine that they use for each bear. If I remember correctly, it takes anywhere from 5-10 minutes to fill a bear and they have 2-3 machines at each store. During the holidays, this can be a serious bottleneck and limit the number of bears sold. How do you think Build-A-Bear should overcome this and do you think this is limiting their income potential? Also, what barriers to entry are there for competitors to enter this space at a lower price?
I am amazed by the success of this company! I would think with its low barriers to entry that they would face stiff competition which would erode any advantage it had. However, they’ve proven over time that they are able to create a unique experience that customers value enormously.
Many toy companies nowadays are not only in the physical toy business, but also the interactive games business. It is common for a kid to buy a toy which comes with a certain code that can be input into the company’s website, and BOOM… the toy is alive online in a game! Kids love it, and will likely demand it from all toy companies in the near future. This might be a bit difficult for Build a Bear given how customized each toy is, but if they are able to make it work, they will continue to keep their advantage!