Lillian Vernon, Sharper Image Crash. Why?
The Harvard Business School Web site includes Lillian M. Vernon (Katz) in its list of 20th Century Great American Business Leaders along with Warren Buffett, George Eastman, Marshall Field, Henry Ford, Howard Hughes and Henry R. Luce.
From 2001 to 2003 the company struggled, losing more and more money.
Since neither of her sons wanted to take over the $250 million-a-year business, in July 2003—at age 76—Lillian Vernon sold the company to a private equity firm. The sale price: $60.8 million. The new owner immediately ordered a new business plan that would ratchet up the corporate gifts division, and hired a consultant to oversee this new operation. They could not make it work.
Three years later, in July 2006, Lillian Vernon was sold to another private equity company. The new president—Michael D. Muoio, an alumnus of Vernon competitor Miles Kimball—told The Virginian-pilot’s Bill Tiernan that the company had lost $25 million a year under the previous owner, who sold it off for a paltry $10 million. Muoio was unable to turn the company around.
Lillian Vernon filed for bankruptcy last week.
Richard Thalheimer’s Story
In 1977, Richard Thalheimer, then a young office supplies salesman and occasional lawyer, used to jog in San Francisco and keep track of his progress on a wristwatch that had been specially designed for runners. All who jog should have this item, Thalheimer reasoned. So he cut a deal with the manufacturer and had designer Steve Sugar craft an ad offering the watch for sale in Runner’s World under the corporate moniker The Sharper Image. The ad generated $300,000 the first year, and the rest is history.
Over the next 30 years, Thalheimer created a business that offered a collection of high-tech and electronic items via myriad catalogs, and later in 184 dedicated retail stores. At the end, the catalogs represented only 10% of The Sharper Image business.