Lillian Vernon, Sharper Image Crash. Why?
To get away from buying product wholesale and selling retail, he opened a research-and-design idea factory where house engineers and designers created some 15 products a year, taking them from the drawing board to the factory (usually in China). By creating his own products, Thalheimer could control costs every step of the way, set his own prices and make the full profit.
The Sharper Image has a polyglot inventory line. Current best sellers include:
* The Ion Audio USB Turntable that converts vinyl records to CDs and MP3s ($199.95)
* Noise-Cancellation Headphones at half the price of Bose ($149.95)
* Roomba 560 Vacuuming Robot ($349.95)
* R2-D2 Interactive Droid ($129.95)
But Thalheimer got into trouble. For example, he made a pile of money with his Ionic Breeze air purifier, which according to The New York Times, accounted for 25 percent of his sales. Two million were sold at $350 each. Then in April 2005, Consumer Reports bashed the product, saying it did not clean air and actually released unhealthy levels of ozone.
Not only were sales hurt, but also the image of The Sharper Image.
After many months of declining sales and losses, Thalheimer was ousted as CEO in September 2006. His two replacements were not able to get the company back to profitability. With $199 million in debt and assets of $251.5 million, the towel was finally thrown in last week.
Sharper Image stock tanked to 47 cents.
How could Lillian Vernon and Richard Thalheimer go so wrong?
The late Joan Throckmorton said this:
As direct marketers, we’re not here primarily to make a sale; we’re here to get a customer. Sales are important, of course. (Where would marketers be without them?) But the name of the game is repeat sales rather than one-shots. And to have that, you need a customer.