The Sharper Image
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The Sharper Image Corporation NASDAQ: [SHRP]
History
Based in San Franciso, The Sharper Image Corporation was originally the brainchild of Richard Thalheimer. The company got its start when Richard visited a consumer product show in Las Vegas, and saw a product from Taiwan that caught his eye. Richard, ever the opportunist, realized that a watch that was oriented towards runners had a huge market. The only other watch that had the same features was a more expensive brand name product. Richard could import his watch for close to $75 and sell it for $175. He started his advertising in running magazines, and within 2 years he had made his first million. This profit was what urged him to start The Sharper Image Corporation.
There have recently been many employment cuts at the company. 20% of the staff has been cut at the corporate office in San Francisco, as well as at most retail outlets. Sales associates and senior sales associates no longer make commision, but instead make a flat pay rate. Despite this, or perhaps because of this, the company continues to open new stores.
Retail Stores
The company has over 180 locations nationwide, even though it started as a catalog only operation. The stores represent close to 30% of the total company revenue. In the last few years more and more retail revenue share has been taken over by internet shoppers and Sharper Image's Ebay operation.
The retail stores have obviously been the biggest way for the company to grow over the last 25 years. The enormous profits that were procured during the 2000-2003 years were instrumental in broadening The Sharper Image's name. As with most non-franchise chains, the stores mainly look the same. Over the years there have been different store models that the visual department rolls out. The company is currently trying to phase-out the "grey" store and replace it with "white" stores, mainly named as such because of the extensive use of white with black contrasting.
The stores contain separate "walls" that include "Home" and "Best Of Tv". Besides the wall displays, the stores are made up of stand-alone fixtures that can have locking glass displays, bottom stocks, or shelving and can be easily converted to the manager's needs.
Sales
The Sharper Image is famous for its monthly sales. Every month, at least one product is sold as a "PWP". This PWP sale means that customers can buy select products at 50% off, as long as they purchase another item. The sale was instituted to get people to walk out the door with more than one product, but instead the customers just go for a pack of batteries.
There are certain offers that have been around since the items they involve have been launched. The entire Ionic Breeze line has had a buy one, get the second one half off deal since the product was introduced about six or seven years ago. This deal is sure to go on until the products are phased-out. The company also has a reputation of introducing its air purifiers at an "introductory" price which is normally about $50 less than the final price. This intro price is effective for about 3-6 months depending on sales, and then the price is raised to its final point.
About once a year, the company also has a sale on refurbished products that they sell in stores. Normally, no stores stock refurbished products as they are sold on Ebay. The relatively lax return policy means that many units get returned even though they work fine, and that means that there are a lot of refurbished Ionic Breezes floating around. Whenever there are too many units, the stores stock them and sell them for 50% off. These are returnable to stores within the sale date, but if they are returned after the date the store has to ship out a new unit. If a new unit is returned, normally a store has a replacement for the customer.
One thing the company is not famous for, is its day after Thanksgiving sales. There are no "door buster" sales like more stores have.
Replacement Service Guarantees
Most consumers are aware that just about every retailer out there has its own service or replacement guarantees that they offer. The Sharper Image is no exception, since they too sell "guarantees" that are backed by NEW or National Electronics Warranties.
A replacement guarantee is sold on Sharper Image, and non Sharper Image products under the $500 price point. This guarantee supersedes any manufacturer warranty, and therefore starts at the date the product is purchased. They cover "failures due to wear and tear" and allow the customer to come back into any Sharper Image, within the 2 or 3 years to get a replacement. Of course it also covers any manufacturer defects, as most consumer product warranties do. If the product a customer wishes to replace is no longer carried, then the customer is given the purchase price of their failed product (excluding warranty dollars) in store credit. This allows the customer to use the money for anything in the store, not just a product of the same type as the product that they are returning.
A service guarantee is sold on products over the $500 price point. The service guarantee also covers "failures due to wear and tear" as well as manufacturer defects, but they customer does not receive a whole new product when there is a problem. Instead, there is a 1-800 number that they customer is given at the time the RSG is purchased, that can be called. After the customer calls this number, they are referred to one of thousands of service stations around the country. A customer cannot bring a product back into a retail store with this type of warranty, the employees cannot help them. They will simply give the customer the 1-800 to call.
There are special RSGs that are sold on certain products.
Back when the company sold Apple Computer's iPod, there was a special service contract sold specifically for the product. It was like the service guarantee, but it started after the Apple manufacturer guarantee had run out. It paid for express shipping wherever your Ipod needed to go, and express shipping on the way back. The company stopped carrying the Ipod due to their short supply and non-existent price-controlled profit margin. However, the company does sell iPod accessories.
The massage chairs that the company carries have service guarantees available on them as well. However, a service technician will actually come to the consumers house in order to fix their 100-280 lb chair, saving the customer hundreds of dollars in shipping costs.
The Ionic Breeze air purifiers have their own special guarantee that is extended for 10 years. It is the longest guarantee the company offers, and is available on the Professional Series Quadra, Professional GP, and older Quadra and GP models (including refurbished units) that the company sells on their auction site. This warranty is similar to the replacement guarantee listed above. The Ionic Breeze Hybrid has been switched to a standard replacement guarantee for products under $500 due to its higher volume of moving parts, and higher manufacturing costs.
The Sharper Image salesperson is encouraged to sell these warranties, and receives a certain dollar amount of each warranty sold (as long as he or she meets the minimum requirements for the month). The company has contests for who can hold up the highest percentage of warranty dollars when compared to total sales, and raises the bar during the Christmas shopping season.
Advertising
The Sharper Image's advertising budget was spent on the catalog for about the first 20 years of its existence. Once products like the Ionic Breeze were introduced, the company realized that "informericals" were a great way for their products to get some air time. Most other products in the home air purifier market (including those made by Oreck) already used this medium, so The Sharper Image followed. This move proved to be well thought out and executed, as it boosted sales tremendously. The employees loved how people came into the store asking for products that they already knew everything about, making their job a little less stressful. However, whenever the company decides to end certain sales, they do so at the store level. This means that the "infomercial" still showing around the world talks about the sale that has technically ended. This has always made employees a little fed up with their company, since they aren't allowed to honor the sale, until the customer mentions the ad they saw on tv.
However, the "infomercials" still are a staple of the advertising network that The Sharper Image has created, and should be for the foreseeable future.
Product Line
In the past, The Sharper Image has been famous for many unique products. Even now, you can still buy a life-sized Superman prop that retails for $5000. Spiderman is also sold in almost all 180 stores, with Batman, Robin, and others specific to certain higher-volume stores. Up until 1998 it was possible to purchase a life-sized Star Wars Storm Trooper for $4000.
The products have always been a wacky mix of down-to-earth goodness and out-of-this-world uselessness. This has kept consumers intrigued and made them come back to the store. Over the past 10 years, the company has sold unique air purifiers that promise to rid customers of their allergies. Some of the higher volume products that made the company's name include an Ionic Pet Brush, Human Touch Massage Chairs, and toys for kids.
The company is known to receive special supplier contracts. For instance, its HW551 and HW552 product code massage chairs are specific to The Sharper Image, and Human Touch Interactive do not sell those specific chairs to any other retailer. Ever since the Robosapien was released on the market a few years ago, The Sharper Image has received the exclusive rights to sell the "Signature Series" which is a chrome or blue-chrome model of the product that is more visually appealing than the standard white models that are sold is stores such as Best Buy. Like already stated, these special contracts have made it possible for The Sharper Image to differentiate themselves from the competition, and make for a very lucrative retail operation.
Ionic Breeze Quadra Criticisms
In 2002, Consumer Reports tested many fan driven air purifiers along side The Sharper Image's Ionic Breeze Quadra. The Sharper Image was not happy with the results, and sued Consumer Reports in order to get what they thought would be a more fair testing of the product. However, the courts sided with Consumer Reports under their 1st Amendment rights.
Two years later, Consumer Reports stated that the Quadra could be dangerous to consumers' health because of the trace levels of ozone produced by the unit. As a result, sales plummented, and the stores even took back units that were years old for a cash refund. The Sharper Image's response was to work with the Engelhard Corporation and create an ozone catalyst that would reduce the purified air of excess ozone before it got the chance to circulate throughout the room. The technology is proved to work, but some consumers are reluctant because of high cost and questionable cleaning capicity. The company's Ionic Breeze sales have yet to recover from the hit.
In 2006, The Sharper Image released a new air purifier based on hybrid technology. The new unit takes the fast air moving capabilities of a fan driven unit with the efficiency of an ionic unit. This "new" technology is counter to previous Sharper Image ads for the Ionic Breeze, which claims the superiority of its product lays in its low power use attained from a technology that uses no moving parts.
External links
- [The Sharper Image website]
- [Sharper Image pays $525,000 to end lawsuit against Consumers Union]
- [CEO and Founder Richard Thailheimer's reaction to the disputed Consumer Reports article]
Sources
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