Live from ACC: A Sharper Keynote Address

San Francisco–Cataloger/retailer The Sharper Image, which celebrated its 25th anniversary last year, expects to exceed $600 million in annual sales this year—a double-digit sales increase over last year’s $523.3 million, which in turn was a 32% jump over $396.2 million in sales in 2001. During his keynote speech yesterday morning at the Annual Catalog Conference, Sharper Image CEO/founder Richard Thalheimer gave his perspective on the company’s success.

Thalheimer spent much of his presentation discussing the company’s private-label products. In fact, it was the high-tech gadget marketer’s introduction of proprietary products that helped keep it out of bankruptcy in the early 1990s.

Thalheimer’s decision to move away from selling brand-name electronics and into developing products inhouse was fairly simple. “We now had products that nobody else had, so they couldn’t copy us, ” he said. Today 75%-80% of the company’s SKUs are private-label or exclusive-license goods.

At one point in the late ’80s, Thalheimer said, there were 14 catalogs “that attempted to copy or look like us.” But excluding stalwarts such as Hammacher Schlemmer and Brookstone, the competitive catalogs went away.

“Once you get a product that’s your own, you have total control of it,” Thalheimer said. “You can go in with a lot of [marketing] force, because you don’t have to worry about competitors advertising the same product. We sit around a table, come up with an idea, then make the product.”

Another difference between The Sharper Image of the past 10 years and its first 15 years is practicality. Throughout the free-spending 1980s, the company sold primarily toys for well-paid executive boys. But coinciding with the marketer’s foray into private-label products was a move toward more-practical goods to appeal to women.

“Men are crummy shoppers,” Thalheimer noted. “So we transitioned to women as well.” The company’s customer file is now 15 million strong.

Recent examples of this sort of practical item include an electronic eyeglass cleaner and an updated version of an electric nose-hair trimmer. The Sharper Image spent five years to develop the eyeglass cleaner. As for the nose-hair trimmer, which the company is promoting heavily, it “is a sexy product,” Thalheimer said—seriously. “Women don’t want their men growing their nose hair long. And it sells all year long.” The company offers both a $59 and a smaller $39 version of the product, which is a hot seller.

On the marketing side of the business, The Sharper Image is a devout believer in three seamless marketing channels—retail (which accounts for 57% of sales), catalog, and Internet. Just before the Internet bubble bust, “people asked me when we were going to close our stores,” Thalheimer said, and shift completely to the Internet.

Of course, he had no such plans. “If retail space gets too expensive, then you stop opening stores,” he said. “If postage goes up, you don’t mail as much. But we work on all three channels, and all three work great. I call that management by opportunity.”

Unlike some other direct marketers, “I don’t know our response rates, because I measure everything on ROI,” Thalheimer said. Last year, The Sharper Image spent $100 million on advertising and measured the expense against sales for all channels. This year, catalog circulation will be up 5%-10%.

Some other tidbits attendees could take away from Thalheimer’s presentation:

* Always treat customers as if you want to do business with them for the next 20 years.

* Be sure to include your company’s street address on the back cover of your catalog rather than a post office box number—“it lends credibility to your business.”

* Don’t confuse customers by trying to drive them to one marketing channel over another.

* “Ask 20 people anything about your company, and you’ll get useful answers.”

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