The History of the Beanie Babies

At some point during the 1990s, you probably had at least one or a couple of Beanie Babies. Or perhaps you were one of those who caught on the Beanie Babies frenzy, hunting down for every remaining available one on the store shelves as soon as they became “retired” from the market.

The creator behind the Beanie Babies craze was “toycoon” Ty Warner. Through the combination of his “little sacks of beans” and (more significantly) his shrewd marketing schemes, the Beanie Babies took the world by storm. Ty Warner became a billionaire, and the way he created his toy empire is nothing short of remarkable. Like many self-made billionaires, Warner first had a long road to go before becoming one.

If anyone of you is not familiar with what Beanie Babies are, they are a line of plush toys. They are undoubtedly one of the best-selling toys of the 1990s. But compared to other fads, though, the way the Beanie Babies rose to fame and then came crashing down is also worth a mention. People began to see the Beanie Babies as more than just toys and collectibles – they even saw them as potential investment vehicles.

The creation of the Beanie Babies mania

Warner had long years of experience in the toy industry before setting out on his own to create his world-famous Beanie Babies. It all began during the 1970s when a toy company named Dakin was the world market leader of plush toys, selling nearly 70 million toys every year. Warner was employed as Dakin’s salesman – and he became their best salesman at that.

But in 1980, Warner was fired for reportedly selling his own toy products to Dakin’s established customers on the side. In 1986, Warner invested pretty much every penny he had in it, including a $50,000 in inheritance from his father who had just passed away, to form Ty Inc. Warner began selling stuffed toy cats, which were called “Himalayan Cats.” They quickly sold out in stores.

The business did well at the beginning, but Warner wanted something bigger.

He then struck up with an idea: why not create toys that children could buy with their own pocket money for under five dollars? At the time, Ty thought that there were no toys in the $5 range “that weren’t real garbage.” So he went to make it happen.

Then Warner launched his stuffed animals, which came with a heart-shaped paper tag that gave their name, their “birth date,” and a four-line poem that described it. The Beanie Babies were born.

What makes Warner’s Beanie Babies different from other stuffed toys is that it used plastic pellets (“beans”) as stuffing rather than the traditional toy stuffing materials. This gave his Beanie Babies more flexibility, allowing them to become more “poseable” instead of the conventional stuffed toy animals, which are usually stiff and hard.

Warner’s competitors thought he was nuts. They ridiculed at his deflated, slumping toys, comparing them to “roadkill.” But Warner had the last laugh, selling 30,000 units of “roadkill” in a toy fair in Atlanta.

The Beanie Babies bubble

Warner could manipulate supply and demand, and that was exactly what he did to make his Beanie Babies a colossal hit and a sought-after collectible. To boost sales, Warner adopted an ingenious marketing strategy – a perceived limited production and scarcity.

He turned down giant toy chains in favor of small gift shops and specialty toy stores. It gave the Beanie Babies an image of being “classy” and “exclusive” toys, which would not be possible in larger toy chains such as Toys R Us. Even so, Warner limited sales to these stores. No store could sell all the available Beanie Baby characters. And to the stores who did, they were limited up to 36 of each character a month. Avid collectors came to perceive them as “rare” items, so they had to buy the Beanie Babies fast before they were gone.

Children who were spending their school allowances on Beanie Babies were overtaken by frenzied adult collectors racing from one store to another to get the newly retired Beanie Babies before they vanished for good.

Instead of churning out as many Beanie Babies he could sell, Warner opted to “retire” Beanie Baby characters regularly Some were retired after a long run on the stores, while others were retired rather quickly. This compelled collectors to hunt down every Beanie Baby remaining on the store shelves. There wasn’t any logic to it, so when a new Beanie Baby character popped up in stores, collectors had to act fast because they would never know when these Beanie Babies would be “retired.”

Warner also made minor changes in the appearance of each Beanie Baby character. For example, if the first production of Sasha the Bear had an orange ribbon, Warner would change its color to yellow, and green the next. Or he might change the color of the entire toy. As a result, hardcore collectors felt compelled to buy several variations of each character.

From nuts to beans… and then back to nuts

When sales of the Beanie Babies began to ease off in the latter part of the bubble, Warner announced that he was going to retire all Beanie Babies on December 31, 1999. The “last” Beanie Baby ever produced? “The End,” a black stuffed bear. All hell broke loose among hardcore collectors, and sales shot up.

Then, on Christmas eve, Warner slyly amended his earlier statement to say that he would let Beanie Baby collectors vote on their beloved toys’ fate. Guess what happened!

This goes on to show that Warner is indeed a marketing genius. But of course, that fake retirement ruse only gave a temporary surge before the Beanie Babies fell to their inevitable fate – to the discount bins.

The Beanie Baby bubble finally burst in the new century. It became too popular to the point that they were no longer regarded as rare, special, and unique, and the thrill was gone even among die-hard fans. Dazed and disoriented collectors who had hoped that hoarding tons of Beanie Babies would fund their children’s college education eventually ended up selling them in bulk on eBay. They made a big mistake of believing that the Beanie Babies would make a sound financial investment.

While the ending didn’t seem to be a happy one for many fans, it was the other way around for Ty Warner. He took significant risks by designing products that everybody in the industry thought was rubbish. By the time the Beanie Baby bubble reached its peak, his net worth had risen to about $6 billion. As of 2018, Warner’s net worth is still pretty sizable – at $2.4 billion. So it’s safe to conclude that his risks certainly paid off, thanks to his pretty crazy – but highly effective – marketing tactics.