"The Sharper Image is over," declared Richard J. Thalheimer.
During the 1980s, Thalheimer, president and chief executive of the San Franciso-based catalogue and retail company, built a fortune catering to the indulgent desires of the newly rich. But with the gimme-one-in-every-color '80s at his back and nervous-nellie '90s ahead, Thalheimer is rethinking the merchandising strategy that turned his small business into a nationwide retailer with annual sales of more than $200 million.
"It's going to be a greatly changed store in acknowledgment of misplaced enthusiasm for the 1980s," said Thalheimer, who owns 75 percent of the public company he founded in 1978. "We are now on a diet ... and plan to establish in our stores some genuine purpose for buying, other than just self-gratification."
Is this the same store that aggressively muscled its way onto the retail landscape of the 1980s with its glossy and macho catalogue containing $5,000 tanning beds, $2,000 massage chairs and $1,695 music systems?
Apparently not. Flat sales and rapidly declining earnings have forced The Sharper Image into a retailing makeover.
"Simply put, consumers have grown up and adult toys are last on their lists, if they are there at all," said Kurt Barnard, publisher of the New York-based Barnard's Retailing Marketing Report. "Stores like The Sharper Image are retailers whose customer base has faded away and now consumers are frugal and careful about the way they spend money."
Wall Street has sent the 42-year-old Thalheimer and The Sharper Image the same message. Sharper Image stock, which traded as high as $11, is hovering just above $2 a share. In the past year alone, Thalheimer has seen the paper value of his Sharper Image shares decline to about $12 million from about $48 million.
In the face of these losses, Thalheimer has "repented," he said, bemoaning his stereotype as a gadget guru. Gone in the future will be most of the pointless and pricey "adult toys" that exemplified the trendy and slick retailer, like the F-14 Tomcat simulation model. ("No relevance to world of the 1990s," he explained.)
Instead, Thalheimer said, the focus will shift in his millions of catalogues, and in his 75 stores (four of them in the Washington area), from things of desire to those of need, such as environmentally sensitive products, stress-relieving gadgets and other purposeful items. He is declining to sell products that are not packaged in an environmentally correct manner and inviting manufacturers of environmentally safe goods to beat a path to his corporate headquarters. To reach female customers, he's even eliminating the cheesecake posters that dominated stores and catalogues of the past.
The Sharper Image has changed its image before. The retailer, not surprisingly considering its name, once sold copiers. But it rose to prominence in the 1980s by appealing to people whohad childhood dreams but adult-sized bank accounts. The Sharper Image did $50 million in catalogue sales alone in 1982. Watching other cataloguers eating into its market, the company plunged into retail stores that year and dazzled retailers with its initial $1,400-a-square-foot sales, quadruple the industry average. To add to its successes, the company sold stock to the public in early 1987 at $10 a share.
But after the stock market crash in October 1987, everything started downhill. Sales creeped up slowly and earnings fell -- to $4.2 million in profits last year from $5.6 million in 1987. Sales per square foot declined to less than $1,000, analysts said.
In addition to the change in consumer attitudes, Thalheimer blames the problems on escalating costs, increased competition and the overly rapid expansion that has become, he said, "a millstone for us in the downturn." Other observers also point out that the stores, mostly located in wealthy sections of urban areas, take sales away from the mail-order business, which has declined too.
In August, Thalheimer responded to the financial setbacks by reducing the company's 1,100-person work force by 10 percent and trimming travel, entertainment and supply expenses. And with earnings projected to be only $3.7 million this year, unless Christmas sales are robust, he said the company is likely to close some unprofitable stores and make other operational changes.
The Sharper Image isn't the only gadgety retailer with problems. A locally-based small chain called Opton recently closed its stores in Georgetown, the Fashion Centre at Pentagon City and Union Station. While owners for the store could not be reached, one source at the Pentagon City location said that "A lot of people came in and looked, but no one seemed to buy."
The 97-store, New Hampshire-based Brookstone chain is studying the changes at The Sharper Image, because Thalheimer's vision would put it in closer competition with the more sedate Brookstone. Executives at Brookstone, a cataloguer and retailer with seven stores here, said its sales are flat.
"Imitation is flattery and we feel their moves reinforce to us that we always had our thinking caps on correctly," said Henry Lee, vice president of marketing at Brookstone, which was founded in 1965 and moved into retail in 1982. "Thalheimer's store is coming off a faddish wave to another, so I think customers will go with our more consistent image," Lee said.
Thalheimer says he can remake the store's image without losing a step. "The change in consumer's willingness to spend made me see this as an opportunity to change, since when times are slow you are creatively free to make big, bold changes since you have less to lose than when you are successful," he said.
"Now I want to merge social causes with business, since before we were all sidetracked by careers and material things."
Whether such changes can save the chain is in question.
"This move to the environment and other social causes is a vogue thing to do, and so different with what the store represents," Barnard said. "So it might just backfire quite badly, since trends always die hard."