February 21, 2008
The Sharper Image Files for Bankruptcy Protection
By MICHAEL BARBARO
The Sharper Image, the 31-year-old purveyor of futuristic adult gadgetry like $5,000 massage chairs and $300 robotic vacuum cleaners, has filed for bankruptcy protection after years of slipping sales, stiffening competition and image problems over its Ionic Breeze air purifiers.

The retailer will still operate at least some of its 184 stores as it tries to pay off debts to a long list of creditors, like U.P.S. (owed $6 million) and Garmin, the maker of G.P.S. navigation systems (owed $2 million).

Sharper Image, which began in 1977 as a catalog retailer selling jogging watches, quickly became a staple of the American mall, attracting crowds of curious customers who wanted to test — and occasionally buy — the exotic products in its stores.

Another catalog retailer, the housewares and trinkets seller Lillian Vernon, also filed for bankruptcy Wednesday, citing a decade of slumping business. Catalog orders now account for less than 10 percent of the Sharper Image’s sales, but taken together the two company’s travails highlight the challenges of mail-order shopping in an era of big-box and online retailing.

Even at its most profitable, Sharper Image never generated the kind of sustained customer loyalty enjoyed by its bigger rivals, like Best Buy, which carried must-have new movies and video games that lured shoppers back into its stores every few weeks.

It turns out that buyers of R2-D2 Interactive Droids ($129) are not the best repeat customers.

That left the Sharper Image struggling for an identity in consumer electronics, a product line that is among the most competitive in American retailing.

The chain began experiencing “steady sales declines,” in 2004, according to its bankruptcy filing. Its profits fell throughout 2005, 2006 and 2007.

It was not alone. Over the last decade, dozens of local and national electronics retailers like Tweeter, Crazy Eddie and CompUSA have either filed for bankruptcy or closed. “It’s a pretty illustrious list,” said David Schick, an analyst at Stifel Nicolaus.

As quickly as an electronic product is introduced, he said, two things happen: dozens of retailers begin to carry it and consumers expect its price to fall. “It is very difficult business,” Mr. Schick said.

Sharper Image tried to avoid that problem with distinctive, even zany products that could not be found anywhere else, at least for a while.

But that led the company to take big bets on a few products, a risky strategy that cost it dearly in at least one widely publicized case. Sharper Image was an early seller of air purifiers, which it sold, rather briskly, under the name Ionic Breeze.

But in 2005, a Consumer Reports study suggested that the product might be dangerous to users because the purifiers generated small amounts of ozone. Sales plunged. Air purifiers, which accounted for 28 percent of the chain’s sales in 2005, fell to 9.4 percent of sales in 2007.

Lawsuits from Ionic Breeze owners soon followed. A California case has been certified as a class action, which could translate into significant legal costs for the company.

A proposed settlement of an Ionic Breeze lawsuit in Florida was rejected by a judge in October, sending Shaper Image’s stock plunging. Soon after, many suppliers began demanding cash payments upon delivery, which left the chain with little money to run its business, according to its bankruptcy filing.

The 2007 holiday season provided little relief. In January, a time when consumers are busy redeeming gift cards, sales at stores open at least a year fell 11 percent at Sharper Image, and overall revenue fell 23 percent.

The retailer’s management now says that 90 stores, about half of all Sharper Image’s outlets, are performing poorly and should be closed “as soon as possible.”

they outlived their purpose. those "neck massager"/dildos kept them afloat for a while. what used to be high end merchandise could be found at walmart a lot cheaper

wait, how did i miss this whole ionic breeze story? im still using mine.

& this is sad becauuuuuse... ???