Sharper Image’s proprietary products team developed over a hundred new products. The biggest sellers among these were the Ionic Breeze (IB) air purifiers that, at peak, brought in hundreds of millions of dollars yearly. This high-margin success drove spending on advertising – and everything else – closely linking the fortunes of the company to IB sales.
In the company’s late days I charted monthly Ionic Breeze “gross net sales”:
The seasonal trends stand out: a holiday surge every Q4, a plunge in January with post-holiday returns, a seasonal allergy bump in spring sliding into Q2’s “Dads and Grads” shoulder, and a lull every summer.
This also reveals an untold story: for Sharper Image, 2004 was the Year iPod Ate Christmas.
Apple’s iPod and its silhouette ads weren’t new but both really took hold in 2004. That fall it became clear at Sharper Image that, of consumers who might spend several hundred dollars on a gift that holiday season, MANY chose an iPod over an IB.
The sales shortfall created kinks in the IB supply chain. After steady IB sales growth through 2004, SI had increased production & inventory to meet projected demand. When 2004 holiday IB sales slumped instead, Sharper Image warehouses filled up with IBs.
Meanwhile my team had developed new & improved models to launch in 2005. But new production had to wait until sales of the old models freed up cash & warehouse space. Sharper Image enthusiastically ran discount promotions on the IBs – “BOGO” 50% off was especially popular – but the company refused to lower the price, despite emerging competition (more on this later).
The company suffered not only the drop in sales revenue, the cascading effects of inaccurate forecasting continued for the next year or more. Clearly this was central to the company’s decline; was it fatal?
Next: the Consumer Reports Myth
Postscripts 