Robert Croak went from promoting concerts in east Toledo to the center of one of the hottest kiddie crazes in years. Here's how he did it.
The UPS truck rumbles down Main Street in Toledo most mornings, past the boarded-up Cloud 9 bar, the abandoned Masonic Temple, the car wash, the tattoo parlor, and the payday loan shop. It stops at the small warehouse of BCP Imports (Brainchild Products), where a dozen young men, recently hired and plenty eager, rush to unload, sort, and repackage hundreds of boxes of Silly Bandz. They are this year's kiddie rage -- brightly colored silicone bands shaped like the outlines of animals, letters, princesses, and more. Kids, and a few notable parents such as Sarah Jessica Parker, stretch them out to wear like bracelets. When taken off they revert to their original shapes. Kids also trade them, count them, and fling them, which is why they've been banned in some schools around the country. A pack of 24 costs about $5. Robert J. Croak, the 47-year-old founder of BCP, says he has sold millions.
| More from BusinessWeek.com: |
• Wal-Mart Turns Toy Animals Into $1 Billion Market
Hit Toy: Zhu Zhu Pets
• Toys With a Second Life
Croak is sitting behind a desk covered with piles of paper and four computer screens, halfway through a bottle of chocolate Yoo-hoo. He's wound up and blustery, his voice raspy from late nights in the office. Croak has been a bar owner and concert promoter in Toledo's gritty east side for years. He grew up in the neighborhood, earned a degree in marketing from Owens Community College, then took over his grandmother's Main Street restaurant after she died and turned it into a rock club called Frankie's Inner-City lounge. For the past several years he has been selling custom t-shirts, dog tags, mugs, and silicone bracelets made popular by Lance Armstrong. Nothing in his background suggested that he would find himself at the center of one of the biggest successes in modern-day toy selling; Croak is an opportunist who has found the greatest opportunity of his life. "I'm the luckiest guy alive right now. I don't think you're going to find anyone who has a reason to be happier than I am," he says. "I have the hottest toy, the hottest fashion product on earth. All the right people like Silly Bandz. Everyone asks who my publicist is. I don't have one. We don't advertise. All we do is viral marketing. This is happening on its own."
It might also end on its own, its energy exhausted, once kids' attention turns elsewhere. "This isn't a cultural phenomenon, it's a schoolyard fad," says Christopher Byrne, an independent toy consultant. "It's tracking the way a lot of fads do. The product is out there for awhile, it hits critical mass, then kids get tired of it." On the fad hierarchy, Silly Bandz might have reached the level of Kooky Klickers and scented erasers, but it has a long way to go before achieving the status of Beanie Babies. The products are also easier than most to copy -- already, cheaper-looking imitations are widely available. Croak says he's not concerned about any of this, although he is trying to establish Silly Bandz as a brand that resonates beyond the bands themselves; after all, they have no logos, no characters, no stories. "We've been planning some new products that will make Silly Bandz a household name for the next 5 to 10 years," he says. As with many aspects of his company, he declines to get into specifics. "I'd love to share some details, but I can't."
| Popular Stories on Yahoo!: |
• A Simple Way to Make a Million
• Home Improvements That Don't Pay Off
• Credit Card Companies Exploit Loopholes
More From Yahoo! Finance
About three years ago, Croak and the manager of the factory that produces his silicone bracelets visited a trade show in China, where the manager spotted stretchy animal shapes that were sold in Japan as rubber bands. "I liked the way they looked, and I thought if they were done correctly -- larger and thicker -- they would make a great fashion accessory," says Croak. "It's like any entrepreneur: If you see something you like and have the capability to develop it differently, then the sky's the limit. You know the Dyson vacuum guy who says in his commercial that he had 180 prototypes before he got it right? With Silly Bandz, we got it right the first time."
The animal bands were hardly new. The Japanese creators had been recognized with a national design award and had been selling them in America in a limited capacity since 2002. The Museum of Modern Art Design Store carried them, as did the Japanese department store Takashimaya. New York magazine singled the animal bands out in October of that year, noting that they could be worn as bracelets. But what Croak saw in China "wasn't Silly Bandz," he says. "We trademarked the name. We created them. We created the craze."
Croak saw potential in the bands that the original designers didn't: If they were offered in a greater variety, kids might want to collect and trade them like Pokemon cards. It could be a $100 purchase made $4.95 at a time. Slowly and unpredictably, Silly Bandz began to draw kids in with its website, which Croak launched late in the summer of 2008. He also took full advantage of the new social order in promoting his product. The Silly Bandz Facebook page now has nearly 255,000 fans, and on YouTube (NASDAQ: GOOG - News), some 2,000 videos have been posted about the bracelets, including a rap song that has been played almost 24,000 times. "Silly Bandz are a great toy, a fashion accessory. There doesn't need to be a reason," Croak says when asked about the way his product took hold. "Why take the fun out of it?"
BCP is a private company, so sales figures aren't available. The bands clearly are a financial bonanza, however. Sean McGowan, a toy industry analyst at Needham & Co., estimates that a package of 24 bands probably costs nickels to produce at BCP's factory in China. Even after including packaging and transportation expenses, the profit margin could be close to 75%. As for Croak's marketing strategy, he prefers to keep the details secret, lest he surrender another profit opportunity: "I'll save that for a book deal, O.K.?" he says.
BCP went from obscurity to the CBS Evening News in a matter of months, and the pressure on Croak is intense. "It's chaos every day," he says. Still, he tries to maintain a relaxed office atmosphere: Music is constantly playing, and the dress code is casual -- Croak wears jeans and untucked shirts, and many of his young employees are in shorts. Competition emerged months after Croak launched Silly Bandz. An entrepreneur named James Howard introduced Zanybandz in Birmingham, Ala., after testing the product out on his nieces. It could be that Silly Bandz and its competitor are actually helping one another: The greater the awareness of the product, the more sales for everybody. "Very often a second company ignites the whole market," says McGowan. Kids and stores don't necessarily care which brand they have. The bands spread to Tennessee, Florida, New Jersey, Connecticut. By the summer of 2009, "it started to get crazy," says Croak. "We thought we were ramping up enough then, and we've grown four times since then. It's a learning curve every week." Croak says BCP has gone from shipping 20 boxes of Silly Bandz a day to about 1,500. (The boxes contain anywhere from 24 to 500 packs.) He says Silly Bandz are carried in approximately 18,000 stores in 25 states.
Croak's career hasn't been without its challenges. In 2002 he was convicted of one count of forgery for signing a check for a business associate and was put on probation. Two years later he was ordered to pay back taxes and penalties of about $45,000. "It was a technical violation of the law," he says, referring to the forgery. One of the terms of his probation was that he was no longer allowed to own or operate a bar. "As a result of this," he says, "I chose to pursue bigger and better things." Regarding his tax bill, he says: "Sometimes taxes don't get paid on time, there are economic reasons. All of my taxes are paid and current." Croak was also involved in a controversial city-run project to develop a Toledo Civic Theater for which he would book concerts. The first ones, in the summer and fall of 2008, were successful. After that, though, Croak ended his role amid fighting between the city council and the mayor over how contracts had been awarded. Croak's recent turn of fortune has been duly noted in east Toledo. Dan Steingraber, the chairman of a local business organization and a longtime associate, says: "It's fantastic. You never know what's going to make you money. Rob has been throwing s--- at the wall for a long time. It's good when something sticks."
These days, Croak is creating jobs in a place that's desperate for them. Once dominated by auto manufacturing, the Rust Belt city of roughly 300,000 now has an unemployment rate of 12%. Croak's office staff has grown from around 20 people to nearly 70 in the past year, and there are approximately 200 salespeople working around the country. (BCP's factory in China -- Croak won't say where it is -- also brought in 700 new workers in the past five weeks.) With the momentum continuing to build, Croak is recruiting people through Craigslist to take phone orders, maintain the Silly Bandz website, and deal with shipping to homes, toy stores, and, soon, Macy's (NYSE: M - News). After the local newspaper, The Blade, ran a story about Silly Bandz, so many people came to the office looking for jobs that Croak had to lock the doors. One night, behind on a deadline, he put up a post on Facebook and 20 people arrived to help within an hour. Jared Hissem, 28 and married with a young child to support, was holding down two jobs, doing data entry at a market research firm, and working behind the counter at KFC (NYSE: YUM - News) when he saw one of BCP's postings. A couple of days later he had quit his other jobs and was taking orders over the phone for Croak. "I had never heard of Silly Bandz until I got hired here. Now I love them," Hissem says. "And it's a laid-back work environment, with the music and all. I haven't left once in a bad mood." Another new member of the workforce, a 23-year-old college graduate named Marcus Ahle, started as a Web programmer in mid-May after searching for work for months. "I'm not worried about the fad ending," he says. "I'm just thankful to have a job in this economy." Until recently, Croak's workers were bringing hundreds of boxes of Silly Bandz a day to the post office to be weighed and stamped. The postmaster just asked Croak to get his own metering machine. He's not sure if he can keep up: "The demand changes every day. Supply-and-demand issues are good, though. It builds the anticipation and hype. A little scarcity is good."
Just 40 minutes into an interview in his cramped office, Croak starts to look anxious; he wants to see how things are going in the warehouse. "We have huge deals that are going to be national news," he says, "but I can't share them now. They're reaching out to us. We're reactive, not proactive." Although Walt Disney (NYSE: DIS - News) has signed up with a competing brand, Character Bandz/Forever Collectibles, there are plenty of other licensing possibilities for Silly Bandz, from the Simpsons characters to Dora the Explorer. "Let's just say that the best names and icons in the United States will be represented by Silly Bandz in the coming weeks," Croak says. He has just introduced a UV-activated beach pack that changes color when the temperature rises. And he lets on that he's going to put out his first celebrity pack, with a basketball player he won't name, as well as backpacks and notebooks for the new school year. He says he has been talking to the owner of an amusement park and to the YouTube rapper.
Croak envisions an empire of Silly Bandz, but if that doesn't quite come to pass, he says he'll be fine with it. "This is proof that the American dream is still alive. Beanie Babies are not the must-haves anymore, but people still buy them. If Silly Bandz turns into that, it's a great place to be."