Build-A-Bear Workshop 2012 Annual Report Download - page 17

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
In Europe, we contract with a third-party distribution center in
Selby, England under an agreement that ends in December
2014. This agreement contains clauses that allow for
termination if certain performance criteria are not met.
Transportation from the warehouses to the stores is
managed by several third-party logistics providers. In the
United States, Canada and Europe, merchandise is shipped
by a variety of distribution methods, depending on the store
and seasonal inventory demand. Key delivery methods are
direct trucks through third-party pool points, ‘LTL’ (less-than
truck load) deliveries, and direct parcel deliveries. Shipments
from our third-party distribution centers are scheduled
throughout the week in order to smooth workflow and stores
that are part of the same shipping route are grouped together
to reduce freight costs. All items in our assortment are eligible
for distribution, depending on allocation and fulfillment
requirements, and we typically distribute merchandise and
supplies to each store once a week on a regular schedule,
which allows us to consolidate shipments in order to reduce
distribution and shipping costs. Back-up supplies, such as
Cub Condo®carrying cases and stuffing for the animals,
are often stored in limited amounts at local pool points.
MANAGEMENT INFORMATION SYSTEMS AND TECHNOLOGY
Optimizing technology is a key business strategy. We are
committed to utilizing and leveraging digital advancements to
gain a competitive edge and improve guest experiences. We
regularly evaluate strategic information technology initiatives
focused on competitive differentiation, support of corporate
strategy and reinforcement of our internal support systems.
In 2012, we launched our new store design that combines
our signature in-store experience with innovative digital
technology that enhances our guests’ experiences and adds
interactive and customization features to our stuffed animal
making process.
We have developed award-winning, proprietary
software including our new Digital Sound Station, party
scheduling system and domestic and international versions
of our Name Me kiosk, which populates our Find-A-Bear®
identification system. Data from these systems are used to
support key decisions in all areas of our business, including
merchandising, allocation and operations. Our innovation
continues in our new store design which begins with an
interactive storefront where guests can engage and play with
the digital signage. The new Love Me station gives our guests
the ability to customize the inside of their animal with special
personality attributes displayed as emoticons on an interactive
table. The redesigned Fluff Me station, includes a digital bath
tub that recognizes items as they are placed on it and reacts
with sensory effects such as virtual bubbles that appear when
play soap is placed on the surface. Finally, at our updated
Name Me station guests use a viewfinder that reveals the
customized attributes that have been added to the animal
throughout the process.
We believe our information and operational systems to
be best in class that incorporate a broad range of purchased
and internally developed technologies; each is built on a
foundation of sound business processes and supports guest
relationship management, marketing, financial, retail
operations, real estate, merchandising, e-commerce and
inventory management processes, with a goal to deliver solid
business results. Our employees can securely access these
systems over a company-wide network. Sales, daily deposit
and guest information are automatically collected from the
stores’ point-of-sale terminals and kiosks on a near real time
basis. All data captured is secured, Payment Card Industry
compliant and protected by a solid disaster recovery plan.
Our critical systems are reviewed on a regular basis to
evaluate security and disaster recovery.
COMPETITION
We view the Build-A-Bear Workshop experience as a
distinctive combination of entertainment and retail with limited
direct competition. Because our signature product is a stuffed
animal, we compete with toy retailers, such as Wal-Mart,
Toys “R” Us, Target, Kmart and other discount chains.
Build-A-Bear Workshop was ranked by Playthings Magazine
as the ninth largest toy retailer for retailers with continuing
operations, based on 2008 revenues. Since we develop
proprietary products, we also compete indirectly with a
number of companies that sell stuffed animals in the
United States, including, but not limited to, Ty, Fisher Price,
Mattel, Ganz, Russ Berrie, Applause, Boyd’s, Hasbro,
Commonwealth, Gund and Vermont Teddy Bear. Since we
sell a product that integrates merchandise and experience,
we also view our competition as any company that competes
for family time and entertainment dollars, such as movie
theaters, amusement parks and arcades, other mall-based
entertainment venues and online entertainment. Being a
mall-based retailer, we also compete with other mall-based
retailers for prime mall locations, including various apparel,
footwear and specialty retailers.
We are aware of several small companies that operate
“make your own” teddy bear and stuffed animal stores or
kiosks in retail locations, but we believe none of those
companies offer the breadth and depth of the Build-A-Bear
Workshop experience or operate as a national or
international retail company.
We also believe that there is an emerging trend within
children’s play patterns towards mobile internet and online
play. According to Emarketer.com, kids aged 8 to 11
reported that they spend between one and two hours online
each day. We believe our bearville.com Web site competes
with other companies and internet sites that vie for children’s
attention in the online space including webkinz.com,
clubpenguin.com and neopets.com.
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