Sharper Image — The Gadget Mall Built on One Air Purifier

Summary

Sharper Image was the gadget-and-novelty retailer of the American mall — the place with the massage chairs you could sit in, the air purifier that hummed in the window, and the catalog full of things no one knew they wanted. In February 2008 it filed for Chapter 11 bankruptcy, and by the end of that year all of its roughly 187 stores in 38 states were closed. Founded in San Francisco in 1977 by Richard Thalheimer — who started by selling a running watch through a mail-order ad and built it into a glossy catalog and a chain of stores — it spent three decades as the high street's showroom for the gadget as gift: the ionizer, the nose-hair trimmer, the noise-canceling headphones, the demo unit you played with and meant to come back for.

The detail that turned the collapse into a cautionary tale is how much of the company rested on a single product. The Ionic Breeze air purifier — silent, bladeless, heavily advertised — became Sharper Image's signature seller and, by some accounts, a large share of its profit. When Consumer Reports tested it in 2002 and found it removed almost no airborne particles, then followed in 2005 by warning it emitted potentially unhealthy levels of ozone, the company's flagship product and its credibility took the hit together. Sharper Image sued Consumers Union for libel, lost, and was ordered to pay the magazine's legal fees; a class action over the Ionic Breeze followed and settled in 2007. The litigation drained cash precisely as the gadget-store model was faltering.

What killed Sharper Image was a thin product story meeting a recession. The catalog-and-store concept depended on a steady supply of novel, must-have gadgets and on discretionary spending that vanished as the 2008 downturn took hold. With its signature product discredited, three straight years of losses behind it, and suppliers tightening credit, the company filed Chapter 11 in February 2008 and liquidated its stores by year-end.

The brand, though, did not die — it was bought. A consortium acquired the assets in 2008, and the Sharper Image name has limped on ever since as a licensed catalog and online label, passing through Iconix Brand Group and then ThreeSixty Group, which paid about $100 million for the global rights in December 2016. The stores are gone; the logo sells gadgets on a website.

Timeline

The Store You Played In

Sharper Image's genius was never really the products — it was the experience of encountering them. The stores were a kind of curated toy box for adults: a massage chair you could sink into, headphones you could try, an air ionizer glowing on a shelf, a remote-control gadget zipping across the floor. The catalog did the same work in print, presenting each item as a small revelation, a thing you had not known existed and now half-wanted. Richard Thalheimer had started the whole enterprise in 1977 with a single mail-order ad for a runner's watch, and the formula that grew out of it — the clever, slightly indulgent gadget, beautifully presented — carried the company public in 1987 and across the country into nearly 190 mall stores in 38 states.

It was a delightful concept with a structural weakness: it needed a constant feed of genuinely novel, genuinely desirable gadgets, and most gadgets are neither. The model worked when a true must-have came along, and faltered in the long stretches when the shelves filled with the merely amusing — the gimmick, the impulse buy, the gift you bought because you could not think of anything else. A store whose entire proposition is novelty lives or dies on its pipeline of novelties, and that pipeline is unreliable by nature. The wit of the place was real; the recurring demand underneath it was thin.

So when a true blockbuster did arrive, the company leaned on it hard. The Ionic Breeze air purifier — silent, with no fan or filter to replace, endlessly demonstrated in stores and on infomercials — anchored the catalog and, by many accounts, a disproportionate share of the profit. For a few years it papered over the model's underlying problem: a gadget store with one hit is a gadget store with one point of failure.

The Air That Wouldn't Clear

The point of failure arrived in February 2002, when Consumer Reports tested the Ionic Breeze and reported that it produced almost no measurable reduction in airborne particles — that the company's signature, heavily advertised air cleaner did not meaningfully clean the air. Sharper Image responded not by quietly fixing the product but by suing Consumers Union, the magazine's publisher, for libel in September 2003. It was a fight the company could not win: in November 2004 a court dismissed the suit, finding that Sharper Image had not shown the testing protocol was scientifically invalid or that the statements were false, and the company was eventually ordered to pay roughly $525,000 of the publisher's legal fees. Suing your critic and losing is a particularly expensive way to confirm the criticism.

Worse followed in 2005, when Consumer Reports warned that the Ionic Breeze Quadra emitted potentially unhealthy levels of ozone — turning the product's story from "does not work" to "may be harmful." The signature item and the company's credibility were damaged in the same stroke, and a consumer class action followed, settling in 2007 with merchandise credits and millions in plaintiff legal fees. The litigation bled cash and management attention from a company that needed both, just as the model's underlying thinness was showing through in three straight years of losses.

By early 2008 the position was untenable: a novelty retailer whose one reliable product had been discredited, whose sales had declined for years, and whose suppliers were tightening credit. On February 19, 2008, Sharper Image filed for Chapter 11 in Delaware, listing $251.5 million in assets against $199 million in debt and only about $700,000 in cash. The chief financial officer's phrasing was blunt: the company was in "a severe liquidity crisis."

The Five Factors

Aftermath

The store closures of 2008 ended Sharper Image as a retailer and erased the mall presence that had been its whole identity — the demo floor, the massage chair, the air purifier in the window. Employees lost their jobs as the roughly 187 locations liquidated in the depths of the recession, and the distinctive stores joined the broader emptying of the American mall. The Ionic Breeze, the product that had carried the company and then helped sink it, faded out as the litigation and the ozone warnings did their work.

The brand's afterlife is unusually active for a dead retailer: salvaged for about $49 million in 2008, passed to Iconix, then sold to ThreeSixty Group for around $100 million in 2016, it still sells gadgets online under the familiar name. That afterlife is precisely the lesson. A name people associate with delight can be a valuable, tradeable asset for years after the stores go dark — cold comfort to the workers, because a licensed logo on a website is not the business that was lost. The store you played in does not come back; only the brand does.

Lessons

References

• Ionic Breeze Suit Drives Sharper Image into Bankruptcy ConsumerAffairs
• Sharper Image Closing All Stores ConsumerAffairs
• Court Dismisses Sharper Image Lawsuit against Consumers Union Quackwatch
• Sharper Image Wikipedia