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Obit: Educational Retailer Learns Hard Lesson

An educational retailer prided itself on being a fun place for shoppers to browse. But that playful atmosphere may have also been the company's undoing. A business obit.
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THE BUSINESS: Retailer of educational products
FOUNDED: 1991
CLOSED: January 2000
CAUSES OF DEATH: Shoppers' perception of the stores as a place to browse rather than buy; unfocused product mix

A general store for the curious mind. That's what Marshall Smith called the first Learningsmith store, which he opened in a shopping mall in a Boston suburb. The 4,500-square-foot shop was organized thematically. A section devoted to aviation, for instance, stocked airplane models for children alongside books for adults.

"If you wanted to learn French, there'd be dictionaries, phrase books, videos, CD-ROMs, children's games, Dr. Seuss in French, flash cards. We were selling access to knowledge rather than products as such," recalls Smith. The noble goal: promoting lifelong learning. Smith, who'd previously founded the Booksmith and Videosmith chains, oversaw the growth of Learningsmith to a dozen stores and, in 1994, sold a majority stake in it to the Boston venture-capital firm Halpern, Denny & Co.

The refinanced company, based in Burlington, Mass., continued to expand, peaking at 87 stores (all but one in shopping malls) in 40 states -- only to implode late last year. Paradoxically, the chain's greatest strength -- as a browser's delight -- ultimately did it in, according to industry sources.

"They tried to do too many things at once. They had toys, books, little novelties, but they didn't really have enough of any one thing to make it a destination store," says Cliff Annicelli, managing editor of Playthings magazine, based in New York City. Rather than making a beeline to Learningsmith for a specific purchase, many mall goers wandered into its stores "to take a break from real shopping," Annicelli suggests.

Part of the stores' drawing power, early on, was the cachet of the Public Broadcasting Service. Learningsmith cobranded its stores with PBS-affiliated stations (for example, WGBH Learningsmith in the Boston area and WETA Learningsmith in the Washington, D.C., area). The company also carried a full range of PBS videotapes and companion books, and discounted its prices for the stations' members.

But the breadth of the stores' inventory belied serious shortcomings, says John Lee, president and founder of developmental-toy maker Learning Curve International, based in Chicago. "They tried to cherry-pick and offer the best of the best," Lee says, "but with a brand like our Thomas the Tank Engine wooden railway system, if you're a loyal customer and want to go back to pick up the secondary pieces to build your system, they wouldn't have them."

Four Learningsmith presidents in four years followed Smith, each tinkering with the product mix. (Emblematic of the trifling changes that the presidents made was the barely perceptible altering of the company's slogan to The General Store for a Curious Mind.) Although the management introduced some private-label brands, it never attempted "the radical makeover" that the industry expected, says the president of one toy manufacturer that sold its products to Learningsmith, who asked not to be identified.

Meanwhile, specialty-toy buyers could shop at Zany Brainy (103 locations) or Noodle Kidoodle (59 locations) or Learning Express (160 franchises), all of which grew along with Learningsmith, crowding the roughly $4-billion education niche of the $25-billion toy industry. The competitors offered broader and deeper toy selection, generally lower prices, and more convenient locations to serve their core customers (like soccer moms with toddlers in tow). And the competitors had another critical edge: less expensive leases. Rent at Learningsmith's mall locations came to a profit-killing 20% of sales, about twice the industry average, according to a source close to the company's finances.

Christmas 1999, a dream season for most retailers, brought instead Learningsmith's grim filing, on December 10, for voluntary bankruptcy. Company executives declined to comment but offered shoppers a holiday gift: all merchandise at liquidation prices.

Please e-mail your comments to editors@inc.com.

Last updated: Apr 1, 2000




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