Dayton Daily News from Dayton, Ohio • 95

1 OF DAYTON DAILY NEWS BUSINESS SUNDAY, DECEMBER 17, 2QOO Sharper Image drops snob appeal for mass appeal If FTT 1 7 1 1 :1 Specialty retailer makes money year round on Internet i in i wrm 1 "-r- Pi said. 1 Thalheimer, a Yale-educated native of Arkansas who started Sharper Image's catalog business in 1977 to sell a lightweight watch for joggers, has taken a lead role in making the company more accessible. He writes and narrates his own whimsical radio commercials about a wide range of products, including sleek electric nose trimmers, a fil-terless air purifier and a CD player for the shower. He also is appearing in television infomercials airing in selected markets. Sharper Image had spent $32.5 million on advertising and promotion through Oct.

31 of this year, a 71 percent increase from last year. The commercials probably wouldn't have made much difference if Thalheimer hadn't decided that Sharper Image should develop most of its own products internally and then sell them through its retail channels. He's the source of many of the product ideas. Sharper Image's patented products account for nearly two-thirds of the company's sales. The exclusivity raises profit margins and keeps the company out of the Internet price wars that have hurt many e-tailers selling more common merchandise.

"The critical mass we are achieving now is so much more satisfying than where we were a few years ago," said Thalheimer, whose stake in Sharper Image is worth about' $75 million. ON THE WEB www.sharperimage.com sv PAUL SAKUMAASSOCIATED PRESS SHARPER IMAGE founder and CEO Richard Thalheimer is with a display of Razor scooters inside a Sharper Image store in San Francisco. Available at these EATON Ameritech Techsonicsfladio Shack Communication Centers: (937) 456-7320 CENTERVILLE ENGLEWOOD Ameritech Business Advanced Cell Paging Sales Office (937) 454-2255 (937)227-2297 GEORGETOWN Ameritech Communication Executive Cellular Network Center (937) 378-2555 (937)439-4900 GET 1,625 MINUTES FOR JUST $12.50 A MONTH, PLUS A FREE PHONE. (SAY, "THANK YOU, By Michael Liedtke SAN FRANCISCO The holiday shopping season used to be make-or-break at Sharper Image Corp. the time when the specialty retailer scrambled to recoup the losses that always seemed to pile up during the first 10 months of the year.

This holiday shopping season, though, is shaping up as Sharper Image's exclamation point on a compelling transformation that has carried the 23-year-old company to its best performance. The prosperity arises largely from the tremendous success of the Razor scooter that the company introduced to the United States last year. The popular Razor acted as a springboard for Sharper Image's recent emergence as a mainstream merchant. Until the Razor rolled around, the San Francisco-based retailer had been known as a high-priced novelty shop for tech-loving snobs attracted to the peculiar gadgets and contraptions sold in its stores and catalogs. It wasn't a formula for success, as Richard Thalheimer, 52, the company's founder and chief executive, came to realize in the early 1990s.

"We weren't very efficient, our products were overpriced, and lots of people were just too intimidated to come into our stores," Thalheimer said. "Sharper Image had become known as a place that had a bunch of products that either you didn't need or were too expensive." It took a few years, but a reorganization and the rise of Internet commerce combined to mold this once-quirky chain into a retailing role model for blending a traditional chain store with online sales. By employing lessons learned in its catalog business, Sharper Image has built a booming Internet business without diminishing its store traffic. The company expects to ring up about $60 million in online sales this year, about one-sixth of its total revenue, while also expanding its store chain from 90 to more than 100 by the end of next year. The Internet presence has helped Sharper Image make money year-round.

It earned $4.4 million through the first three quarters of its current fiscal year on sales of $237 million, compared to a $1.7 million loss on sales of $157 million during the same period last year. Even as it reaches out to the masses, Sharper Image has retained a certain elitist quality. For instance, the company still carries items like an indoor rotating rock-climbing device that retails for $15,000. The company also is developing a "home robot" that will be equipped with cameras to monitor activities in other rooms. The robot is expected to sell for about $1,000.

But most of Sharper Image's products today are more practical and priced under $100. The Razor, more than anything else, put Sharper Image on the cutting edge of pop culture. Thalheimer first saw the product during a trip to Hong Kong in 1998 and negotiated a deal to sell the Razor exclusively in 1999. The scooter boards didn't become a craze until this year, though, inspiring Wal-Mart and other discount retailers to begin selling the scooter boards too, usually at lower prices. The increased competition hasn't noticeably affected Sharper Image the company's November sales through the first weekend of the holiday shopping season were up 30 percent from the prior year and scooter sales remained strong.

Yet, investors are worried that the joy ride might be over. Through Dec. 12, Sharper's Image stock had plunged by 25 percent since August, though shares were still up 18 percent for the year. Signaling its belief that the company is undervalued, Sharper Image GREENVILLE Telcom (937) 547-1010 SPRINGFIELD (937) 327-1600 Also available at HILLSBORO these SEARS locations: Executive Cellular Network (937) 393-0088 DAYTON 400 Dayton Mall (937)439-1740 HUBER HEIGHTS Ludlow Cellular Paging (937) 236-4330 GET 50o OFF LOCAL RATES, PLUS A FREE NOKIA DIGITAL PHONE. SPRINGFIELD Upper Valley Mall (937) 322-4596 MIDDLETOWN Ludlow Cellular Paging (513)422-5494 Ameritech service and equipment also SIDNEY available at the following Ludlow Cellular Paging authorized sales (937)497-9100 and service locations: Ameritech is dropping in for the holidays with the perfect gift idea for you or someone special.

Just take a look at what it includes: 50 off monthly access on select local digital rates for three months SPRINGFIELD BEAVERCREEK Craig Robinsons Ludlow Cellular Paging Communications (937) 320-0700 (937) 964-8007 Ludlow Cellular Paging (937) 399-5566 BELLBROOK Ludlow Cellular Paging (937)848-6110 A free Nokia 5100 series digital phone Afi Free long distance 9 Free activation TIPP CITY Ludlow Cellular Paging (937) 669-9321 6- CELINA Northwest Regional Systems (419)586-1081 rfV. I 1 CI Mi o-' TROTWOOD Ludlow Cellular Paging (937) 837-4900 CENTERVILLE Ludlow Cellular Paging (937)433-3350 TROY Ludlow Cellular Paging (937) 339-9707 DAYTON Ludlow Cellular Paging (937) 222-6725 URBANA Champaign Cellular (937)653-6868 GREAT NEW LOCAL DIGITAL RATESI Page Tech (937) 256-9970 (937) 274-6158 WILMINGTON Executive Cellular Network (937)382-2999 Pager One (937) 274-1100 this month said it will buy back about 7 percent of the company's outstanding stock during the next year. XENIA Ludlow Cellular Paging (937) 372-8979 The Pager Place (937) 276-4400 Analyst Ozarslan Tangun of Southwest Securities in Dallas said Sharper Image is actually being hurt by the Razor craze now. "People are afraid this is a one-product company, Open Sunday Premier (937) 224-3000 but it's not," he said. "Sharper Image ForThree Months 7 Anytime Minutes Weekend Minutes' Total Minutes 125 1,500 1,625 ($25 alter three mos.) iJl7m- 250 50 1'750 ($35 alter three mos.) 'Weekend minutes include 1,000 bonus weekend minutes for months.

ieritech. NOKIA CoMNKCTINr. PfiOPl isn't just selling products that tech nology geeks can afford. It has made its products appealing to a broader customer base." 1-800-MOBILE-1 www.ameritech.comwiraless As more customers come into Sharper Image's stores to buy the scooter, their eyes are being opened to other practical products, Tangun mil Ameritech reminds you to use your phone satety while timing. Limited-time offer.

Additional rate plans are available. New line activation and minimum two-year service commitment required. Subject to credit approval and early termination fees may apply. Weekend package minutes will be 500 minutes per month after Click Click Solc Dayton Daily News 12 months. Regular monthly access charge applies after first three months.

Roaming, taxes, surcharges and other fees and charges apply. Ameritech long distance required. Roaming minutes are 69eminute including long distance. Airtime and other measured usage are rounded up to the next full minute at the end of each call for billing purposes. Phone models and dealer participation may vary.

See authorized agent or nearest store lor restrictions and other details. Other restrictions may yply. See store for details. Nokia is a registered trademark ol Nokia Corporation. 2000 Ameritech Corporation.

rights resyved..