Tiny company, huge hit: Robotic hamsters dance out of stores before they even hit shelves

Robotic hamsters are holidays’ unlikely new craze

NEW YORK — When Lori Fowlkes first saw robotic Zhu Zhu Pets toy hamsters in September, she remembers her kids started jumping up and down and saying “Please! Please! Can we buy them?”

Seeing a fully stocked shelf, she decided to hold off until Christmas.

That was “before I knew that the hamsters would soon be off the shelves and more scarce than an H1N1 vaccine,” said Fowlkes, 32.

Now she can’t find them anywhere.

Zhu Zhu Pets, which retail for about $10, are this year’s bona fide must-have toy, following in the footsteps of past crazes for Tickle Me Elmo and Cabbage Patch Kids. On resale Web sites like eBay and Craigslist, they fetch $40 or more. Vital accessories as the hamster car and funhouse are sold separately.

By many counts, the toy is an unlikely hit. They’re in a field crowded with toy pets. The hamsters, which scurry around, make noises and drive cars don’t always work the way you expect and have a limited range of action.

“Honestly, I don’t really get it,” said BMO Capital Markets analyst Gerrick Johnson. “But I don’t need to get it for a toy to be hot.”

The toys do have several factors that make them compelling, Johnson said: fun accessories and scarcity — sometimes when something is hard to obtain it makes people want it more. And they have one big thing going for them in tough economic times: They’re cheap.

“The last couple of years the robotic pet has been very popular, but those have been very expensive,” like Hasbro’s $250 robotic dinosaur Kota the Triceratops, he said. “But here’s a version of a robotic pet that only costs $10.”

Hasbro’s line of lower-priced Furreal Friends robotic animals have not hit the same chord, perhaps because they still cost more, are immobile and don’t have any accessories.

Zhu Zhu Pets, aimed at 3- to 10-year-olds, have rushed in to fill the void. But unlike past “It” toys made by large manufacturers like Mattel’s Tickle Me Elmo and Tiger Electronic’s Furby, Zhu Zhu Pets are made by tiny Cepia Inc. of St. Louis, with just 16 employees in the U.S. and 30 in China, making their success even more unlikely.

____

CREATION OF A CRAZE

Just six years old, Cepia previously worked on an electronic dispensing device for consumer products before turning to toys and its only other product, a line of light-up bears called Glo-E Bears.

The company was started by toy industry vet Russ Hornsby, 56.

The success of Zhu Zhu Pets wasn’t entirely accidental. After being inspired by classic robotic toys, like the barking puppy dog who flips, Hornsby created a prototype. Stores in Phoenix were used as a test bed in May.

The company got the word out with a savvy mix of local cable ads and parties thrown by “mommy bloggers.”

Hornsby said he was hoping to sell three to four pets per store per week, but was secretly hoping for eight. The result, Hornsby said, was exponentially higher, though he wouldn’t say how much.

“The rate was so astonishing everybody had to go back and pinch themselves,” Hornsby said. Toys R Us pulled all of the test data to make sure it wasn’t being manipulated, Hornsby said.

That gave a running start to Cepia’s national rollout in August.

Ads on cable stations Nickelodeon, Cartoon Network and Disney XD have proved to be catnip to kids.

“My daughter saw a commercial for them on Nickelodeon or one of the kid channels and instantly wanted it,” said Tara Purdy Callender, 21. Her daughter’s 6th birthday is on Nov. 25 and “all she wants is Zhu Zhu pets,” lamented Callender, whose search has been fruitless so far.

____

KEEPING UP WITH DEMAND

For parents, the hamster hunt is intense. A Facebook fan site tracks parent’s search for the toys. Hornsby said he recently got a call at 4 a.m. on his cell phone from a mom asking for hamsters. Calls have also been received at the store’s Chinese base from parents trying to go straight to the source.

“They’re calling because they’re upset and they feel we’re not doing a good enough job getting merchandise on the shelves,” Hornsby said.

But with retailers being extra cautious with orders this year following the dismal holiday season last year, the maker has had to scramble to make enough to catch up to demand.

Toy analyst Jim Silver at Timetoplaymag.com said it was late fall by the time Cepia and retailers realized how popular the toys were, and by that time it was difficult to increase production.

“You can’t just go to China and flip a switch,” he said. But in the past three months, the company has added three more factories in China.

“We’re all working so hard right now to try to fulfill this,” Hornsby said. “Retailers are airlifting in millions of products,” a rare and expensive move for stores.

Even if the product remains impossible to find for the holidays, the craze sets Cepia up for a strong 2010. Hornsby estimates the company will sell $100 million in Zhu Zhu Pets by the end of the year. It’s always hard to tell how long a toy will stay hot, but based on bookings, he says that will grow to $350 million to $400 million by the end of next year as production ramps up.

BMO analyst Johnson agreed 2010 will be big for Zhu Zhu Pets.

“I don’t know what Chinese New Year is coming up, but as far as toys are concerned next year will be the year of the hamster.”