As Seen In Bankruptcy Court: Struggling Oddball Retailers End Up With Same Pitch

The past year has seen a wave of bankruptcies from companies whose products were better at spawning memes than sales. The medium doesn’t seem to matter. SkyMall folded its print catalog, infomercial specialist Thane International filed for bankruptcy in Canada, and online invention crowdsourcing startup Quirky Inc. filed Chapter 11.

The product-as-punchline business model doesn’t necessarily doom a brand to failure, but it does raise the likelihood a company will see the inside of a bankruptcy courtroom.

SkyMall was an anachronism long before it shuttered this January, when its bankruptcy brought an end to the era of in-flight catalogues selling luxury” dog beds, yeti sculptures and glow-in-the-dark toilet seats. It was a brilliant idea when it was launched in 1990 – a captive audience of in-flight readers flipping through a catalog spiced up with just enough oddball items to keep people talking about it long after their plane had landed. But smartphones, tablets and in-flight Wi-Fi helped kill the catalog.

C&A Marketing bought SkyMall’s assets in a bankruptcy sale this April for just $1.9 million, saying it would shift the brand away from life-size yard gorillas and back toward its “roots,” travel products that are “innovative, fun, cool.”

Thane International was essentially SkyMall for the home viewer, a purveyor of “As Seen on TV” products like the X-5 Steam Mop and the Rockin’ Abs Abdominal Trainer. The Toronto-based company boasted of the “power of the half hour” to drive sales, with 250,000 half-hour time slots globally and seven full-time home shopping channels. But following the great success of the X-5, the company couldn’t find a new product to match previous bestsellers. Direct marketing on TV is on a years-long downward spiral as eyeballs shift elsewhere.

“The media ratio — the sales you get for every dollar [you spend] — used to be 10 to 1,” Thane CEO Amir Tukulj said this May. “Now, it’s less than 2 to 1. You’re hardly breaking even on TV. You have to make it up somewhere else.”

For its part, when Quirky launched in 2009 it was teed up to be the next generation of  gadget vendors, but in practice was more like “Hooli XYZ” from HBO’s Silicon Valley, a fictional “dream big” company with more cool ideas than practical ones. Quirky solicited potential inventions from its users via an online “idea factory,” where community members voted on which ones should be turned into inventions. The company’s website boasts that 286,416 inventions were at least “started” at Quirky, including the CitriTwist device designed to best wring juice out of citrus fruits, and the Porkfolio, a piggy bank that synchronizes with an app to keep track of its contents.

Quirky rose fast. The Sundance Channel created a show around the company in 2011, following Quirky as it put together inventions and picked up $185 million in financing from some of Silicon Valley’s largest venture capital firms. But the company was spread too thin and operating expenses mounted as it attempted to simultaneously manufacture dozens of different products instead of iterating a profitable handful.

Both Thane and Quirky have buyers for their assets that will keep certain of their brands going. Thane is proposing a $50 million asset sale to its own senior management. Quirky sold its Wink smart home subsidiary for $20 million, but the sale of the parent company’s intellectual property looks like it will be much closer to SkyMall’s dimensions, with an opening bid of just $2.3 million.

The companies may die, but their brand names will likely shuffle on post-bankruptcy in the vein of The Sharper Image, which after its 2008 Chapter 11 continues on as a website with products like lightsaber tongs and electric unicycles.

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