Why the party’s over at Party City, but Build-A-Bear Workshop is Thriving

We’ve been talking about the retail apocalypse for quite some time now. And the sector sure has had its problems – from rapacious Private Equity investors who burdened their properties with debt, to customers wanting one-stop-shops, to the pandemic, to just being kind of irrelevant, retailers have struggled. But there are lessons to be learned from the success stories. I am proud to say my friend and Columbia MBA grad Sharon Price John, CEO of Build-A-Bear workshop, is one of the amazing rare ones!

Sharon Price John at her New York City book signing for her book “Stories from Heart” with myself and my brand-new friend, Norah the NYC Bear who has become a much-beloved member of our family!

The party’s over….they burst your pretty balloon

While that is an actual line from a popular song, it kind of sums up the sad fate of Party City, whose management team has now decided that staggering through a third chapter after its second bankruptcy is probably just not a good idea. 700 stores are going to be shut down, and its employees will receive no severances and no extension of health care benefits.

When Party City originally filed for bankruptcy in January 2023, many observers chalked it up as another victim of the retail apocalypse. E-commerce meant more online buying, a shortage of helium for those balloons (and rising prices for the same) and of course the fact that during the pandemic, people weren’t having parties were all contributors. But their founder, Steve Mandell, wasn’t having it during the first bankruptcy filing. Multiple private equity buyers found gold in the store’s brand, loaded it up with debt and (in his words) “…took out the top two things that made this company very special. First, we were the discount party superstore. Today, it is not a discount store. The prices are top dollar. Second, Party City had great variety.” Mandell’s story is highlighted here.

Party City's strategy reflects to some extent what I call "the trap of sustainable competitive advantage" – assuming that what worked in the past would continue to work indefinitely. The company doubled down on physical retail presence, ending up with nearly 900 stores, and added a huge debt load to reward their private equity investors. They treated their customer experience as transactional, focused primarily on holidays and occasions, missing the profound shift toward experiential retail and year-round engagement. They also suffered from owners who tilted far more toward financialization than building a living company.

Putting their hearts into it

The contrast with Build-A-Bear Workshop couldn't be more striking. When Sharon Price John took the helm in 2013, the company was struggling with similar challenges – a mall-based retail model under pressure and changing consumer preferences. But rather than clinging to old assumptions, she led a remarkable strategic transformation. And she did it while still retaining a wonderful working relationship with Build-A-Bear’s iconic founder, legendary entrepreneur Maxine Clark.

Price John understood what I call "transient advantage" – the need to continuously reconfigure assets and capabilities to create new sources of value. She also recognized that Build-A-Bear was a brand, not the actual workshop, which expanded the addressable market way beyond the shopping mall and gave it access to creating experiences for many occasions. Under her leadership, Build-A-Bear diversified beyond malls into tourist destinations, hospitals, and cruise ships. They expanded their demographic appeal beyond just children to include adults, capitalizing on the "kidult" trend and nostalgia market. The company embraced digital transformation, creating omnichannel experiences that blend physical and digital interactions.

Most importantly, Price John recognized that Build-A-Bear's true value transcended the physical store environment – it was about creating memorable experiences and emotional connections that lived in customers' hearts long after they left the retail space. She understood that when customers walked into a Build-A-Bear Workshop, they weren't just buying a product; they were purchasing a story, a memory, and an emotional journey that began in the store but continued far beyond it.

This insight led to a profound shift in how the company approached its brand. Instead of thinking of Build-A-Bear as a retail chain that happened to offer experiences, Price John repositioned it as an experiential brand that happened to operate retail locations. This subtle but crucial distinction opened up entirely new strategic possibilities. The company began leveraging its emotional equity to expand into content creation, licensing, and entertainment, effectively transforming from a retail chain into an intellectual property company with multiple revenue streams.

You can read more about Price John’s remarkable story in her delightful book Stories and Heart which also reveals her superpower – the ability to bring meaningful stories to life. You can watch a recent “day of” in her life in this Fortune video interview.

We also had a great conversation about her philosophy, lessons learned, the disappointments and combining a high-powered job with family. You can watch a short clip on having the courage to ask for what you want by considering “what’s the worst that can happen?” here. You can watch (or listen) to our full conversation here. It’s a master class in leadership and thinking strategically.

The results, and lessons learned

The results speak for themselves. While Party City struggled under its debt load and outdated strategy, Build-A-Bear achieved record profits in 2024, with a steadily climbing stock price. To me, it’s a heartening (see what I did there?) illustration of a company that has deeply human core values at its center, but that can also deliver results for shareholders, given sufficient time. Their success demonstrates key principles I've long advocated: the importance of continuous reconfiguration, the power of strategic inflection points as opportunities rather than threats, and the critical role of leadership in driving strategic transformation.

The key takeaway? In today's rapidly evolving business landscape, sustainable competitive advantage is largely a myth. Success comes from embracing transient advantage – continuously discovering, exploiting, and reconfiguring opportunities. Build-A-Bear's transformation under Sharon Price John provides a masterclass in this approach, while Party City's failure serves as a cautionary tale of the perils of strategic stagnation.

What strategic assumptions in your business might be ready for reconfiguration? The answer could mean the difference between Building a Bear and hosting a going-out-of-business party.