Thursday 12 July should have been a red-letter day for thousands upon thousands of kids, and for their favourite shop, Build-A-Bear Workshop. The company had announced a pay-your-age promotion, so customers in the UK, US and Canada could come in to make their own teddies and pay just a fraction of the normal cost: instead of £52 for a top-of-the-range bear, a six-year-old would pay just £6. It sounded brilliant.

What Build-A-Bear hadn’t factored in was the devotion of its young customers, and the unending human appetite for getting something cheap. Its shops were overwhelmed with huge queues wanting to take advantage. Police had to be called to help control the crowds outside the Leeds branch. Scores of shops had to close early; thousands of people left without getting in. Even some of those who did left wildly disappointed: one parent told the BBC that she and her children queued for three and a half hours to get into the Derby branch, then spent another two hours waiting to get their bears stuffed: “When I look back I will probably think, ‘What have I done that for?’ – especially with what I will end up paying for parking,” she said. The next day’s headlines contained the words no executive wants to see describing their business: “chaos”, “carnage”, “fiasco”.

You might have thought Build-A-Bear would take urgent action to ensure a different outcome when its US stores opened, hours later, but no. Ben Bigalke and his three-and-a-half-year-old daughter Astrid arrived at their local Build-A-Bear Workshop in Minnesota’s Mall of America at 9.30am – 3.30pm UK time, several hours into the day of disaster. “The area around the store was completely packed with ensconced, almost camped-out customers,” he tells me by email. “The line zigzagged through the mall’s first floor and wound its way entirely through the theme park in the centre of the mall to the other side of the mall. It seemed like a quarter-mile-long line, at least. We learned later that people began camping out at 6am and there were probably more than 500 people – maybe 1,000 – in line before the store even opened. We were nowhere near the store.”

Facebook Twitter Pinterest The Build-A-Bear store in Belfast, where police were called to deal with crowds who turned up for the promotion before the store had to be closed. Photograph: Niall Carson/PA

In Minnesota, despite what had already happened in the UK, the events came as a complete surprise to all concerned. The Build-A-Bear store staff didn’t tell customers about how long they might be waiting, or what was happening. “I asked a security guard what to expect and they said they were upset by the situation, saying it was unexpected and that they were not prepared or even forewarned that something like that could happen,” Bigalke says. “They didn’t have any information about how many hours we could be expected to stay in line for, and I feel like they should have known. There also should have been representatives from the store telling us what was happening and what to expect.”

Pay-your-age was the first major disaster in Build-A-Bear’s 21-year history, during which time the company has usually been ahead of the game, both as a retailer and a mythmaker. It is rare that a shopping chain has an origin story – its US founder, Maxine Clark, had been shopping with a friend’s children when the little girl commented that they should make their own bears in the absence of anything new in the shops. A lightbulb went on in Clark’s head. Of course, it wasn’t quite as homespun as that: Clark was an experienced retail executive, who had worked for the May Co department store company and been president of Payless ShoeSource. She knew what she was doing.

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The first part of Clark’s genius – and it was genius – was to anticipate what was to prove the most important shopping development of the internet age before it was de rigueur: experiential retailing. In summer 1998 – a year after Clark set up her first Build-A-Bear Workshop in St Louis, Missouri – Harvard Business Review published Welcome to the Experience Economy, an influential essay that set out the path ahead. “From now on, leading-edge companies – whether they sell to consumers or businesses – will find that the next competitive battleground lies in staging experiences,” wrote its authors. “An experience is not an amorphous construct; it is as real an offering as any service, good, or commodity … Businesses must deliberately design engaging experiences that command a fee. This transition from selling services to selling experiences will be no easier for established companies to undertake and weather than the last great economic shift, from the industrial to the service economy.”

This was precisely Clark’s business plan. Build-A-Bear has an eight-step process: “Choose Me, Hear Me, Stuff Me, Stitch Me, Fluff Me, Dress Me, Name Me, and Take Me Home.” Everyone who buys from one of Build-A-Bear’s 361 stores or 102 franchised shops – in the US, Canada, the UK, Ireland, Denmark and China – has the same experience. They choose an outer skin from more than 30 options; they select a sound chip to go inside (it can be a prerecorded sound, or one they record themselves); they add in a small satin heart (the part of the process that is the most emotionally rewarding, or manipulative, depending on your point of view); they get it stuffed to “just the right amount of huggability”; they get the bear sewn up, with a unique barcode for future online participation; they get the fur fluffed; they accessorise it with clothes and extras. They give it a name to be put on a birth certificate and “passport” (I know of one parent who always takes his children’s bear passport on business trips, in order to buy something from the local Build-A-Bear Workshop and get the passport stamped). Then they are given the bear in a special carrying case to take home.

Facebook Twitter Pinterest Accessories for the teddy bears make up a substantial revenue stream for Build-A-Bear. Photograph: Christian Sinibaldi/The Guardian

“I think they did something incredibly clever,” says Corin Birchall, founder of the retail consultancy Kerching. “You pick away at the corners and there’s not actually a lot to it. But it absolutely captured kids’ imaginations and turned this commodity into a tangibly valuable product. At all retailers across the world, as the internet makes the market more global, a retailer’s job is to add tangible value to their place in the sale journey. I can’t think of another retailer that has added more value to the process. It’s just incredible how well they can monetise something that seems intangible to an adult. They were ahead of the curve in doing that.”

And, for kids, the intangible really is something magical. Nicola Hunt’s nine-year-old daughter, Jenna, has nine bears and the associated accessories – the bears are from parties and gifts, the accessories (where Build-A-Bear makes a huge chunk of its revenue) bought with birthday money. The number of accessories seems unending, all priced at what appears a reasonable level individually, but capable of mounting up: £4.50 for a pair of bear sunglasses, £14 for a tent, £8 for a sleeping bag, £2 for a headband, and on and on and on.

Facebook Twitter Pinterest The queue for Build-A-Bear at the Mall Cribbs Causeway shopping centre in Bristol on 12 July. Photograph: @jonesy_lynz/Twitter/PA

While Hunt feels disquiet at the hard sell given to parents, she admires the way the staff interact with children who visit the stores. “I like the actual process of choosing a bear, I like the way they put the heart in and you give it a kiss. But the bears are overpriced, the quality isn’t good and you can’t wash them.” Nevertheless, she has seen how important her bears have been to Jenna. “She was very unwell last year and in and out of hospital,” she says. “One of the things we did was go to Build-A-Bear and get a bear to go through the process with her. That was really helpful. When she had a drip in her arm, the Build-A-Bear had a drip in its arm. There was something very special about it.”

The second part of Clark’s genius was choosing the teddy bear, a toy that has remained fundamentally unchanged since coming to the market 115 years ago. “The teddy bear has become an icon, a symbol of childhood, which is why campaigns aimed at children use the image of a bear – think of Pudsey,” says Deborah Jaffé, author of The History of Toys. “The teddy was the first really mass-produced soft toy. But it was just chance it was bear – it could have been a dog or a monkey. But a bear is a simple shape to make and doesn’t use much material. It’s not as complicated as, say, making an elephant.”

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They remain popular, Jaffé says, not just because of their simplicity and sweetness – and, truthfully, who does not love a nice teddy bear? – but because animals can stand in for humans in a universal way: bears have neither race nor gender. “You get this in children’s book illustrations: in order to get round gender stereotyping or race and ethnicity, it’s easy to use the animal rather than a human form. When you put a human form in, it gets much more complicated. Mattel have had to make Barbie in lots of ethnicities – but you don’t have to do that with an animal.”

Clark had hit on the perfect combination: a universal product and a new way to sell it, and then to continue to sell. By registering each bear with a unique code before it leaves the store, Build-A-Bear gives its young customers the chance to continue participating – and spending – in the Build-A-Bear experience online once they get home: as well as buying yet more stuff, they can participate in Build-A-Bear’s world. “Our website lets children create virtual versions of themselves and their animals and interact with each other online,” Clark explained in 2013.

Even before data was such a valuable commodity, Clark had created an idea that meant Build-A-Bear knew more about its customers’ tastes than most toy retailers. As its senior marketing manager for digital explained in 2015: “We’re looking at the data from a macro level to understand whether a particular product resonates with a girl who’s four years old or 12 years old, and as you market to the mother, how do you continue to tell the mother about additional pets or accessories and fashions? We’re starting to get into this from a digital perspective with our loyalty members where we have that type of data collection because they chose the option of us continuing to market to them on a one-to-one basis.”

Facebook Twitter Pinterest Kaleigh Arnett-Harris, eight, of Denver, celebrates being next in line. Photograph: Joe Amon/Denver Post via Getty Images

By the time Clark stepped down as CEO in 2013, the company had generated $5bn (£3.8bn) in sales. It also continued to expand its “experiential offering”. As Clark’s reign drew to a close, it was introducing “HyperSound directional audio technology” into some of its stores, which would let Build-A-Bear run multiple interactive kiosks within its shops, offering a specific audio message to customers. Directional audio is yet another of the techniques used by retailers to try to prolong time in-store and increase the amount they spend. Or, as the website Retail Customer Experience put it: “By using directional audio retailers can create an immersive 3D sound environment confined to a specific area … Those outside of the zone don’t hear the sound, and for the shopper the experience is similar to wearing headphones, except they aren’t wearing headphones … The memorable experience delivered via directional audio adds a ‘wow’ factor that increases the effectiveness of advertising messages, ultimately leading to increased sales.”Fearing kids were being lost to screens, it partnered with Samsung to place interactive stations in shops, so customers could build their bears without any of the burdensome physical or personal interaction of the traditional experience.

Facebook Twitter Pinterest Build-A-Bear teddy shells at its New York store. Photograph: Alamy Stock Photo

But times aren’t necessarily easy for Build-A-Bear. It made a loss in 2013, when Clark left, before bouncing back into profit. Its 2017 annual report notes that total revenues have declined year-on-year since 2014; last year’s profits are little more than half its 2014 levels. The report admits one of the main contributors to a consolidated net income increase over the previous year was “an increase in gift card breakage revenue”. In short, a big chunk of its profit was down to gift cards that had been sold not being redeemed.

The pay-your-age promotion was meant to be the start of a new thrust. By making it open only to members of the Build-A-Bear Bonus Club, it hoped to entice scores of new customers to register. Doubtless they succeeded. Unfortunately, the offer they made was just too good. In the wake of the fiasco, a YouGov poll found that while awareness of the brand had rocketed, that awareness was almost entirely negative.

And, as Birchall observes, the episode was entirely avoidable. First, he says, it is “quite alarming” how badly Build-A-Bear underestimated the level of demand. What’s more, the fact that the whole appeal of the shop is based on a time-consuming experience means it does not lend itself to events with acute peaks of traffic, rather than steady flows. “I can’t fathom how they could be that far out.”

Facebook Twitter Pinterest Romeo Erickson, seven, of Aurora, Colorado, hugs his My Little Pony tight after it was built. Photograph: Joe Amon/Denver Post via Getty Images

At this point, it would be apt to give the last word to Build-A-Bear. I sent them 15 questions, most of which were purely factual, and some specifically about the pay-your-age promotion. After due consideration, the company’s PR people sent back their response. “We greatly appreciate your interest in this story. We are still reviewing and analysing, so we’re not able to answer most of your questions at this time. That said, we did want to share the press release regarding the Build-A-Bear Count Your Candles program to ensure you had the full details on this program that launched last week.”

So I go to Brent Cross shopping centre in north London, to the branch hidden away inside the Fenwick department store. There were no customers there on a warm Wednesday morning during term time. Can I speak to the manager, please? Yes, that’s me. Would you be willing to tell me what it was like to be in charge on the Thursday of pay-your-age? She looks panicked and says she has to call her boss. A couple of minutes later, she returns. “We’re not allowed to talk to anyone. No interviews.”

At Build-A-Bear, the PR shutters are down. But the bears still sit there in their rows, waiting to be stuffed, fluffed, named and taken home.

• This article was amended on 25 July 2018. Gift card breakage revenue refers to unredeemed gift cards, not those that are physically broken in half as an earlier version said.

