$20 Doll Salon? American Girl Takes on Hollywood

Celebration of Wide-Eyed Girlhood Hits Responsive Chord With Loyal Moms, Daughters

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The wind is whipping through the snowy streets of Chicago. It's not the ideal time for a trip to the city's ritzy downtown shopping district, yet the taxis stop at frequent intervals in front of the glowing glass doors of American Girl Place.

For Brooklyn Chase of Kansas City, Kan., it's a long-awaited trip to see the "birthplace" of her prized doll. The 3-year-old is wide-eyed as she searches for an outfit for herself to match her doll's. Her mother, Megan, has big plans for an all-day outing at the store tomorrow, but to wait until then was unfathomable for Brooklyn since her arrival by plane just hours earlier.

Such is the allure of the American Girl brand. The stores get no national ad support; they're promoted in American Girl Magazine, which has 650,000 subscribers, and in the American Girl catalog, which prints 50 million copies a year. There is some local print support in each market, but that doesn't explain why a parent will bring her little girl hundreds of miles so she can spend hundreds of dollars on doll stuff. American Girl Place is a powerhouse of "experiential" retail marketing, the kind that breeds invaluable loyalty and word-of-mouth.

For the Chases, the trip is likely to include a photo shoot with Bitty Baby, a salon visit, a three-course lunch at the cafe and that matching outfit -- an outing that could total more than $300 by day's end. Although Ms. Chase admits to sticker shock, she feels it's all worth it.

"I know it's a bit more pricey," she says. "I'd rather pay that than less for something that's a little risque and violent. It's not like those Bratz dolls. We don't buy those. They're real suggestive and stuff. Even Barbie is a little on the border."

In an era of retailer behemoths selling aisle after aisle of toys and putting pressure on marketers to keep prices low, Mattel's American Girl attracts consumers willing to spend as much as $200 for a doll. It's a strategy that glorifies the conservative and traditional, such as with American Girl's recent "Saving Girlhood" campaign, as opposed to the likes of Mattel's Barbie, always aspiring to be contemporary and cool.

AG Place fulfills the desire for a wholesome play experience and a chance to share in a childhood ritual; it also provides the opportunity to engage in a shopping experience that goes beyond the banal offerings of big-box retail.

There are only three American Girl Place locations -- New York, Chicago and the latest American Girl Place, opening April 22 in Los Angeles and the only new store planned for 2006. The Chicago and New York stores last year drew about 1.2 million visitors each, and the new L.A. site is expected to do as well.

American Girl products are sold only at these stores, through catalogs and online. About 12 million dolls have been sold since the brand was born 20 years ago. American Girl generated sales of $400 million in its fiscal 2005. Admittedly, Barbie still betters American Girl with sales of $1.2 billion, but American Girl's 2005 sales were up 15% as Barbie continued to struggle with U.S. sales down 18%.

American Girl's success is especially noteworthy during these tough days for toy marketers. The bulk of the toy market is essentially locked up by three big-box superpowers -- Wal-Mart Stores, Target Stores and Toys "R" Us, which blanket the nation with stores and are all known for their cost-cutting ways and hammering of suppliers. Mattel is free of these concerns with American Girl. The company can set its own prices and doesn't need to split the take with retailers.

"You are not going to see an American Girl in every mall and strip mall in America because the brand is very special, and that's how we keep it special by limiting the availability of the experience," says Wade Opland, VP-retail for American Girl Place.

Experts dub American Girl Place "experiential retail" times 10. It goes beyond the norm in the kids/tweens retail segment. There are other companies that nurture the special retail experience, but few can get away with charging $20 for a visit to the doll salon or $18 for lunch at their cafe.

This high-price, limited-location strategy is fine with Mattel, which acquired American Girl in 1998. Mattel CEO Robert Eckert, during his most recent conference call with analysts, reconfirmed his oft-quoted plans to never exceed six stores with the American Girl concept.

Good strategy for Mattel and analysts, perhaps, but the American girls of Kansas City will continue to face a 500-mile-plus shopping trip. And they'll go.

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