Throughout Richard Thalheimer's sprawling Pacific Heights home are quirky artifacts from happier days when he still ran The Sharper Image.
There's Alfred the Butler, once a popular catalog item, holding a silver tray filled with chocolate mints in the foyer. A whimsical, life-size C-3PO, the Star Wars character, which the company once sold for the sci-fi buff who has everything, adorns a corner of the living room. Elsewhere, there's a full suit of armor, another refugee from past Sharper Image catalogs at $3,800 a pop.
The 59-year-old Thalheimer made a name for himself — not to mention a fortune — purveying such fun-but-inessential luxury items to the wealthy and hordes of the upwardly mobile in shopping malls across America. Within the last year, however, the man whose public identity had been intertwined with the company from its start has vanished from the Sharper Image consciousness.
Dumped as head of the San Francisco–based retailer last September, and banished from its board at year's end, Thalheimer's remaining connection to the company he founded 30 years ago was severed in May. That's when the new regime installed after a shareholder revolt — headed by corporate turnaround artist Jerry Levin — forked over $26 million to acquire his remaining 20 percent stake in the company.
After the takeover, products with Thalheimer's likeness on the packaging were sent back to distribution centers to be reboxed; all mention of him as the company's founder was removed from the catalog and other materials; and an inspirational CD, Creating Your Own Sharper Image: Richard Thalheimer Helps You Grow and Manage Your Business and Your Life, was yanked from stores.
Thalheimer's exit had been hastened by consecutive years of declining sales, a depressed stock price, and mounting legal woes from consumer class-action lawsuits challenging the safety of the Ionic Breeze air purifier, the company's most successful product. (The class-action cases were preceded by a famously unsuccessful legal complaint the company lodged against Consumer Reports magazine, which, ironically, helped draw attention to the air purifier's alleged failings.)
Earlier this month, a federal judge in Florida rejected a settlement the company had been hoping for in one of the lawsuits, ruling that awarding $19 store coupons to people who bought the air purifier before it was equipped with an ozone-reducing attachment was not “fair, adequate, and reasonable.” Experts say that the other consumer action, initiated in San Francisco, and which had been on hold pending the Florida ruling, has the potential to push the company — with its 186 stores and swank headquarters on the Embarcadero — into bankruptcy.
Sitting in his living room with its sweeping views of the bay and the Presidio, Thalheimer talks about his last days as chairman and CEO the way a historian might describe a palace coup. It's the first time he's agreed to be interviewed since being ousted.
“All in all, I guess it wasn't so bad,” he says, as if trying to convince himself that his forced departure from his beloved company somehow might not have happened. Thalheimer professes to have accepted his overthrow “with a great deal of philosophical calmness,” but acknowledges the difficulty of being tossed from an enterprise he built from scratch. “You'd think the founder-creator guy would be recognized more graciously,” he opines. “Even if you don't want to follow him anymore, even if you think he's done, you still sort of recognize the founding father.”
First as a blockbuster mail-order catalog, then as an iconic chain of retail outlets ensconced in shopping malls, The Sharper Image came to epitomize the technologically innovative, the new and the cool. And the man who epitomized The Sharper Image was Thalheimer, whose low-key effervescence and congenital optimism made him an alluring figure as its chief executive and pitchman.
“Richard was The Sharper Image,” says Craig Trabeaux, who rose from being a store manager to being head of all its stores before following his boss out the door. “In every sense of the word, the company was an extension of his persona.”
Back in the early '70s, when Thalheimer began selling copier supplies door-to-door to merchants in the Financial District, there was little about his fledgling enterprise to suggest it was the forerunner of a new retailing genre. He called his one-man operation Thalheimer Business Systems, before scrapping the name for one that seemed better suited to what he had to offer: The Sharper Image.
The gig started the day after he arrived in San Francisco in a new fire-red Porsche bought with profits from selling encyclopedias the previous summer. At the time, he was fresh from having acquired a degree in psychology at Yale, and was preparing to enter Hastings College of Law.
As the scion of an Arkansas retailing family, Thalheimer got an early start in sales, helping peddle toys at Christmas in his family's Little Rock department store. By the time he finished high school, relatives say his ambition was well charted: to start his own company and make a name for himself as an entrepreneur. “Richard could sell anyone anything; it's in his genes,” says his sister, Joan Nafe, a Little Rock veterinarian.
Although Thalheimer worked briefly as a contract litigator after graduating from Hastings, practicing law was never in the cards. He nurtured his tiny business — as he had done throughout law school — waiting to seize the right opportunity.
Opportunity knocked in the summer of 1977 with the Realtime Watch, billed as the first affordable, waterproof, and shock-resistant chronograph that could be reliably used by joggers. Thalheimer discovered it at a Las Vegas trade show and locked in an exclusive sales arrangement with Seiko, its creator. To sell it, he took out an ad in Runner's World magazine featuring friend and legendary San Francisco runner Walt Stack, and the orders poured in. Thalheimer sold thousands of the watches at $69 apiece, earning a cool $1.5 million.
Living in a one-bedroom apartment at Octavia and Broadway, which had a dirt basement that served as his first “warehouse,” Thalheimer used the profits to open an office and troll for other products that could be marketed for a mostly upscale clientele. He scored again with the first cordless home telephone, long before cell phones. In 1979, he unveiled the first Sharper Image mail-order catalog, which went on to be ranked alongside Sears and L.L. Bean as one of the best catalog concepts ever. Two years later, the first Sharper Image store opened near Jackson and Battery streets in what is now a deli.
Tapping into a market of conspicuous consumers willing to shell out $117 for a neon phone or $200 for an electronic stethoscope (marketed as able to monitor conversations through walls), Thalheimer was off and running. With the catalog and a proliferating number of stores, The Sharper Image was a phenomenon. And Thalheimer became a retailing celebrity.
He popped up on TV talk shows, including Oprah, The Today Show, and Good Morning America. ABC's 20/20 devoted a segment to him. His name and likeness were plastered all over the ubiquitous catalog, on in-store displays, merchandise boxes, and, later, on the company's Web site. For years, until shortly before his ouster, he was the star of countless company TV infomercials.
“Richard couldn't go anywhere without people recognizing him as the Sharper Image guy, and I'm sure they still do,” says Reed Trencher, the Mill Valley public-relations guru largely responsible for the company's (and Thalheimer's) early media success.
Trencher says he met the Sharper Image founder in 1981 at a time when Thalheimer couldn't get any media attention. “The Chronicle and Examiner didn't want anything to do with him,” Trencher says. He built a mystique around the impeccably dressed, fastidiously groomed gadget man, whose gentle enthusiasm seemed perfectly suited to the frilly items he hawked.
Others selling similar products might have come across as hucksters, Trencher says, but not Thalheimer: “He came off as the man bringing the newest toys from the North Pole, except that the kids were adults and every day was Christmas.”
For someone whose persona was honed to convince a mass audience of customers that they knew him, Thalheimer is intensely guarded about his personal life. He and his wife, Christina, met on a blind date at the San Francisco Ballet in 2000 (he's a longtime ballet board member). Married in 2003, the couple has a young daughter. (Christina declined to discuss the couple's private life for this article.) Thalheimer has two daughters, ages 20 and 18, from a previous marriage.
“Richard has always been a loner,” says Joan Nafe, who recalls her brother as more interested in being the “brainy kid” on the debate team rather than being part of the “follow the football crowd” while attending public high school in Little Rock.
Thalheimer is the product of an upper-middle-class family with deep roots in Arkansas' capital city. His German Jewish immigrant great-grandparents started a livery business after settling there in 1850. His father's side of the family developed an in-state department store chain that was sold to become part of nationwide retailer Dillard's at about the time Thalheimer left for Yale.
His father, Alan Thalheimer, hoped that Richard might return home to work in the family business, a small chain of ready-to-wear women's clothing stores. “Richard has a lot of ambition; he wanted to do his own thing,” says the elder Thalheimer, who kept his son busy at summer jobs as a teenager, including driving a delivery truck and working on a paving crew.
But the younger Thalheimer was best at sales. He had begun to sell encyclopedias in high school, and when he got to college, he added embroidered T-shirts and yogurt machines to his repertoire. That he made a mark as the nation's preeminent gadget retailer didn't surprise his sister. “My mother had a hard time keeping him in toys when he was little,” she recalls. “He went through them quickly and was always looking for something new.”
His penchant for toys, albeit more expensive ones, has scarcely ebbed. For years he kept a collection of rare motorcycles on display at Sharper Image headquarters. On a trip to the Florida home of Arthur Jones, the founder of the Nautilus exercise equipment empire, Thalheimer was so impressed by Jones' aircraft and private landing strip that he took up flying (his latest plane is a burgundy, gray, and white Cessna 182) and has logged 1,500 hours. Until bending to shareholder pressure to get rid of it, he kept a corporate jet at his disposal while at the company.
While serving him well, his relentless quest for the new and the cool has also taken a toll. “Richard has so much energy and is so focused on his work that his mind is never at rest,” says ex-wife Elyse Eng, who sits on the board of the California Pacific Medical Center Foundation and is prominent in Nob Hill social circles. A former modern dancer, she met Thalheimer after he saw her perform with a small dance ensemble in the Mission in the late '70s. The two have remained friendly since their 13-year marriage ended in the mid-'90s.
Eng recalls vegetating with a book during beach vacations to Hawaii and elsewhere while Thalheimer was “constantly thinking of stuff and calling his creative director back and forth.” Even on bicycling getaways to rural France, in the days before cellphones, she says that whenever they entered a city he would be “looking in store windows, always looking for products.”
“He's a very complicated person; very difficult to get to know,” she says.
Former subordinates, some of whom asked not to be quoted, say he could also be difficult to work for. A self-described neatness freak, Thalheimer for years enforced a strict dress code that dictated the style and color of clothes headquarters staffers could wear (blue or gray); decreed that only ceramic coffee cups be used (to curb spills); and outlawed all but gray legal pads and pencils (to match the décor). “He chewed me out more than once for propping my feet on the [office] furniture, although eventually he lightened up on that some,” one former underling says.
Thalheimer's impromptu store inspections — in which he was famous for giving the white-glove test to Plexiglas display cases — became the stuff of company legend. “Whenever he landed in a city with more than one store, the people at the first store he visited called ahead to the others to let them know he was in town,” one former manager says. “That was the pact.”
Despite his creative genius at sniffing out new products and knowing how to market them, Thalheimer fared less well when it came to nuts-and-bolts organizational details. Under his tutelage, the company experienced a variety of chronic problems over the years, observers say, including inventory shortfalls and product development delays. His critics, including some Wall Street analysts, say that he was prone to governing by whim.
Asked about such things, Thalheimer is candid. “There was a time, especially in the earlier years, when I had a reputation for being somewhat demanding,” he concedes. “But we all grow. And I believe people will tell you that over time I mellowed.”
The gold standard of The Sharper Image's diverse product offerings was, and remains, the Ionic Breeze. The air purifier was not only a top seller, it was also the prize progeny of Sharper Image Design, a highly successful and secretive product design lab that Thalheimer introduced in 1991 to churn out high-margin items the company could produce itself.
Occupying nondescript quarters in a Novato office park without so much as a sign to announce its existence, the design group became a kind of Xerox Park for gadgetry. The lab started with a couple of inventors-for-hire whose first project was to develop a motorized tie rack (60,000 units of which were sold in a few months). By the mid-'90s it had two dozen engineers churning out scores of patents. Those who worked there say Thalheimer provided hands-on inspiration during frequent visits in which he and the inventors typically sat around a huge table and brainstormed over burritos.
“The place was so secret that there were people at company headquarters who didn't even know where it was,” says inventor Chuck Taylor. He registered dozens of patents (with The Sharper Image as the assignee) during 15 years at the lab, before retiring to Florida to spend time on his sailboat, aptly named Ironic Breeze. “Besides Richard, there were only a handful of company executives who came.”
Joe Williams, who as the company's longtime former security chief was among the occasional visitors, recalls the lab as “where the inner child could come out in every man, with gizmos blinking and whirling. The only thing missing were white coats and propeller hats.”
The lab (which the new regime disbanded after Thalheimer's departure) was responsible for some 300 patents. It rolled out more than 100 products, from the fanciful to the bizarre. Some, including a fogless shower mirror, “sound-soother” white-noise machines, and a battery-powered line of nostril-hair trimmers, were phenomenally successful. Others, such as an anti-snoring wristband, with a snore-detecting microphone that triggered a mild electric shock to wake up the offender, were somewhat less so.
But nothing came close to the triumph of the first-of-its-kind air purifier, with its ability to move air silently while trapping airborne particles.
The principle upon which it is based, called electrostatic precipitation, had been known, in theory, for more than a century, but it had never been applied to a consumer product. That changed with a struggling inventor named Jimmy Luther Lee, who approached Taylor in 1995 with an electrostatic box the size of a cigarette pack that he hoped to introduce as something to keep computer monitors dust-free. Taylor saw air-purifying possibilities.
At Taylor's urging, Thalheimer staked Lee the princely sum of $25,000 to engage in further research. Lee ultimately earned more than $10 million in royalties from The Sharper Image, those familiar with the matter say. (Lee, who heads a product development company in Rohnert Park, did not respond to interview requests.)
The Breeze was an instant sensation. After an ad for the purifiers inadvertently appeared prematurely in SkyMall, the in-flight catalog, the company booked 2,500 orders before the first shipment had even arrived from China.
Yet the same blockbuster product that pushed Sharper Image revenues into the stratosphere would also figure prominently in Thalheimer's losing control of his cherished company, and in its lingering financial woes.
Consumer Reports dinged the Ionic Breeze as “ineffective” in 2002, ranking it dead last among 16 air purifiers. The magazine concluded that the Ionic Breeze — of which the company by then had sold more than 3 million since 1999 — had performed poorly at removing dust and smoke particles from the air.
The purifier took another hit in 2003, faring only slightly better in follow-up testing in which the magazine moved it up a notch to rank next to last. Still, the buying public didn't appear to care. Sales of the purifiers were skyrocketing, constituting nearly half of Sharper Image profits, and helping to make fiscal 2003 its best year ever, with $750 million in revenue.
But Thalheimer seethed at the negative reviews and the company filed a lawsuit attacking the magazine's test procedures as unfair and accusing it of negligently disparaging the product. Owing to the publicity from the lawsuit, sales of the purifiers tapered off, even as competitors, including Home Depot, Radio Shack, and shopping mall rival Brookstone, flooded the market with imitators.
In 2004, a judge dismissed the lawsuit as frivolous, and The Sharper Image was forced to fork over $525,000 to cover the magazine's legal fees. Thalheimer now concedes the lawsuit “was a strategic mistake,” although he still stubbornly insists he was in the right.
If things seemed bad after the lawsuit was tossed out, they got worse.
A new study by Consumer Reports in 2005 determined that a model of the Ionic Breeze (along with similar air purifiers produced by four other companies) was not only ineffective, but also released harmful levels of ozone — something the company disputed, even as it reduced ozone emissions in subsequent versions of the product.
As a result, besides slumping sales and a severely depressed stock price, the company also was hit with competing consumer class-action lawsuits aimed at the purifier.
Even now, Thalheimer asserts that the venerable consumer publication's ozone findings were the result of a “vendetta” for his company's challenge to the magazine's credibility by suing it, something that Consumer Reports attorney Steve Williams of Burlingame dismisses as “preposterous.”
“That's my opinion,” Thalheimer insists. “It may be right, or it may be wrong. But that's what I believe.”
Right or wrong, the demise of The Sharper Image's most successful product (which still accounts for nearly 15 percent of the company's revenue) led to shareholder disenchantment with Thalheimer.
In the spring of last year, the Knightspoint Group, a dissident shareholder group, acquired 13 percent of the company's stock and made a play to seize control of its board to oust Thalheimer and replace him with Jerry Levin, the veteran executive whose résumé includes stints as chief executive at Revlon and the Sunbeam Corporation (now a subsidiary of Jarden Corporation).
To avoid a proxy fight, Thalheimer offered a compromise: The company would drop four members from the board (including Thalheimer's then-80-year-old father) and expand the board to include three members from Knightspoint (including Levin), as well as three independent members.
Thalheimer says he believed he had made an accommodation with Levin and the investor group. “They expressed a willingness for us to work together and I took them at their word,” he says. “I thought that with my merchandizing ability and their pragmatic business skills, it was really a strong combination.”
But shortly after the board was reconstituted, he says it became plain that “Levin wanted to take the reins of the company and push me out.” Last September, the new board named Levin chairman and interim CEO. A month later, the new regime told Thalheimer it wanted him off the board and out of the picture completely. After a severance package that included a $5 million payout, he surrendered his board seat on New Year's Eve.
“It was really ugly the way they ushered him out the door,” says Nick Kiele, an information technology worker who spent eight years at The Sharper Image until leaving this year. “It shocked a lot of people.”
Having had his corporate baby snatched from his grasp, Thalheimer appears bent on proving his conquerors wrong. Just over the Golden Gate Bridge, on a hilltop in Greenbrae, he has turned a remodeled residence into offices to accommodate the small staff of his latest creative incarnation — a privately held Internet specialty retailing company called RichardSolo.com.
Next to a beaming image of Thalheimer at the top of the RichardSolo.com Web site, a scrolling message reminds visitors of his earlier role as The Sharper Image's founder and thanks them for their “past business.” Just as you might expect at The Sharper Image, RichardSolo.com is chock-full of tricked-out phones, power alarm clocks, and assorted novelty items. (Among them: a reconditioned slot machine and a crank radio that doubles as a night light.)
Although it isn't the Ionic Breeze, there's even an air purifier.
Meanwhile, the new Sharper Image regime is busy repudiating the longtime Thalheimer business model of finding the latest, coolest, hottest items around which to generate sales.
As a first order of business, the new team disbanded Sharper Image Design and announced that it would adopt a model similar to department stores in offering customers a choice in different price ranges across each of its product lines. Instead of developing products in-house, it hopes to strike deals with manufacturers to sell items exclusively at The Sharper Image before they are sold elsewhere.
Levin, who has avoided mentioning Thalheimer publicly, declined to be interviewed for this article. However, in a press release last year, at the time the Knightspoint takeover bid was announced, he stated that the company's results “demonstrated that its strategy has stagnated.”
The Thalheimer way “is antiquated and doesn't work,” Steve Lightman, the new CEO installed by Levin, says bluntly. He cites the “volatility” of hitching the company's fortunes to a few hot items, singling out its past overreliance on the Ionic Breeze as an example: “We don't believe that shareholders can withstand that kind of rolling of the dice.”
So far, the jury is out on the new approach. In the year since the management coup, the company's store, catalog, and Internet sales have floundered, and analysts continue to criticize the product mix as stale. (Lightman says he expects that criticism will vanish with the promised roll-out of scores of new items for the holidays.)
The company's foray into selling high-end steaks bearing the brand of celebrity entrepreneur Donald Trump — to which it devoted several pages of the catalog during the spring — was a flop. And its stock has continued to slide, from a high of nearly $40 in early 2004, before the Ionic Breeze tailspin, to less than $3 as this article went to press. The stock has plummeted by more than 70 percent since May alone, when Thalheimer cashed out his remaining shares.
Still, Lightman expresses confidence that the troubled retailer is poised for a rebound. But an affidavit from one of the company's own consultants, introduced in August as part of the Florida court proceeding, takes a dimmer view. “[The company] has virtually no cash relative to total assets and is currently funding operations with borrowing,” wrote James Hitchner, an Atlanta financial analyst. His conclusion: The Sharper Image faces a “high probability” of bankruptcy within a year.
You might think such news would give Thalheimer satisfaction. He insists it doesn't.
“I may not agree with how things turned out with me,” he says. “But I don't want the company to fail.”