(Note: Until recently, Fred Zerull was a long-time Ben Franklin retailer and former member of the Sierra Pacific Crafts group of independent retailers.)

This summer I liquidated my Ben Franklin Crafts business in Redding, a northern California town of 85,000 with a trading area of 160,000. Here's my story:

I started my first business with an initial investment of $5,000 and built a multi-million dollar sewing fabrics business with 15 stores in two states. But the de-regulation of business and the dropping of tariffs destroyed the home sewing business. At the time, though, the U.S. was an extremely wealthy country, so the destruction of a few industries raised little notice.

I have been a student of trends. Common sense told me we are on our way to destroying what made America great. Wealth comes from manufacturing and production of goods. When you have the Chinese being paid $5/day vs. an American being reimbursed with pay and benefits approaching $15 an hour, what is going to happen? Eventually jobs will head toward the lowest cost of labor. When transportation by boat from China is cheaper than the rail cost from New York, it doesn't take long to figure out what the eventual results will be.

It's taken 20 years for the general American public to wake up to what has happened. As an individual and a merchant I can only work within the real world trends.

The craft business as we knew it in the 1990's is dead and has been in a downward trend for several years. For example, we would buy 500 pounds of glue sticks at a time to earn prepaid freight. By 2001 we were buying a dozen small packages of glue sticks from Petersen-Arne every few weeks.

So we shifted into other areas, such as home dec. That did very well for a short while until every drug store, grocery store, and big-box store also jumped into the area. Stamping came along and we did well until, again, five stamping and memory stores opened, plus there were stickers in every drug, grocery, and big-box store.

Our number one employer in the area is the county government. Our major industries have all gone overseas and environmentalists killed the wood products industry. Now we have the second-highest welfare rolls in the state, and retired people escaping the San Francisco parking lot.

At the same time, California changed from being a state where business was encouraged to one that extorts small business. To survive one must find a niche where extra margin can be obtained to pay decent wages and provide service to our customers. (I'm from the old school. I will not cut employees to four hours a day or jump them around from six hours one day, eight hours another, and four hours the next. They are human beings. Even though we can't pay a great deal, we treat them with respect.)

Thus, this spring I liquidated my Ben Franklin Crafts business, remodeled into a collection of five specialty stores, and reopened as Decor Fabrics & Crafts. It is my seventh business. Never in my wildest dreams did I ever expect to have to change so often.

We are now specialty stores catering to upscale customers, thus the upscale remodeling.

1. Framing. We retained our frame shop where we have a brilliant, creative person who can accomplish projects no Aaron Brothers (next door) or Michaels (within walking distance) can ever do.

2. Art. We retained an expert in our art department. He is an accomplished artist and a brilliant salesperson who can demonstrate and sell $200 brushes. We are number one in our area.

3. Quilting. We retained and enlarged our quilting cotton department. We have the largest selection of designer cottons in Northern California. We are starting children's sewing classes and quilting classes with an instruction area in the middle of the store, an open area to enable bystanders to see what we are doing.

4. Yarn. An employee came to me and said if we put in better yarns, she would teach classes. Now we sell yarns from all over the world. How about $18.99 a skein? (Boy, did I brag about how much we actually sold at that price. I don't brag anymore, because I don't think people will believe me.) We went on to $24.99, then $44.99, and now up to $69.99 a skein - and we are selling at these prices.

5. Upholstery. This is the area with the most margin potential, because we are the only outlet of any size in northern California.

Also to survive, I dropped all employee benefits. No paid vacations, no medical, no benefits of any kind. Dropped from 30 employees to 10.

We have re-designed the store to make it more employee efficient. We have a bullpen in the middle of the store with cash registers, and our five specialty departments radiate out from there. Inside the bullpen we have about half of our incoming shipments so that during slow periods merchandise can be checked in and priced.

So in a nutshell, we have three areas that we dominate in our area that are upscale from the box and chain stores, and two areas where we have no competition. We have 12,000 sq. ft. on the floor in a 15,000 sq. ft. building, and we have the best location in northern California - surrounded by chain stores, a mall, Wal-Mart, Costco, and others.

Instead of following the chains, we are going back to providing expert sales personnel in each department, full selection in each area, and classes. (Nearby Shasta College had just laid off their sewing instructors.)

What we are doing is filling a need in the community instead of fighting all the chain stores. And I am now back in areas the chains can't do or do as well, and where I can make the margins needed.

I haven't put my head in the sand; I've done what must be done to survive. I have changed from a variety of crafts, which is going the way of the dime stores, and returned once again to specialty items. I expect to save $40,000 a year in shoplifting alone. (It's very difficult to walk out of the store with a bolt of fabric.)

This is what I have done to adjust to today's world. I am very optimistic on our approach, although, as I have learned every time I have opened a new store, you always start at the bottom. It takes three years to reach your potential and five years to mature.

Based on the first two months, we are going to have a solid, profitable business. With a very talented manager, and my secretary, I am able to spend a little time in Maui, where I am writing this letter. - Fred Zerull, Decor Fabrics & Crafts, 961 Dana Dr., Redding, CA

(Comment: What do you think of Fred's strategy? IS abandoning the general craft concept a sign of the times? Email your thoughts to mike@clnonline.com. Previous Business-Wise columns are available by clicking on the titles in the right-hand column)

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