Creative Leisure News - Business-Wise

Mike's often irreverent, thought-provoking analysis of the industry.

2003 IN REVIEW

As usual, lots of ups and downs.

by Mike Hartnett (December, 2003)

The top stories of the year:

1. ACCI and HIA agreed to merge. While the deal is not yet done (due diligence continues), the end result should be the best of both worlds: two annual shows, one membership, redundancy eliminated, and the industry speaking in one voice.

2. INRG and TNNA agreed to a joint show in Columbus in 2004. This should greatly benefit retailers who now need only attend one show to find the latest in cross stitch, yarn, and needlepoint. In related news, the Crochet Guild of America and its events will be held in conjunction with the Knitting Guild of America.

3. Michaels opened its first two ReCollections (all scrapbooking) stores and Village Crafts stores (craft stores in smaller population areas).

4. Jo-Ann's caused a huge stir when it invited vendors to a 60^th anniversary party and asked for money for anniversary promotions. Many vendors were outraged, but the complaints stopped after vendors heard the presentation of the company's history and future plans.

5. Mergers weren't the only changes for the trade associations. HIA, HSA, and NAMTA hired new executive directors, and Offinger Management agreed to manage INRG and the Crochet Guild of America.

6. Crafts magazine, once the largest circulation consumer craft magazine, announces it's changing to Paper Crafts, setting off a huge debate on specialization.

7. The industry started to pay attention to Hispanics, now the largest minority group in the U.S. HIA released a study on the Hispanic market, publishers published books in Spanish, and more vendors included Spanish on their packaging.

8. The SARS epidemic stopped travel to the Orient during the crucial spring period, but it taught some retailers and importers that they don't HAVE to travel overseas as much as they had assumed.

9. Congress held hearings and continued to wrestle with legislation to curb online copyright infringement. The effort is led by the music industry, but the final result should help our industry, too.

10. Retailers in other industries continue to pick off "our" products, whether it's stickers in drug stores, Christmas decorations at Lowes, framed art and frames every where you shop, etc.

11. Martha! Not a good year for the "doyenne of crafts." She was indicted on criminal insider-trading charges, saw her tv ratings and magazine circulation decline, and watched as her retail partner, Kmart, continued to struggle.

Business.

2003 was not a particularly great year for most. Overall, sales probably outpaced most other industries, but profits were only slightly better than last year, if at all ... Chains continued their pressure on vendors to lower prices ... Importing grew as vendors and retailers look for lower prices ... Some scrapbook retailers are thinking twice about their business as some regions become over-retailed ... Scrapbooking is evolving into two industries; large vendors sell to chains, small vendors to independents, and a lucky few to both ... It is difficult to

get chains to take a chance on new lines, so some vendors are looking to expand their business by acquiring companies that already have shelf space in the chains.

Categories.

Scrapbooking remained king and spawned increased interest in stamping, cardmaking, and other paper crafts ... Jewelrymaking and yarn continued to grow � both the high-end and the lower-cost lines ... Quilting continues to roll on ... Newcomer of the Year: pursemaking ... Embellishments were strong not only in scrapbooking, but in quilting as well ... Decorative painting needs to attract a younger audience ... Altered books appeared and expanded into altered art, which one veteran designer said, "Isn't that just a fancy name for mixed media?" ... Toys suffered from price wars ... Collectibles declined drastically ... Seasonal suffered from so many "non-craft" retailers dividing the pie.

Trade Shows.

Generally attendance equaled or surpassed last year's events, when people were still leery of traveling after 9/11. There were complaints at some shows about how they were becoming "scrapbook" shows. Those complaints came from vendors/retailers not involved in scrapbooking. Shows like TNNA, Memories Expo, MemoryTrends, and Great American Scrapbooking continued to break records. Shows in most industries declined.

Condolences.

Once again our industry has lost some good ones this year, including Justin "Freddy" Zimmerman, one of the founders of Jo-Ann's ... Dick Thompson, one of the industry's most well lked manufacturers' reps ... Author/designer Betty Auth ... Painter/author Debbie Toews ... Sales rep Ted Nelson ... Randy Schafer, former owner and creator of Omnigrid ... Pei Ling Chong, a former buyer for the Ben Franklin stores in Singapore, died of SARS ... Marilyn Schwankoff of Walter Foster and AMACO ... Cara Nabity, daughter of Accu-Cut�s Steve and Lynette Nabity ... Industry veteran Marty Gelfand, formerly of Darice and Westrim ... Don Pendray, husband of Shay Pendray ... Painter Marty Bell ... And our friend, Lisa Julson Cahoon, formerly of CraftShop.com, co-president of VirtualAdvantage.com.

Bankruptcy.

FAO Schwartz (Chapt. 11, for the second time) ... MJDesigns (Chap. 7) ... The Art Stores (Chap. 11) ... Wellington Leisure Products, whose Maxwell-Wellington division was the dominant macrame vendor when macrame was king ... Kmart emerged from bankruptcy amidst a flurry of lawsuits, but, well, it's still Kmart ....Ames died long ago, but lawyers are still hounding creditors to return millions in payments.

Mergers/Acquisitions.

Hygloss Products acquired Color Fantasy, manufacturers of Color Your Own T-Shirts and Color Your Own Posters ... Greenleaf Steel Rule Die re-acquired its former dollhouse line, Greenleaf Products ... Caron acquired substantially all assets of CC Product Co./Bond America ... Berwick, a division of CSS Industries, acquired substantially all of the assets of C.M. Offray ... Jean Charles and ImageHill merged ... Janlynn signed an exclusive partnership deal with Kooler Design Studio, a leading needlework design firm ... Malinda and Jim Johnston sold Lake City Craft to Sandy Watson ... Duncan Ent. acquired all of PSX ... Creative Beginnings acquired and revived Stampa Rosa and reestablished the product line. The Buffalo Batt division of Leggett & Platt acquired the consumer (Mountain Mist) division from Stearns Technical Textiles.

Lawsuits.

The United Brotherhood of Carpenters Pension Trust filed a class action suit against Michaels and some top execs, charging the company with violations of federal securities law. Michaels denied the charges ... A California judge was deciding whether to make a sex discrimination suit by current and former Wal-Mart employees a class action suit. If he decides yes, it will be the largest case in history ... Wal-Mart is also the subject of numerous lawsuits claiming the company forced employees to work unpaid overtime, engaged in anti-union activities, and used illegal workers ... Wal-Mart led a class action suit which won big settlements with Visa and MasterCard that should lower retailers' costs of accepting debit cards.

(Note: To comment on this column or other industry issues, email Mike Hartnett at mike@clnonline.com. To read previous "Business-Wise" columns, click on the title in the right-hand column.)

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