irreverent, thought-provoking analysis of the industry.
The State of Our Industry
Some positive analyses, some negative, and lots
Compiled by Mike Hartnett (October 3, 2005)
Karen Ancona, Editor of CNA magazine.
The industry experienced a sort of blood transfusion from three
recent trends which brought us many new customers: scrapbooking,
beading, and knitting. Many of these are dabblers or weekend
crafters. The industry is challenged now to introduce these younger,
more affluent crafters to other activities to boost their indulgence
in crafting and to sustain some industry growth. They’ll never
leave their favorite hobby, but we know they are capable of crafting
other types of wonderful projects. It’s up to the retail level to
show them how and to grab more of their discretionary dollars.
We already see scrapbookers testing paint on their pages and
beads on their cards. Knitters will be adding beads to simple
projects this year as fashion demands it. And women already in love
with beading may be enticed into stores other than niche bead stores
if the selection and classes are right for them. Quality beads are
the key to that movement.
Will we make them quilters or painters or clay artists? That
depends on merchandising, marketing, and education at the store
level. But I personally believe that home decorating and fashion
updating will drive the industry in the near future. We have to get
better at marketing that news. Manufacturers have introduced some of
the best products ever, available at some of the best deals. The
responsibility of taking that product past static merchandise rests
on the shoulders of our independent retailers.
The good news is that our independent retail base is owned and
managed by the highest percentage of men and women I’ve ever known
who are business savvy, not just craft savvy. They are already
studying the new trio of consumers and putting together some pretty
impressive plans on how to increase their interest in crafts. Of
course, television is helping and industry events such as Knit-Out
will, too. But it will all take time, and shopping, of course,
will suffer because of the price of fuel. Expect some static years,
easier for well-funded independents to weather than mammoth chain
stores. That’s a bit of a flipover in our marketplace.
An Independent Retailer.
I don't even know where to begin. It's all very confusing and in
many ways very frustrating. It appears that every store is
struggling to find its niches and then to meet the consumer needs in
a unique way. No on is immune to the impact that the oil and gas
prices have on us – and the industry news is no different.
The stores are all changing their mixes in an effort to
become/remain profitable. It's a major challenge with no easy
solution in sight. We all need help – and I'm not sure the big
boxes are doing any better.
Consultant, Chain Store Pro.
1. Scrapbooking has had spectacular growth; the craft and
fabric chains have helped by following the independents at first,
then jumping in early and really exploding the category sales. The
growth was so good, in fact, that the mass merchants, drug stores,
food stores, and other big box retailers like office supply chains
and now Best Buy have picked up pieces of it. Has the category
peaked or are sales from traditional stores being siphoned off?
2. Jewelrymaking has and continues to grow consistently over
the last 10 years. The craft chains have done a good job in this. I
am not sure they have the space or interest to carry
good-better-best, however, which has left a niche for independents.
This is not an easy area to manage at retail – SKU intensive, low
retail value items, etc. But this category will keep growing.
3. Yarn continues to grow. This is a fashion business that
needs constant newness in end use and fun and interesting yarns. In
this category you have good retail distribution beyond traditional
craft and fabric stores and I would not be surprised to see this
continue to increase.
4. One underlying commonality of scrapbooking, jewelrymaking,
and yarn is the continued craft and fabric chains' ability to
introduce a new or revitalized category to the consumer at a
beginner level. Taking customers to the intermediate and advanced
level has always been a challenge and one the independents have
helped with. This kept the consumer interested. In today's
environment it is hard for chains to do more than teach beginners
with classes and demonstrations and reach the consumer with sale ads
in newspaper tabs.
5. Margin pressure on retail chains and then down the line is
hurting budgets at the distributor, importer, and domestic
manufacturing level. Really big industries with sophisticated
systems do not need 70% and 85% initial markups; these industries
are bigger because there is money at all levels left to promote,
package, and advertise products.
In our industry now the marketing thrust is primarily price-off
ads in the Sunday paper. The concept of using the ads to attract the
consumer into the store is proven and valid. However, if you want to
expand the business, it is necessary to really show consumers what
to do beyond a sign package, demonstration, and beginner class.
There are several chain experiments going on that address some of
these issues, and they might be the answer to part of the consumer
6. Many manufacturers have so much financial pressures from
the chains that product development, marketing, and consumer
advertising budgets are no longer available. In addition, China has
been a great boon to our industry, but may become a great source of
problems in the coming years. The latest trend of Chinese companies
hiring U.S. designers to develop products for U.S. retail chains
seems in part a dichotomy at best.
China's move from cheap labor is starting to cost them more,
along with increased power costs for buying and building machines
that will replace some of their labor. We have seen many examples of
Chinese manufacturers bringing in sophisticated machines to replace
labor, and the ocean and land freight costs, which are born by the
U.S. retail chain, continue to rise. In addition, I think it is
likely that import duties may rise in certain areas. Look for more
anti-dumping duties. All of this leaves the door open for U.S.
manufacturers to become more competitive in several areas where they
have virtually been frozen out in recent years.
7. Many U.S. manufacturers became too dependent on
traditional outlets and did not expand their customer base as fast
as the core customer base continued to consolidate.
8. As to upcoming categories, the best one I see right now is
embellishments. If you look at ready-to-wear catalogs, they are full
of the same looks that were prevalent before fabric paint took off.
Already I think you will find appliques, trims, beads, and other
embellishments are real growth areas.
9. Manufactures and retailers that are truly best of class
are doing well and are continuing to grow. Times are tough, which
are exacerbated by Katrina and Rita. I hate to say it, but look for
them to get tougher. With continued borrowing, the world situation,
and upcoming pressure on the world economy, it is likely to get
worse before it gets better.
10. I heard on TV yesterday that China's oil needs five years
from now are likely to be increased by the total amount the U.S.
uses today. Think about that: we will be competing for oil with
China who supplies a tremendous amount of goods to us – and that's
not factoring in our increased consumption five years out. I suppose
as a worst-case scenario we could be looking at $6 or more a gallon
cost for a diminished supply.
11. The challenge and opportunity is, do we have a cohesive
industry with common goals and objectives? We have a diverse base,
each with their own goals and needs but with common business
I think one of two things are possible: first and most likely,
the best-run, best-financed retailers, manufacturers, and
distributors will flourish and many of the rest will fall by the
wayside. Consolidation will continue at all levels. Means of product
development and execution could be hampered.
A bright spot is many real mass merchants are continuing to have
increased interest in the craft business, and if they continue, that
might attract many more consumers. Scrapbooking is the driver and I
have not seen them cutting back space yet. When they do, it is
likely they might replace it with other products from the craft and
fabric field. But if everyone stays on the margin train and does not
have or put enough money and intellectual capital back into the
business, many of the consumers will become disenfranchised and move
on to other leisure time pursuits.
12. The craft and fabric industry still has a long way to go
to harness technology at the consumer level the same way it has in
the accounting and distribution levels. If we do not move in this
area, the industry may lose out to other industries.
Despite all the above said, I do not see doom and gloom. I can
give you countless examples of retail chains, independents,
manufacturers, importers, and others that are doing it right, as
well as several companies that have realized they need to change and
have put people in place to make it happen. The world is just
changing at an unbelievable pace, and any company or group of people
not in line with the changes could just be left behind.
Marketing Director, Major Craft/Scrapbook Manufacturer.
Yarn is definitely slowing down quickly. Scrapbooking is still
strong in major craft chains, Wal-Mart, Target, select specialty
retailers, and the remaining group of strong independent scrapbook
stores. The challenge is the comp gains are in the low double digit
lower than last year and trending down. Office Depot just announced
they are getting out of scrapbooking to refocus on their core
Beads/jewelry making are VERY strong in the craft chains.
Tracking at well over 50% gains year over year. The independent bead
store really appeals to the hard-core crafter and these stores are
buying in bulk from importers. No need for packaged product.
The word I am hearing now is that wearable art is rebounding and
the action is in home dec in all its variations. No one really doing
a good job here yet, but all the signs are right: two to three years
after a home purchase is when people really start doing home dec
accents, etc. Note the housing boom over the past three years.
Kid's crafts are still strong. The industry just needs to keep
coming up with exciting assortments of fun, interesting ideas in a
variety of materials and target specific times such as camp,
Halloween, summer vacation, Easter, etc.
I believe we are getting over stored and this is contributing to
the reduced comp-store numbers we are seeing. Expect a great deal of
item merchandising for gifts this fourth quarter to drive sales. And
there will be more pressure on suppliers to improve margins (lower
prices/more rebates co-op allowances, etc.) to offset the slower
We need a hot category! I believe it is beading/jewelrymaking.
Retailers should promote make-it/take-its in their stores to convert
current consumers to this craft and do outreach marketing to attract
new consumers. There is a very high trial-to-adoption rate, but
consumers have to do it themselves, not watch a demo.
Pam Riddell, The Riddell Group and Maps2Memories.
I'm not saying it's tough out here, but it's changing. We're just
in another of those "rearranging" phases, as the industry
further consolidates. I was in the Florida panhandle region last
week and visited a couple of stores in the Destin/Ft. Walton area.
They are still hurting from Hurricane Ivan last Sept., and
"Dennis" this July. Their doors are open but it's a
struggle. I can only imagine what's happened to the economy further
west in the hardest hit areas. I'm sure we're all feeling some
fallout from that.
But over all, things are good. I still think the biggest
challenges facing our retailers are self-imposed. With better
education and better business practices they can be overcome. So
we're trying to spread the word.
Product Manager, Major Scrapbook Manufacturer.
I don't know that I have any answers to your questions, but I do
have some observations – maybe rants is more accurate.
As far as when the economy downturns, it's true that in the past
people turned to crafting. But in 2005 our industry has more
competition for leisure time than ever before: consumers are working
longer hours, surfing the Internet, attending school and family
activities, exercising, eating, and watching television. All of
these things are more options for that leisure time than ever
Last week, in the paint aisle of a large chain craft store, the
everyday price for the 4-oz. bottle of acrylic paint was $0.99. In
the late 90s, the same bottles sold for $2.49 or more.
Meanwhile, imported painted items in retail stores are well done,
yet so inexpensive that consumers can purchase attractive,
designer-inspired items for much less than the cost of materials –
let alone the time and learning curve involved in painting a project
to achieve a similar quality. Well-painted products in stores like
Linens N Things, Bed, Bath and Beyond, and especially Target do not
seem to be inspiring consumers to paint for themselves – just to
As big business moves into and acquire companies the craft
industry, it seems we're losing our "personality." We
don't seem to feature and promote creatives as in the past. In the
90s, Priscilla Hauser, Donna Dewberry, Dee Gruenig, and Debbie Mumm,
just to name a few, rose to recognition.
[Editor's note: Actually Priscilla has been a star since
the 70's, as were a number of other painters such as Sue Scheewe. In
the 80's, cross-stitch designers such as Alma Lynn rose to
These ladies are inspiring, but where's the next generation of
creative leaders? It doesn't seem that today's creatives enjoy
lasting popularity. Yet, why are the DIY shows successful? They show
average people creating successfully with smart, fun talented hosts
showing them how to do it.
Today's do-it-yourself television shows don't show the designers
going into the craft chains to get supplies. Teens (and a lot of
other people) love ABC's Extreme Home Makeover series, which
shows them how to do things with supplies from a home improvement
store – not a craft store.
Add this to the fact that most of today's teens are the product
of at least the second generation of moms who work full-time outside
of the home, and it's easy to see that most teens are not learning
about making things inside their home from people they're related to
like Mom or Grandma – but through television or the Internet –
and they're not learning to go to craft chain stores.
While visiting a local knitting shop this weekend, I saw several
teens and college age students shopping and buying. There was also a
couple mother/daughter shopping teams. They were selecting yarn and
discussing projects, and the shop's staff was helping them select
the proper knitting needles for their project and providing tips for
finishing their project. This sort of experience is non-existent in
the craft chains.
Chain buyers today are more powerful than ever. Demands on
vendors are more exhaustive than ever. With the imperative
insistence on not just lower prices, but THE LOWEST PRICES, the
margins for advertising, education, and promotion so slim, they're
practically gone. The chains have reaped the benefits of lower
invoice pricing and more programs, but have not increased store
staffing; nor have they focused on insuring that the in-store staff
is knowledgeable about how to use the product in the stores.
(Note: Have any reactions to the writers' thoughts? Email
them, on or off the record, to firstname.lastname@example.org.
To read analyses specific to scrapbooking, read the current Memory,
Paper & Stamps column. To read a savvy designer's perspective on
the state of the industry, read the current entry in Designing
Perspectives. To read previous Business-Wise columns, click on the
titles in the right-hand column.)