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Your Business Commentary

Mike's often irreverent, thought-provoking analysis of the industry-- with an occasional guest columnist.

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Predictions for 2007

From manufacturers, a retailer, a distributor, a headhunter, and a sales rep.

Compiled by Mike Hartnett (December 18, 2006)

2007: A Year in Transition.

(Note: CNA asked a number of industry veterans for their thoughts on the coming year. This first entry is by Howard A. Hoffman, one of the industry's most respected analysts. Howard was the VP of MJ Designs when MJ was the industry's leading retailer. He served on the HIA board of directors, including a year as Chair of the board. He also has been a VP of sales for industry manufacturers, so he has seen the industry from both sides, as a buyer and as a seller.)

I see 2007 as a year of transition. Three of the four leading craft retailers have new leaders. The hot categories that have been giving us our sales increases have leveled off. We will see more vendor consolidation by businesses purchasing other businesses and retailers cutting down the number of vendors they purchase from. It will be a year that we will have to get back to the basics for our growth.

We need to bring more crafters into the stores and get more non-crafters to craft. When the industry is in this transitional period, which happens, we need to go back to the basics to drive the business. Re-open the classrooms and set a class schedule that will create excitement. Put up finished items to inspire customers' interest and show them what they can make. Conduct make-it/take-its and demos to educate and create more interest and excitement. Storyboards need to go back up to show consumers how to get from point A to point B. Put enough knowledgeable people in the stores to help customers with their purchases and we will all do fine. Sounds familiar, doesn’t it?

CHA, now the only association representing our industry, needs to take an active role in bringing more customers into the retail stores. I do not know if the answer is in consumer shows, a traveling road show, media tours, advertising the industry, or all of the above. CHA is the only one who can unite us in a common effort that will help everyone. I am sure, with the talent of Jim Scatena and the board, and Steve Berger and his associates, they can come up with something to champion the initiative. This should be a high priority since we do not know when the next "hot craft" will show up. Working together, we can make it happen and continue the growth we have welcomed in the past.

Remember, there is nothing in our stores that anyone needs. We have to make our stores a fun place, a place where consumers want to go, to create, and to buy. – Howard Hoffman

The Overall Industry – A Vendor's View.

I have very positive feelings about the coming years. I believe we are in a period of significant change and I believe it's a change that will take us to a new level. Here are some of the changes that I think are not so good and need to be studied:

Too much focus on costs and allowances and not enough focus on business building. We need to allow everyone in the supply chain to make some profit so it can be reinvested into programs that inspire and educate the end consumer.

Too much "sameness" so that all stores start to look alike. I heard someone describe shopping in Walgreens, CVS, and Rite-Aid drug stores and realizing that they couldn't tell one store from another. I hope that craft stores don't get that same reputation.

On the other hand, there are too many manufacturers getting into categories where they have no experience or knowledge. Do what you do best and do more of that.

Too much lip service to being consumer focused. Everyone talks about project sheets, in-store demos, and web-based education, but are we really committing to finding ways to maximize these tools?

Less innovation by suppliers because the risks have become too high. We need new and exciting product to motivate the consumer.

Then there's the 50% of the population that we ignore: men and hobbies that are more traditionally male oriented. I think it's time to start courting the model railroaders and remote control car racers again.

OK, enough about not-so-good. Here are some of the changes that I am really excited about:

A lot of new blood coming into the leadership of the major chain stores. Michael, Alan, and Jack were all really great guys. But Greg, Darrell, and Rick all have some pretty exciting backgrounds with successful and innovative retailers. I think they will take us in new directions and new levels of business.

We're hearing a lot that there is new focus on making stores cleaner, neater, more shopper-friendly. Great news from our new industry leaders.

Some interesting print articles on crafts being hip and sewing being cool. This is great news. Over 70 million baby boomers moving toward retirement with time on their hands and money in their pockets. And now that I have become a grandparent, I see a huge opportunity for grandparents to help grow the kids crafts category.

And on the other side, information that the younger generation, Gen X, Gen Y, and Millennials, may be finding value in "making things themselves." Note, many of the staff here at FloraCraft love the new magazine, Ready Made. Our marketing director refers to it as "the Mother Earth News in color." (Come on, some of you remember Mother Earth News.)

By the way, many of our old "basic" crafts are new to these younger crafters. We see a resurgence. Last month in Ready Made they took a Styrofoam wreath (yeah!) and covered it with wire-ties that were spray painted silver and gold. Two out of three products bought in a craft store.

Martha is coming! Martha is coming! The fact that Martha Stewart is making a formal entrance into our industry is fantastic news. She has millions of loyal followers and I'm guessing a lot of them will be first-time visitors to our retail partners. It's a good thing!

The consolidation of ACCI and HIA into CHA is giving the trade association one focus and a strong, united membership.

Speaking of CHA, Steve [Berger, CEO] has put together a very good team who needed a little time to get acclimated. Well, they are ready to hit the ground running now. Just you wait and see!

And CHA has a board of directors who passionately represent all member segments.

Thanks for asking for predictions and thoughts. It helped remind me how many exciting opportunities there are in the coming years. – Jim Scatena, President/CEO, FloraCraft

The Overall Industry – A Retailer's View

We believe there is an upturn in stitchery and great interest in painting – frustrated by a shortage of design, new books, and surfaces. We think the emphasis on beading is over focused, as happened to yarn. We think yarn continues to be a very good category, but it must be supported by lots of classes and instruction.

We think that parents are interested in supporting the academic development of their children and would purchase more craft projects, especially three-dimensional projects, if they were aware of the developmental connection.

We think the art community is wasting many opportunities with craft retailers by not having a more intensive focus on the CHA Shows. The same may be said of the hobby suppliers, especially those with materials for youth projects and entry level models.

We think that many of the existing scrapbook and yarn stores will look to add a new product area to their retail stores and grow their business with strong classes and workshops. It would be very logical for yarn stores to add stitchery and for scrapbook stores to add any of the several departments normally found in craft stores, depending on their community area.

Last prediction: many of the vendors who have stood on their heads trying to be in the Scrapbooking section of the CHA Shows will come to their senses and realize that their customers are looking for them to continue to develop their core products and locate in the correct show section. Scrapbooking is a good department but General Crafts is still the core of the business! – Jim Bremer, Tall Mouse

Needlework in 2007 – A Vendor's View.

The industry will continue to need to fight very hard to gain what little free time the consumer has these days. Time is so precious and limited, and that will not change moving forward. Is it time the industry as a whole launches a similar marketing campaign like the very popular "Got Milk" concept ? I like the sound of "Got Crafts?" – Name Withheld

Scrapbooking in 2007 – A Vendor's View.

Overall sales: Will hold steady (basing this solely on the fact that crafting has become so mainstream). 

Chains: Non-craft chains (mass merchandisers like grocery stores) carrying scrapbook items will phase out those aisles. Mini-chains' (Recollections) growth will remain stagnant, potentially even close a few locations.

Independents: A continuing decline in the number of independent stores (more stores closing than the number opening).

Product trends: Digital kit offerings by manufacturers will double and more manufacturers will offer 'hybrid' kits (CD's of printable images along with traditional paper-and-paste kits).

Category trends: Home decor will continue to soar; instant-gratification crafts (projects done in hours or a day) will also continue to grow. This could include simple beading projects as well as simple photo projects.

Trends for successful stores: Building on the success of coffee houses, the number of stores that incorporate a total package for the senses – warmth, comfort – will explode. They will be the stores shoppers call "home."

Trade shows: CHA Summer will continue to strengthen as MemoryTrends goes by the wayside.

Media: At least one more scrapbooking magazine will fail, maybe more. Consolidation will be more prominent in the print mags, while a resurgence in growth will continue to be enjoyed by Internet media, such as online crafting segments (free to subscribers, paid for by advertisers/sponsors). – Mid-size Scrapbook Manufacturer

The Industry's Job Market.

1. There will be much more sophistication in hiring. Applicants will need a higher degree of education and communication skills in all positions.

2. More "outside of industry" hiring. Companies are looking for strong managerial and channel-specific skills as opposed to industry knowledge.

3. With so many company acquisitions/mergers, many positions are being eliminated. However, many of these people are starting their own companies in various industries, creating new opportunities, products, and services. The merger trend opens new doors that many of these people never considered for themselves.

4. There is an increase in the number of companies wanting "on site" employees vs. home offices.

5. We are placing more candidates in the Asia. Many expats as well as nationals.

6. We are doing more and more contract placement. That is, people are hired for a given period of time, or by project.

7. In lieu of many traditional raises, company performance-based bonuses are offered. Normally these provide a much higher incentive and income potential.

8. Manufacturers in our industry are doing more and more business outside our industry. Finding new markets and opportunities. Adjusting their products and packaging to new markets, thus needing employees to niche in those areas.

9. Companies are hiring one person to do two jobs. – Gail Czech, The Creative Network

Art Materials in 2007 – A Distributor's View.

I'm pretty optimistic about the U.S. art material world's prospects for 2007. The chains seem to be fighting hard to re-make their selections and presentation to the consumer. I particularly like Harvey Kanter at Michaels as a force for positive energy and meaningful change. I just have to believe that all this activity will bring good results.

As for the independents in art supplies, the larger stores and buying groups are mirroring the innovation and changes of the chains, and as such their prospects are cautiously bright. That said, the average age of the privately held art supply merchant gets higher and higher each year, which is starting to result in a cascade of store closings. The chains fill in some of the vacuum, but the bottom line is that there is lost consumer access to art supplies. This is a troubling, but slow-developing problem. Very few young or new people can afford the huge asset cost and poor return on investment that starting a new art supply outlet requires.

The consolidation of products and suppliers will continue unabated. There will be fewer choices. The chains won't care but it will hurt the independents.

Our initiatives continue to be focused on employing our talents and money to deliver the best value possible for our customers. That includes driving costs down through improved usage of people and technologies, aligning our selves in more meaningful ways to the customers who most value our package of services, and treating our employees fairly and ethically.

Key dates for the art materials world: Paperworld, Frankfurt, Jan 24-28; CHA Winter Show, Jan 27- 31; NAMTA, Chicago, Apr. 19-22; and Paperworld, Shanghai, Nov 20-22. I deliberately left out the CHA Summer Show. I personally do not feel this gathering has much meaning for the art materials world. – Frank Stapleton, MacPherson's

A Manufacturer's Rep's View

As I see it, if we do not include more independents, we seemingly are not allowing ourselves and the major chains the opportunity for new products. The chains in most instances want a proven seller to go after, and who better to prove a product's sales potential than the small independent?

Many of the chains will not be willing to give up space for new items without knowing the return or turns – SAD. This does not speak well for the progress in our industry. There is no sense of adventure in buying, only how many turns will it guarantee me and what's the profit.

IF management at our major chains do not start looking at the creative side of our industry and what it can do to help sell product, then we are not looking at strong sales for the upcoming year.

Whatever happened to the sharing of thoughts, ideas, direction and planning? "Partnership" is just a word that is used to sound like you want to work together, but not a true working partnership. We do hope that there will be a fair balance for the upcoming future, allowing all to work together to make our industry stronger and committed.

Also, I hate to think that we are going to see a more heated price battle out there on product. No one wins at that. Maybe the consumer. But look for more coupons and sales. – Name Withheld

xxx

 

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