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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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TNNA, CHA Leaders Speak Out ...

... on the challenges facing the industry in 2008.

by Marilyn Murphy and Jim Scatena (January 7, 2008)

Marilyn Murphy

Marilyn Murphy is President of The National NeedleArt Association and President and Publisher, Fiber Division, of Interweave Press.

1. The Many Faces of Competition

Online and Brick-and-Mortar: Online is not going away. The Internet is a structural change and it will evolve just as all other structural changes have (electricity, automobiles, telephone, etc.). Every business is considering its impact and opportunities. We might as well as embrace it and figure it out.

It’s imperative that the wholesalers and retailers continue to work together. What we sell is not an end product. Yarn, canvas, thread, fabric, etc. all require the addition of skill and creativity before it becomes something. Without strong retailers (and teachers), the growth of the industry is adversely affected.

Discounting and Keystoning: To what degree is discounting and set keystone pricing helping or hurting? With the new Supreme Court decision regarding pricing of product, it gives vendors an opportunity to evaluate their pricing policies.

The World is Flat, or at the very least, Fuzzy. It’s hard to know anymore who you’re communicating with, doing business with, or even competing with at times. Perhaps the answer is everyone. It does give an opportunity for many businesses to sell in a global market and a number of TNNA businesses are rapidly expanding into global companies.

2. Economic Realities

Weakness of the dollar against foreign currency is causing volatility at the wholesale level.

Increasing costs are leaving consumers with little left in their pocketbooks. Historically, during these times, the enthusiast spends more time at home and crafting. Will that bear out this time?

3. Attracting New Consumers

New vs Retaining: While we are attracting a younger demographic, we’re not replacing the aging customer at the same rate. Baby Boomers theoretically have more time and disposable income for leisure time activities, but we have to deliver new and exciting product to keep them crafting. For the new consumer, we need to lower the barrier to entry into our crafts and make them more widely accessible as well as offering something very unique, which is the independent’s forte.

Trading Crafts: There are many makers who work on one type of craft for a while and then shift to another. That’s okay when the shoe fits and they come into the needle arts. But all that does is weaken other craft categories – unless the other craft categories are exploding with new consumers as well and we’re benefiting by the change of craft habit.

Strong consumer awareness programs: TNNA is evaluating our programs to determine which ones are the most effective in reaching and creating a new consumer for our markets. It’s challenging offering programs that are effective for all – simply not possible. But we are focused on making programs and services as uncomplicated as possible in order for them to have any success. A key goal of ours is to ensure we are using popular technology to effectively promote our consumer initiatives.

4. Sustaining and Growing TNNA

TNNA retail members generate substantially more revenue per year than non-members. The new retail council is evaluating all of the education offerings and has a goal of further enriching the business offerings. Our membership and marketing committees are reaching out to encourage more retailers to join and participate. The more members, the greater the opportunity we have to grow successful businesses and strengthen our outreach efforts.

Adding Value: Making sure that everything we do is of value to our members – shows, education, business services, etc. At the same time, we need a strategy for growth that is consistent with the size and scope of the market segments we serve.

A Healthy Trade Show: We have to increase the number of buyers attending our shows so there is a healthy ratio of vendors to attendees. It also means addressing new ways to create more excitement and enthusiasm during the show, having strong programs, and vendors having new exciting products.

Communication: As an association we are constantly focusing on our communication methods as well as communicating and moving forward with implementation of the organizational changes we have made in the last couple of years.

Jim Scatena

Jim Scatena is Chief Governance Officer of the Craft & Hobby Association and CEO of FloraCraft.

2007 was a challenging year in many ways for the Craft & Hobby industry. When all of the final numbers are in, I think most will remember it as a lackluster year in terms of sales and profits. But if you look at 2007 objectively, there were very few retailers who had strong results. With a few category exceptions (like consumer electronics), retailers did not experience significant growth in 2007. And the list of reasons is quite long: questionable economy, rising gasoline and home heating costs, tightening credit market, bad news in the housing sector, and of course, weather patterns that were either too hot, too cold, too dry, too wet, and for those of us in the Upper Midwest, a winter that started way too early (and is still dropping snow!).

Early indications are that 2008 will not have a "fast-start." I think many of the factors listed above will impact business for the first few months. Yet I'm optimistic that 2008 will be a better year for many in our industry. We came through a year where the leadership teams of three of the five largest retail chains had undergone significant transition. I believe that some of those new industry leaders are more settled-in than others. Those who have acquired their "sea legs" in some very choppy waters have put programs in place that are already showing some positive results. Those chains, who are still re-arranging their leadership teams, will create opportunities for the others, especially the independents.

I'm encouraged by the apparent strength that many independents are showing. While we have seen many independents struggle (and some give up completely), I believe that the shake-out is nearly complete. And in that process, the best-of-the-best have emerged. We have some very strong regional players and some who are organized nationally now. And I feel that they are stronger than ever and better than ever.

Retailers should investigate the opportunities offered by CHA, especially the two trade shows which showcase the best that the industry has to offer. And with the repositioning of the CHA Summer Show, it's a "can't miss" opportunity to get the first look at many new products and programs.

The distraction of the consolidation of manufacturers seems to have slowed dramatically as the private equity market has retreated. Those suppliers who continue to bring exciting new products and programs to the market will have good results. And it's important that they can manage the supply chain effectively. Those suppliers who do not add value will see competition eroding their business. In some cases, the competition will come from chains stores who are strengthening their import capabilities. As a supplier, you should be taking full advantage of the programs offered by CHA that can help you improve your supply-chain skills. Equally important are the opportunities to work with designers and teachers that will allow you to have full impact with the consumer.

To me, this means that all of us in the industry can focus on what it is that we do best: inspiring and educating the consumers. Through all of the doldrums of the past few years, our industry seems to have lost some of our focus. We need to renew our commitment to being a consumer-focused industry where suppliers and resellers partner to excite, inspire, and educate our loyal consumers while welcoming the new "indie crafter" (or craftster) to the benefits and rewards of what we all have to offer. (Editor's note: To learn more about the Indie craft movement, click on Category Reports.)

CHA is a member organization led by a Board of Directors who volunteer their time to help the industry grow. As CHA members, we are blessed with a dedicated staff who are committed to the success of our members. Take advantage of what CHA has to offer, communicate with your board members and the staff and get involved.

Best wishes to all of you for a healthy and prosperous 2008!

(Note: To read previous Business-Wise columns, click on the titles in the right-hand column.)

xxx

 

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