Creative Leisure News - Business-Wise

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

Why Industry Sales Are Down

The answers are more complex than simply the recession.

by Bob Ferguson (December 1, 2008)

(Note: Bob and his family operate a Ben Franklin store in Redmond, WA and has been considered for years one of the best independent retailers in the industry. His store has survived numerous recessions. Bob has also served on the boards of the Craft & Hobby Assn. and Sierra Pacific boards of directors. He wrote to CLN after CLN's report that Michaels, A.C. Moore, and Jo-Ann reported declines in their third-quarter sales.)

Regarding your sales update on Michaels, A.C. Moore and others:

No one likes to see sales decline for anyone, even for competitors. All the losses do not bode well for the future of the entire craft industry if it continues like this.

From the independent side, many are seeing similar difficulties in sales. Unlike economic downturns in the past, most craft stores are seeing declines during this period.

Unfortunately, sales losses in many parts of our industry have been lagging for much longer than the start of this economic downturn. You have been reporting for quite a long time about the loss of independent craft and scrapbook stores as well as the economic troubles of most of our industry chains.

I have a bit of a different spin on the reasons why.

During prior economic downturns, traffic in craft stores has always been up and sales have increased in direct proportion to the traffic improvement. This time is much different in that first the customers are buying more craft products and far less seasonal and home d�cor products.

While we are enjoying the increased business of crafts (as much as 30% more product in some of the craft departments), we are seeing declines in the home d�cor and seasonal products. The products from those departments usually carry a higher price, which results in a higher total average sale. The bottom line: more craft products sold at a less-than-average unit price of home d�cor goods results in sales declines.

A second reason why many are so hard hit is that a large number of craft stores have abandoned what has always been their core business. Hard crafts (i.e., painting, clay, wood, and wiggle eyes, among others) have seen little in the way of innovation in recent years; plus, the everyday-price-off promotions run by many chains have run that business into the ground for many. So now, when the consumer interest is high for those same products, stores simply don't have much of a selection.

Finally, craft stores are suffering beyond what would be normal for us in an economic downturn because the consumer is BORED!

If it is true that business has traditionally been good because the first interest of a craft consumer is "What's new?" and craft consumers want to be inspired to buy (we carry nothing remotely considered to be "consumables"), then it makes sense that with the dramatic slowdown in product development in the past few years, coupled with the emphasis of nearly all craft store marketing on price first and uniqueness, quality, and creativity somewhere far down the line, that the consumer is BORED.

Motivation to buy craft products is normally thought to come from the inspiration instilled in consumers through displays, models, ease of project completion, educational concepts (i.e., classes, demos, and craft-related activity programs). In recent years nearly all motivation to purchase has come from price, regardless of the fact that consumers have no inspiration to buy because they don't know what to do with the product or don't care what the price is if the demand is not established.

I recently was in a shoe store that had a huge sale ongoing. I wear a size 13 and the store's selection of 13's was extremely limited. An enterprising young salesperson enthused that the shoe I was looking at was such a good deal that perhaps I would consider taking the size 12 and making it work.

Isn't that by and large what many stores and manufacturers have done by trying to sell me something even when I haven't a clue what I would do with it?

Now manufacturers are calling daily with hot deals that they should have been offering six months ago. My response to the hot deals is the same as it has been: spend your money on innovation, creativity, and stop trying to entice me as a buyer and my consumers with price.

They and I don't give a rats arse what the price is if I don't know what to do with it. And with the traffic down so much because of the boredom we have all created, as well as the economic morass we are in, consumers are not going to react to something they don't understand. So what if I offer a crop-a-dile for 5 bucks; what the heck is a crop-a-dile to 99 our of a hundred folks?

If our industry does not create some new interest in crafting through some initiatives to promote the benefits of crafting, we could be doomed to a long downward spiral. The consumer has our number, Mike, and the ride down is not going to be pretty.

(Note: Bob raises a number of questions: Why are there fewer new products? What happened to project sheets, madeups, instruction booklets, and traveling teachers? What's the danger in low prices? How do we create new interest in crafting? Send your answers � all anonymous � to CLN at mike@clnonline.com.)

xxx