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

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So, Why Aren't We Happier?

Maybe the theme song for the January trades shows should be Elton John's "I'm Still Standing."

by Mike Hartnett (December 21, 2009)

Consider these positive items:

A) The quarterly reports from Michaels, Jo-Ann, and Hancock were strong. Although the average transaction was lower, there were more of them because more consumers are shopping in our stores.

B) Wall Street is impressed. The stocks of this publicly held trio have risen substantially this year.

C) Anecdotal reports from independents around the U.S. One retailer wrote, "For the quarter our sales are flat, margins are up two full points, and customer count is up, but the average sale per customer is down about 6%. But our expenses are down and profits are UP!"

Wrote another independent: "Our customer count is up over the past two years – but average sale is still difficult. Lots of people "redoing wreaths" is sort of an attitude indicator. They want the new look and are working to save $’s in the process. In many ways it reminds me of people doing the "old crafts" re-using and recycling for economic reasons. Lots more people doing small projects using basic craft supplies – Styrofoam, glitter, felt, sticks, and pipe cleaners. (Let's use an old term; it sort of goes with the times).

D) There are countless media reports, just as there were last year, on consumers turning to crafts this holiday season.

There are still more media items offering crafting advice; Michaels' Jo Anne Pierson's recent appearance on NBC's Today Show is just one example. Martha Stewart demonstrating on the Today Show how to use crafts to make Christmas gifts is another.

Clearly, our industry is performing better than most retail industries. So why are so many people unhappy?

Once upon a time, their main concern was making a product that retailers would carry and consumers would buy. Not this year; they had to contend with the following:

A) The Consumer Product Safety Improvement Act; it was well intentioned, but vague and rushed into law – a confusing, expensive mess.

B) Losing their credit line, even though they had – they thought – a strong relationship with their bank and a good credit rating.

C) Their inability to obtain receivables and product liability insurance. Some worried about a particular customer eventually going bankrupt, then worried even more when they not only couldn't buy insurance for that customer but, in some cases, couldn't buy any insurance.

D) Employees contracting the H1N1 virus. Especially for small businesses – what if half your employees called in sick?

E) Chain stores summarily dropping their lines because they're having the products made overseas. Supported a chain for 20 years? Doesn't matter.

F) Worrying about A.C. Moore's mounting losses as sales decline, Michaels' $3.4 billion debt, and struggling independent scrapbook stores.

A) For independents, their most important customers, the enthusiasts, aren't spending as much, dipping into their stash instead.

B) Are the chain stores worried? Michaels has that enormous debt. A.C. Moore's declining sales and growing losses. Jo-Ann, Hancock, and (I assume, but don't know for certain because it's privately held and doesn't release sales/profit figures) Hobby Lobby must wonder, are we doing ok because we're on the right track, or is it simply because Wal-Mart is getting out of fabric?

In light of all I've mentioned above, is it any surprise that publishers are worried? Advertising – and advertisers – are declining, and magazine sales are down. When you think about it, magazines, especially trade magazines, are a reflection of the state of the industry.

The problems, imagined or real, that retailers and vendors are having create a trickle-down effect on everyone else – wholesalers, designers, and even trade associations. Fewer customers, fewer exhibitors, and smaller booths.

Vendors, don't expect the chains to be more loyal.

Retailers, think of ways to get your enthusiasts to deplete their stashes more quickly.

Everyone else, as Ken Harrelson, the broadcaster of the Chicago White Sox says when a Sox batter has a two-strike, no ball count against him, "He's got to cinch it up and hunker down."

Remember, too, this time-honored principle: If you can expand your business, whatever it is, and increase your market share during bad economic times, you'll maintain that greater market share when the economy bounces back.

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