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Creative Leisure News
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Date: September 16, 2002 TABLE OF CONTENTSCOMMENTARY: BUYERS AND BRIBESThe CEO of a major retailer called me, very concerned about the emails in our last issue regarding buyers accepting gifts from vendors. Names were mentioned in the original emails, but I deleted them; I won't print unsubstantiated charges against an individual or company.The CEO wanted to know if any of his buyers were named; they were not. It can be a murky issue. Is buying a cup of coffee at a trade show a bribe? Or paying for a buyer's trip to a vendor's office to work together to develop a new line and work on merchandising plans? Clearly, buyers have favorites, but it should be vendors who consistently produce strong-selling products, deliver on time, and develop solid merchandising and marketing plans. Buyers and vendors often become personal friends, too, and exchange dinners, Christmas gifts, etc. But the key word is exchange. Flat-out gifts are unethical and, by the way, illegal. A few years ago, a buyer for J.C. Penney was convicted of accepting bribes -- and went to jail.
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AUGUST SALES FLAT -- BUT NOT FOR CRAFTSAccording to most retailers, the economy has slowed down again and back-to-school sales were a flop. Most department stores, apparel retailers, and others had "lackluster sales," CBS MarketWatch reported. Even Wal-Mart stumbled a bit (for Wal-Mart). Its same-store sales rose 3.8% -- better than most, but the expectations were for a 4.4% increase.Among those reporting disappointing or even negative same-store sales were Target, Federated Department Stores, May Department Stores, Sears, Saks, Abercrombie & Fitch, American Eagle Outfitters, Gap, and Family Dollar. In contrast, same-stores sales for craft chains were excellent: Hancock, +8.9% ... Jo-Ann's, +8.6% ... Michaels, +6%. (Reminder: A.C. Moore and Rag Shops do not report monthly sales.) Duckwall-ALCO's same-store sales dropped 8%, but once again, craft sales were considered "particularly strong."
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WATCH FOR RAGGEDY ANN NEEDLEWORKM.C.G. Textiles will create, manufacture, and market Raggedy Ann and Andy needlecraft products, thanks to an exclusive licensing agreement with United Media.This fall MCG will produce six latch-hook rug kits, two latch-hook pillow kits, and two latch-hook Graph N Latch pattern books. A Raggedy Ann crochet doll kit and an afghan kit will be introduced in early 2003. Raggedy Ann was "born" in 1915, when creator Johnny Gruelle designed a floppy rag doll to entertain his daughter when she was ill. Already a popular cartoonist, Gruelle began to include the character in his story lines. At home, the Gruelle family made dolls by hand, and in 1918 the first Raggedy Ann book, Raggedy Ann Stories, was published. In 1920, Gruelle created a companion for Raggedy Ann, a brother named Andy, who debuted in Gruelle's second book, Raggedy Andy Stories. Raggedy Ann and Andy are licensed by United Media on behalf of Simon & Schuster, which publishes new and classic Raggedy Ann books. The Raggedy Ann products will be online at www.mcgtextiles.com in a few weeks. For more info, call 909-591-6351 or email carol@mcgtextiles.com.
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SCD SEMINAR LOOKS STRONGThe upcoming Society of Craft Designers annual Education Seminar Sept. 25-28 looks like it will be a big success. Membership is up more than 8%, and Seminar's manufacturers' demos and showcases, the designer showcase, and most of the technique and established-member classes are sold out. Among the speakers:"Global Influences in Craft & Home Decor" by Lisa Shephard "Editorial Tips from the Pros" with magazine and book editors Deborah Morgenthal (Lark Books); Linda Augsburg (Michaels Create!); Valerie Pingree (Crafts); Barb Sunderlage, (Clapper Communications); and Tricia Waddell (North Light Books) "Protecting Your Designs" by attorney James Goldberg "The Evolution of the Industry and Its Implications for Designers" by CLN's Mike Hartnett "How to Work with Manufacturers" -- a panel of vendors addressing issues that arise between manufacturers and designers "The Principles of Design made Ridiculously Simple" by Greg Albert The Seminar will be in Schaumberg, Ill., near Chicago's O'Hare airport. Pre-registration is closed but members can register onsite. For more info, call 740-452-4541, email scd@offinger.com, or visit www.craftdesigners.org. For a profile of SCD, click here.
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SHOULD IT BE "FRANK'S NURSERY & HOME DECOR"?Frank's Nursery & Crafts has emerged from bankruptcy with new stock and a new plan. DSN Retailing reported Frank's has dropped 16,000 craft SKU's as part of its post-bankruptcy makeover. The new strategy is garden ... and home dec. Crafts were dropped from all 170 stores because of the low turnover rate and the problems competing against "craft specialists."The stock in the new Frank's will be traded under the symbol, FNCN, on the OTC Bulletin Board. Non-secured creditors of the old Frank's (i.e., vendors) are being paid in stock at the rate of about 10 cents on the dollar. Net sales for the second quarter ended Aug. 11 rose 2.7% to $89.1 million, and same-store sales rose 15.2%. Net income was $1.6 million; a year ago it was a loss of $18.4 million. (Comment: Frank's dropped crafts because it couldn't compete against Michaels, A.C. Moore, etc. So now it's going to compete against Hobby Lobby and Pier 1.)
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CLN'S 2003 BUDGET SERIES, PT. III: BASICS(Note: This is the third and final installment in CLN's series to help you assemble your 2003 budget. The previous installments, on health insurance and trade shows, are available in the Sept. 2nd and Aug. 19th issues. To read them, click on the "CLN Archives" button.)General Inflation: Figure 3 to 4%. Imports/Exports: Sales of exports should improve. Massive federal budget deficits will sap the dollar's strength and make U.S. products more competitive overseas. The reverse will be true for imports -- they'll cost more. Travel: The number of flights will go down and prices will rise ... Hotels and car rentals should increase 3-5%. Oil/gas: It all depends on what we do in Iraq. Weather forecasters say it will be another El Nino winter, meaning it will be a mild one in many parts of the country, thus keeping a lid on oil prices. If we invade Iraq, there will be at least a temporary spike in oil prices. And if oil-producing countries like Saudi Arabia become truly angry with the U.S., the spike may not be temporary. Wages: The minimum wage will not increase unless the Democrats win control of both houses of Congress. If they do win control, no wage bill will pass until late 2003, if then.
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TREND REPORT: CRAFTS(Note: The following was written by Karen Ancona, the editor of CNA magazine.)Fragrance, illumination, and texture continue to be the underlying elements that send products over the top. Fragrance can add value to floral arrangements, wreaths, soaps, and candles. Our fascination with illumination makes candles, lampshades, decorated strings of lights, and oriental-looking paper lights bestsellers. Texture can be added to just about any project: pillows are more luxurious when made with velvet; dimensional paints are again important on fabric and wood; and scrapbookers desire all types of ribbons, trims, and puffy stickers to add depth and interest to their pages. These three elements have been important for more than five years. It's interesting that entire product lines have been built up around them, such as the puffy stickers, smelly candles, and lampshade kits. Lifestyle trends, of course, dictate so much of what crafters choose to create. And the desire to nest, to create a safe and soothing home, is the great mover of goods now. We've taught consumers how to refinish walls and furniture, accessorize every nook and cranny, color windows, cover floors, and deck the halls for just about every holiday. I fear we're lagging behind, though, in one opportunity: framing. Americans are in love with photography (my own non-scientific statement, but one entirely supported by the mania over scrapbooking), and they will eventually conclude that framed photographs are critical to good home decorating. I'm not the only person expecting growth in this area. Warren Buffet, perhaps the greatest living investor in trends, just purchased Larson-Juhl, a leading framing vendor. Larson-Juhl supplies custom-made frames, some of the most beautiful and most expensive in the world. Our consumers, I suspect, will craft frames from lightweight woods, Styrofoam plastic foam, plastic, cardboard -- you name it. But they'll make these frames wide (at least 1" for a 5-by-7 photo, and as wide as 6"). Then they'll paint them, embellish them, carve them, decoupage them, crackle and glitter them. It will be wonderful, and "the trend" will sell lots of products. We can't talk trend-talk without mentioning color. Brown is big. How big? New York women have switched from black to brown wardrobes. That's big. Brown marries well with other earthtones, and metallics such as copper and yellow gold. Orange is given new life with brown being so popular, and blue also creeps up in importance. (Note: Karen says she has lots more to say about trends, and to read her column in CNA -- or visit the website, www.cnamag.com. The editorial lineup in CNA's 2003 issues will reflect Karen's thoughts and predictions. To obtain a copy of CNA's 2003 editorial lineup, call Marilyn Duquaine at 715-445-2214.)
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EMAIL, I: SCRAPBOOKING AND NEW PRODUCTSJust a note to agree with you on the assessment of Memory sales -- in the past, as a "trend" toned down, vendors began to believe that it was dead, and they would stop developing or investing in new items. If we do the same in memory, we will create the end result.Consumers are enjoying the hobby -- yes, they own their scissors -- let's sell them lots of paper and spend some time developing another craft interest. Let's not abandon memory in the process. Anyone wonder why so many stores continue to do well with fabric painting? -- Jim Bremer, The Tall Mouse
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EMAIL, II: SCRAPBOOKING AND NEW PRODUCTSI appreciate your commentary on declining per-purchase sales at scrapbooking stores. Like many people involved in the market's ebb and flow, I recognize the very real inevitability of significant shrinkage in this category.However, there are some effective ways retailers can stave off the negative effects of receding interest in this particular trend. The most crucial factor in maintaining sales is keeping a vigilant eye on innovation. For instance, a retailer geared toward the woodworking hobbyist has a laundry list of high-ticket tools a consumer might spend a lifetime trying to attain. Woodworking retailers have had many years of innovation from manufacturers to draw from in choosing the best tools to sell. Likewise, scrapbooking retailers have hundreds of innovative manufacturers to choose from. Retailers must not be shy about bringing in high-ticket, innovative items to attract sales from their veteran customers. And retailers must promote innovation from the bottom up, by learning what their customers wish they could do and passing this information on to manufacturers. Scrapbooking is still time-consuming and a sometimes difficult hobby for many. If retailers help to develop cookie-cutter, easy ways to complete scrapbook projects, they will find a whole new wave of customers willing to give scrapbooking a try. Memory-related retailers can also attract new hobbyists and increase per-purchase sales by diversifying their inventory. It is crucial for retailers to merchandise products that are memories-related and not just those products tied directly to scrapbooking. Chains like Hallmark have become successful by anchoring a "memories"-related product offering with keepsakes and greeting cards. Scrapbooking materials are popular enough to become this anchor for our stores; now these retailers just need to embrace other products that embody the spirit of a memories-related theme. Personalizable products of all kinds are abundant in the craft industry, but only a few savvy retailers in the scrapbooking market take advantage of them. This type of diversification at the retail level will draw new customers; customers who might have only shopped only for some sort of memories product could leave with tools for scrapbooking, and increase sales to existing customers by offering them new choices. -- Arthur Schile, Sales Manager, Milestones Products (Note: Since rubber stamps can be used with scrapbooks, they, too, seem like a logical extension to a scrapbook store's inventory. Stamps for a scrapbook could lead to all sorts of stamping projects -- and sales.)
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EMAIL, I: CHAINS PRESSURING VENDORSI just finished reading the current issue [and the emails from vendors unhappy with the pressure they receive from chain buyers]. My my, aren't there some angry people in our industry?Yes, retailers want every advantage they can get; they wouldn't be successful business people if they didn't. Yes, the chains can make demands which can cripple a manufacturer. On the other hand, no one is holding a gun to the craft manufacturers' heads forcing them to accept terms which are not profitable. Too often the eye is on the size of the initial sale and not on the bottom line. Greed can make people stupid, even experienced and savvy business people. Large volume orders may look lovely, but when the bottom line is a loss, they lose their glamour. Selling to chains can be like getting into bed with the devil. It may be fun up front, but there is no commitment, and they won't necessarily be nice to you in the morning. Not to say that we aren't in the same boat; we, too, have to deal with the occasional devil to stay alive. Fortunately, we have a CEO who isn't afraid to "just say NO" when demands become unreasonable. And, it should be mentioned, not all of the chains expect the impossible. Finally, the word support may be [as one vendor wrote] "getting a very negative meaning" in our industry. For us, support doesn't necessarily mean discounts, ad allowances, or rebates. It means that we need to work harder to provide our customers with the tools to sell our products successfully. I personally find that my customers buy from me because I encourage them to use me as a resource for marketing ideas, merchandising, product education, class and special event ideas, etc. Rarely, if ever, have I been confronted with pressure regarding discounts or ad allowances, but then I'm blessed with a CEO who made me Sales Manager for INDEPENDENT Retailers. I commiserate with all those "long-time manufacturer, name withheld by request" folks who responded. Unfortunately, we are the ones who created the monster. We continued to say "yes" long after we should have started saying "no", and it is ultimately up to us to create change. -- Pat Hansen, Sales Manger to Independent Retailers, PSX (formerly known as Personal Stamp Exchange)
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EMAIL, II: CHAINS PRESSURING VENDORSYour major manufacturer [in his email in the last issue concerning the emphasis on short-term profits] says it like it is -- or at least how some of us independents perceive that it is -- in regard to the CEO's of major retailers. Perhaps that's because too many of us remember the big severance packages given to departing CEO's who managed to put [the old] Ben Franklin into a position from which it could not recover.As independents we care about tomorrow -- it is a reflection on our families and our communities. We're in it for the long term. This makes it even more difficult to compete with the major retailers who are focused on Wall Street and big profits for today, frequently at the expense of tomorrow. Oh well, time to get off my soap box. By the way, your comments on scrapbooking pretty much mirror what I mentioned during panel discussions at HIA and again at ACCI. There is a change, particularly in those areas where we've been selling scrapbooking for more than six years. The customers are still there, and new scrapbookers are out there, there are just fewer of them than when the early adopters were getting "hooked". -- Emma Gebo, Crafts & Frames
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RANDOM NOTES, RANDOM THOUGHTS1. There have been a number of questions raised and rumors circulated regarding HIA's $2+ million in reserve assets. The money has been frozen as part of the Security and Exchange's investigation of the company through which HIA invested the money. We talked to Tom Ware, president of Bagworks and HIA's finance vice president. He said any HIA member who has any questions is welcome to email him. Tom's email is tware@bagworks.com.For a profile of Bagworks, click here.2. Execs at Duckwall-ALCO blamed its substantial drop in August same-store sales (8%) on running one less ad circular than a year ago. A few years ago, I wrote about how ad circulars were like an addictive drug for public retailers. They absolutely boost sales, but a year later you need that circular to maintain last year's figures. Then if you need to show stockholders an increase, well, you add another circular and worry about next year when it comes. So sales are maintained, but at the cost of profits. Independents don't have that problem. They can use as many or as few circulars as they want and they don't have to answer to stockholders. Michaels had fallen into this trap before Michael Rouleau arrived. I'm sure I'm exaggerating, but it seemed like everything was on sale all the time. Slowly Rouleau has weaned the company away from this addiction, and now Michaels runs (at least in our local paper) the same type of display ad that Hobby Lobby runs. 3. In July ACCI sponsored an excellent panel discussion, "Challenges Facing the Industry Today," by four of the industry's top retailers -- Brenda Lugannani (Michaels), Dave Bolen (Jo-Ann's), Jim Bremer (Tall Mouse), and Emma Gebo (Crafts & Frames). Creative Leisure News reported the highlights of the discussion in August, but now you can read the transcript yourself. Segments are being posted on ACCI's website (www.accicrafts.org) on a bi-weekly basis. The first installment is online now. Here's a quote from the transcript: "We've introduced more new products this year at Michaels than any other year in our history. Over 20% of our sales this year will come from products not in the stores last year." -- Brenda Lugannani
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MISCELLANEOUS NEWSDATA, I. 63% of the 713 respondents to a survey on the Hobby Industry Assn.'s consumer website, www.i-craft.com, said they look for craft ideas online and 24% exchange craft info via email. Project info (53%), craft tips (44%), patterns (36%), trends (27%), and products to buy (27%) are the most common reasons respondents turned to the Internet. 72% spend 6+ hours/week on their computers and 54% spend 6+ hours/week involved in crafts.LOOKING FOR FINANCING. Small company with an appealing product for the kids and art market, well received at ACCI, is looking for additional funding to support future growth. For more info, email or call Mike Hartnett in complete confidence at 309-925-5593. STOCK. The Michaels board of directors approved a repurchase of up to another one million shares of the company's stock. Since July 1999, Michaels has repurchased approximately 11.4 million shares of stock, and currently has about 66.5 million shares outstanding. AMES. In August, its last full month of operation, the going-out-of-business discounter lost $22.6 million. (No wonder the creditors pulled the plug.) CONDOLENCES. Bert Buratto, husband of Country Marketplace and Country Sampler magazines Editor Paddy Buratto, was killed in a car accident on August 16th. Our deepest sympathy to Paddy and the family and friends. SCRAPBOOKS. The Do It Yourself (DIY) tv network is having a Croppin' USA Marathon on Sat., Sept. 28, from noon to 8 pm EDT. Part of the Marathon will run simultaneously on HGTV at 2 pm. ACQUISITION. CLN has learned that Promotions Unlimited has acquired E-Z Gregory, a variety-goods distributor in Madison, Wis. FAMILIES. Michaels will host a Free Family Event at each of the 742 stores across the country on Sat., Sept. 28 from 10:00 am - noon and 1 pm - 3 pm. Sponsored by DecoArt, the event will allow family members to make one of five wooden pins (Halloween, Thanksgiving, Christmas/Winter, Kwanzaa, or Hanukkah designs) using DecoArt paint. All materials are free. ACCI. Is accepting nominations for Board of Director positions beginning in 2003 for a three-year term. If you're interested in serving on the Board or on one of three ACCI Committees, call the Executive Director Marrijane Jones at 740-452-4541 or email mjones@offinger.com. Nominations will be accepted through Oct. 1. NEW COMPANY. R&M West Coast Enterprises has been created to help fill the void caused by the book distributor, IDD, going out of business. The Capitola, California distributor works with more than 50 publishers and requires only a three-book minimum. A key figure in the operation is Gail Campbell, formerly of IDD. Call Gail at 847-741-4132. PROJECT SHEETS. The project sheets that were available at the Idea Stations at the July ACCI show are now available, free, to download and copy, at the ACCI website, www.accicrafts.org. They are designed specifically to show new uses for already-established products. Visit www.accicrafts.org, click on "Site Map," then "2003 Attendee". Use for in-store handouts, classes, mailings, etc. KNITTING. A new book, Hollywood Knits, will be published next month by Stewart Tabori & Chang (ISBN: 1584792264). The author is Suss Cousins, who made those amazing sweaters on the Bill Cosby series. Various Hollywood celebrities are models in the book. The number of advance orders has moved it onto Amazon's best seller list at 1,821. SHOWS. The School, Home, & Office Products Assn. (SHOPA) show is Nov.12-14 in Atlanta. Last year's event drew 11,884 attendees and 701 exhibitors. Info and online registration are available at www.shopa.org. JAIL. Bob Perlmutter, of Pearl Paint, has been paroled from prison. DATA, II. Results of recent polls conducted at www.stitching.com: 1. Where do you buy most of your needlework supplies? Independent Retailer: 46.21% ... Craft Chains: 20.17 % ... Wal-Mart/Discount Chains: 7.58% ... Online Store: 19.42% ... Mail Order: 6.62% ... Total Votes: 937 ... 2. Has a new store that sells needlecrafts opened in your area in the last year? Yes: 9.9% No: 90.1%.
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BUSINESS PROFILES: PSXPSX (previously known as Personal Stamp Exchange) has been designing and producing quality rubber stamps for more than 20 years. The company is well known for its original rubber stamp designs, drawn by talented illustrators and produced using the highest quality materials. The stamp collection includes thousands of images, with well over 1,200 in active production at any given time.In 2000, PSX launched a major new product line, PSX Design Stickers. Hundreds of the most popular designs were hand-painted by local watercolor artists; then PSX converted the paintings into archival quality art stickers printed on clear film backing. With their sophisticated watercolored look, PSX Design Stickers have raised the bar for the sticker industry. PSX also produces rubber stamp sets, easy-to-use Design a Card kits, and creative templates, as well as an array of unusual craft papers and a wide variety of inks and accessories. The company will launch a new line of printed scrapbook papers in January, as well as new, seasonal additions to the stamp line. A complete catalog is published annually. PSX is expanding in other ways, too. It is licensing some of its designs to manufacturers for use in a variety of new products. Familiar PSX images are on rub-on transfers from Duncan, figurines from Papel, and decorative ceramics from Kurt Adler. PSX recently teamed with Duncan and with Kids Kingdom, a major distributor of craft supplies in Asia. These new partners give PSX the resources to continue developing new products for the marketplace. To support retail marketing, PSX offers an all-inclusive home card-making center as well as a variety of specialized display units for rubber stamps and stickers. PSX promotes product education through workshops, graphic art boards, and project guides. The web site provides convenient access for wholesale customers and consumers to keep up-to-date on PSX products and services. TOP EXECS. Jim Doty, CEO... Jeannene Chase Langford, Creative Director ... Mike Paquin, General Manager. ROLODEX. PSX, 360 Sutton Place, Santa Rosa, CA 95407. Call 800-782-6748; fax 707-588-7476; email info@psxdesign.com; or visit www.psxdesign.com. Note: If any industry-related company is interested in a Business Profile such as the one above, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.
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THE CREATIVE NETWORK: JOB OPENINGSTo see a sampling of the current job openings and to contact The Creative Network, click on the "Jobs" button in the left hand column.
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THE CLN RETAIL INDEXA. C. Moore (ACMR). Last*: 22.15 ... Change**: +0.89Hancock Fabrics (HKF). Last*: 15.39 ... Change**: +0.84 Jo-Ann Stores (JAS.A) [a]. Last*: 33.10 ... Change**: +3.10 Michaels (MIK). Last*: 47.99 ... Change**: +1.50 Rag Shops (RAGS). Last*: 5.60 ... Change**: +1.35 Wal-Mart (WMT). Last*: 54.40 ... Change**: +0.92 CLN Retail Index. Last*: 178.63 ... Change**: +5.1% Dow Jones Index. Last*: 8,312.69 ... Change**: -4.0% *September 13 ** from August 30 [a] voting share Prices are exclusive of dividends
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9/11: A YEAR AFTERWe've learned a lot in this past year, enough to make hard-core cynics of all of us. We've learned we are not safe from terrorism in our own country. Parents have learned their children haven't necessarily been safe in the hands of priests and bishops. Stockholders have learned they can't trust companies' "independent" accounting firms. Many employees have learned they can't trust their CEO's or that their pensions are safe.So now what? I have no idea, other than the realization that we can only count on ourselves. So I offer this story, "Two Wolves", which was sent to me by a friend: An old Cherokee is telling his grandson about a fight that is going on inside himself. He said it is between two wolves. One wolf is evil: Anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego. The other wolf is good: Joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion, and faith. The grandson thought about it for a minute and then asked his grandfather, "Which wolf wins the fight?" The old Cherokee simply replied, "The one I feed."
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REMINDERS1. For more information on how your business can be the subject of a "Business Profile", call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.2. Paid subscribers are invited to have their website evaluated by Lynn Carlisle of Carlisle Communications. She'll check the site and provide a confidential assessment and suggestions for improvement. Just email mike@clnonline.com or ljc@carlislecommunications.com. 3. If you want a hard-copy of this issue, click on "Printer Friendly version". 4. If your company is a paid subscriber, everyone in the main office is welcome to register, free. 5. If you want to recommend CLN to a friend, use the "Tell Your Friends" box on the home page. 6. Creative Leisure News is published on the first and third Mondays of each month. Because there are five Mondays in September, your next issue will be Monday, October 7.
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