Date: January 3, 2005
Vol. IX, No. 1

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TABLE OF CONTENTS

COMMENTARY: TIME TO GIVE

The death and devastation from the tsunami in Southeast Asia is beyond comprehension and certainly makes any of our business or personal problems seem petty. An industry friend had vacationed on the island of Phuket off the coast of Thailand a week before the earthquake and tsunami and says, "The beautiful resort is obliterated, and I keep thinking of all the wonderful Thai people I met there. They're either dead or their relatives are."

The number of relief agencies getting involved is remarkable. To see the list – and to donate to at least one of them – visit www.msnbc.com and click on "ASIA'S DEADLY TSUNAMI: How you can help."

Business-Wise. One of our chains just made a major goof.

Note. To see a listing and links to all of the 2004 columns, see below. If you surf to a column and it's an "old" column, click on the "Refresh" or "Reload" button on your browser.

Retailers: Who is your biggest competition? Vendors: Who is your most important customer? To vote, click on Industry Polls in the right-hand column or click HERE.

A whopping 50% of the retailers and vendors who voted in CLN's poll said the holiday season's sales were disappointing. Forty-one percent thought the sales met their expectations, and only 9% were pleasantly surprised by the sales. The results are even more negative than the preliminary results CLN reported two weeks ago.

Price cutting continued unabated through and beyond Christmas as retailers scrambled to meet sales goals. Many may meet those goals, but only at the expense of their profit margins.

Although the season appeared to be disappointing for many retailers, the final results may turn out better, and consumers spent more, than first thought. Consider: Initial online sales reports indicated Internet Christmas shopping rose 23% according to comScore Networks. Meanwhile, gift cards comprised 11% of all retail sales. They don't "count" as sales until they are redeemed, which may not happen until January. So December sales may be disappointing, but January sales might be a pleasant surprise.

Brick-and-mortar sales reports continued as CLN had reported earlier: High-end stores such as Nordstrom did very well, but the dollar stores saw sales rise but profits slip as consumers bought only the basics. Retailing seems to be reflecting the growing division in the U.S.: the rich are getting richer and the poor are getting poorer. Even Wal-Mart reported same-store sales would increase only about 1.3% in December.

As for the discounting, "We've trained the consumer too well," one craft veteran told CLN. "If it isn't drastically discounted, she won't buy it."

On Friday the Wall Street Journal assigned reporter Nina Siegal to try her hand at scrapbooking and write about the results. Siegal talked to Tracy White, editor of Creating Keepsakes, who recommended a beginner kit.

Siegal's favorite was the Memories in Minutes Scrapbooking Kit ($35.18) from QVC. "QVC seems to have the widest variety of comprehensive scrapbooking kits we found anywhere, even the sites devoted solely to scrapbooking," Siegal said.

Siegal thought Westrim's Memories Forever Super Deluxe Scrapbooking Kit ($33.79) from Scrapinsanity.com was the best value and "probably better for children."

Other kits tested were Home Shopping Network's Ephemera 685-piece Scrapbooking Kit ($39.95) ... Archival U.S.A.'s Pioneer Memory Book MB-10 12x12 E-Z Load Scrapbook ($27.95) ... Scrapbook Superstore's Scrapbooking Basics for Dummies 12" x 12" Kit ($35.55).

Craft industry stocks outperformed the Dow and other common stock indices in 2004, but no thanks to the fourth quarter. The CLN Index stocks rose 18.8% in 2004 while the Dow rose 3.2%, the S&P 500 gained 9%, and the Nasdaq Composite Index rose 8.6%. (Results exclude all dividends.)

A.C. Moore was the leader, up 49%, followed by Michaels at 35.6% and Jo-Ann's at 34.8%. (That's taking into account Michaels stock split in October.) When Rag Shops was sold in October, its stock had risen 40%. The losers were Hancock, down 28.2%, and the mighty Wal-Mart, which slipped 0.6%.

The big winner was Martha Stewart, whose stock rose 195%, with much of the increase coming while she sat in jail. Investors expect big increases in the sales of her products when the Kmart/Sears merger is completed. Industry-related publishers did well; Primedia rose 33.6% while Meredith was up 11.1% for the year. Target rose 33.5%.

The fourth quarter was a different story. The Dow outperformed the CLN Index stocks, 7.0% to 5.9%. A.C. Moore and Michaels both rose 17%, while Jo-Ann's slipped 1.9% and Wal-Mart dipped 0.8%. Hancock lost 13.3%, although it has risen somewhat in recent days since Jane Aggers was named CEO.

Again the big winner for the quarter was Martha Stewart, whose stock jumped 89.1%. Publishers did well again; Primedia had a strong quarter, up 66.5%, while Meredith rose 5.7%. Wal-Mart may have declined, but Target was up a strong 14.6%.

In conjunction with Microsoft, Fujifilm's new Get The Picture Online service is accessible through Windows XP Online Print Wizard, MSN Photos, and Microsoft Digital Image Suite. It enables consumers to order digital prints directly from a Windows XP-based PC for pickup in as little as an hour at more than 5,000 Fuji retail photo centers, including those at Sam's Club, Ritz Camera Centers, and Wolf Camera. Consumers can also have the photos mailed to them. Consumers can order 4x6-, 5x7-, and 8x10-inch prints or even customized options. No word yet on the prices.

Once a photo or group of photos is selected on the Windows XP desktop, consumers can click on the Order Prints Online icon and elect to pick up their prints at the photo center of their choice. As the images are shown on screen, the system will suggest an optimal print size based on resolution. The service also will allow consumers to do basic photo editing – including image cropping, image rotating and red-eye correction – at some participating retailers.

(Comment: Consumers are going digital, and Fujifilm's service is just the latest example of how chains may steal business from independents. Why? Because scrapbookers will probably buy some supplies since they're already in the chain store to pick up their photos. To read more on the subject, and how independents can have a photo kiosk in their stores, read "Why a Kiosk Makes Sense for You".)

Sales of traditional greeting cards have dropped 10+% since 2000, down to $10.2 billion; a new study by Unity Marketing reveals that 43% of consumers said they bought greeting cards or stationery in the past year, down from 70+% three years ago. (Comment: We suspect cardmaking is one reason consumers are buying fewer readymade cards.)

"Indoor decorations represented a $10.9 billion market in 2003, and paper and party decorations, [with] sales of $2 billion in 2003, were the largest revenue producing product category. Rising demand for paper decorations means big opportunities for party stores and websites that sell innovative designs, even complete create-your-party kits...," Unity reports.

(Note: Between now and the CHA show in mid-February, CLN will report on new products being unveiled at the show. Exhibitors: when your new products can be seen on your website, email mike@clnonline.com and we'll post a brief description and a link to your site.)

Delta. The new Paper Crafting Collection includes wood-handle stamps, paper collections, tags, stickers, etc., designed by the well known artist, Sara Lugg. www.deltacrafts.com.

Janlynn. Has taken the Dolly Mama stamp designs and used them for stitchery kits. The designs are from Stamps Happen which Janlynn acquired last year. www.janlynn.com.

Milestones. Li'l Hands plaster handprint impressions kits ... Mosaic Garden Mirror and Mosaic Garden Ornaments kits ... Printed Ceramic Tiles added to the Amazing Mosaics line ... New Stepping Stone kits. All items will ship in early 2005. www.milestonesproducts.com.

Posh Impressions. Stamp star Dee Gruenig works with a variety of vendors and lists products at www.poshimpressions.com: Additions to the Altered Art Mounted Rubber Stamp Collection from All Night Media ... Unmounted rubber stamp sets using Sunday Int.'s EZ Mount and Storage System ... Blending Blox and Dee's Signature Brush Art Markers from Uchida/Marvy ... Posh Impressions stickers from Mrs. Grossman ... The Jupiter craft desk lamp from OTT-LITE ... The Procraft craft gloves by Wilshire Industries.

F+W Publications named Bill Reed as Magazine Division President. Reed had been VP/Publishing Director for a division of the Meredith Corp. As President of the board of the HIA, Reed and ACCI President Lynda Musante began the talks in 2003 that eventually resulted in a merger of the two associations into the Craft & Hobby Assn.

F+W owns Memory Makers magazine, Krause Publications, and numerous non-industry magazines, plus an extensive book division. F+W's Chair is Bill Reilly, founder and former CEO of Primedia, which publishes Craftrends, Creating Keepsakes, and numerous other publications.

Meredith publishes 170+ publications in various categories, including decorating, crafting, and scrapbooking. Meredith is best known for its Better Homes and Gardens brand.

Noted cross-stitch designer Lois Winston is proving that designers have many more talents than just, well, design. Lois has been writing mystery and romance novels and was named a finalist in New York-based Dorchester Publishing’s American Title competition, which has set its sights on crowning genre fiction’s next star. The publisher is giving the public the chance to vote on the fate of Winston and nine other finalists between now and March 6. The winner receives a publishing contract. To vote for Lois, visit www.romantictimes.com.

Lois has already won a number of writing contests. In 2004 she was a finalist in the Malice Domestic competition sponsored by St. Martin’s Press with Assault with a Deadly Glue Gun, a mystery featuring an amateur sleuth who works as a crafts editor of a woman’s magazine where a murder takes place.

The Glue Gun mystery was planned as the first in a series. The second, Mop Doll Murders, takes place on the set of a daytime TV show with a weekly craft segment. Murder at a trade show is planned for book three. For more about Lois, visit www.loiswinston.com.

The Society of Decorative Painters named Mike Saubert as its new Executive Director. He's the former marketing director for the American Concrete Pipe Assn.

SDP Sheila Rouse said, "While new to the decorating industry, his knowledge and background will be invaluable in helping us develop new programs and attract new members. He has already contributed several ideas to help us enhance member benefits and generate excitement about our 33rd annual convention in Tampa, FL, as well as our ongoing programs."

The convention is May 23-28. For more info, visit www.decorativepainters.org.

(Note: Below is a listing of the 2004 columns. To read any of the articles, click the title (e.g. Business-Wise) in the left-hand column, then the specific headline in the right-hand column.)

Business Wise. (Mike Hartnett's and others' thoughts on industry issues) What Hasn't Changed in 25 Years ... HIA: A Marketing/Design Perspective ... Vendors Discuss Hobby Lobby's Success ... Gay Marriages, Craft Designers, and Retail Prices ... Debate: Should We Junk 'Crafts'? ... Rising Health Costs, Fewer Jobs ... Why Katelyn Can't Swallow: Who pays -- and at What Price? ... "Why I Did NOT Go Into Retail" ... Hot Trends and Trade Shows ... What Makes a Product Successful? Hits Have Qualities in Common, No Matter What the Category ... Thoughts on Free Trade ... The Future for Independent Scrapbook Retailers ... "Why a Photo Kiosk Makes Sense For You ... A Customer's Nightmare ... So, Is the Industry Glass Half Empty?

Memory, Paper & Stamps. (Interviews, comments, and analyses about the industry's strongest categories) Interview with Sue DiFranco: Candid Talk on the State and Future of Scrapbooking ... Memories Community Releases Survey Date, Plans Magazine ... Problems Loom for Scrapbook Retailers ... Characteristics of a Hardcore Scrapper ... The State of Scrapbooking ... Learning from Another Market for Scrapbooking ... Great Britain: Getting (Paper) Craftier by the Day! ... Turning a Crafter into a Scrapbooker ... More Ways To Turn a Crafter into a Scrapbooker ... "Do What You've Always Done: The Scrapbook Industry Is in Trouble! Some Possible Solutions.

"Vinny Da Vendor". (Thoughts from large and small manufacturers, usually writing anonymously) The Trials of a Small Company: Talent, Drive, and Product – But No Money ... Retail, E-tail, and "Unfair" Competition ... Vendors Respond to Independent's Plight ... More Vendors Respond: A Dialog Between Vendors and a Savvy but Unhappy Independent.

"Benny Da Buyer". (Thoughts from large and small retailers, usually writing anonymously) Buyers' Horror Stories: Vendors: What NOT To Do at Trade Shows ... Retailers Respond to Scrapbook Dilemma ... How Do We Turn This "Crafter" into a Scrapbooker?

Kate's Collage. (Advice on management and communication. Encouraging Bright Ideas: Debunking Myths about Your Staff's Creativity ... How To Say What You Mean.

Category Reports. (Trends and analyses from category-specific events.) Why the Gift Market Is Seeing "Red": The Red Hat Society ... Decorative Painting Gets a Face Lift .. The Decorative Arts Collection Spreads the Word ... Quilt Market: Changing Colors, More Wool – Lots of Trends ... TNNA/INRG Show Report ... Licencing Show Update: Crafts Are Definitely on the Radar ... TNNA Names Star Search/Design Winners ... Knit-Out & Crochet 2004 ... A Warning to U.S. Scrapbook Vendors.

Designing Perspectives. (Reports and commentary from some of the industry's top designers.) Trends at the Atlanta, Dallas Gift Shows ... HIA 2004: WOW! ... Market Research on Decorating Trends ... CHA Summer Show Trends ... My Love/Hate Relationship with Michaels.

Scene & Heard. (Trend spotter Ellie Joos' reports on trends relevant to our industry.) The New York Gift Show ... HIA 2004 ... New York Home Textiles Show ... New York Stationery Show ... Update: Micah Ashley Jones ... 2004 New York Gift Show ... Premiere Vision Fall/Winter 2005/2006 ... Quilt Market 2004. 

Legal Q. & A. (A copyright lawyer answers your questions.) Protecting Your Trademarks ... "I Have This Great Idea For ..." How To Protect Yourself ... A Legal Response for Small Business Owners ... The Donald and the Trademark, "You're Fired": An Independent Retailer Battles a Giant ... The Donald and the Trademark, "You're Fired" Pt. II ... Can David Really Defeat Goliath? ... Photographs and Copyrights ... Don't Mess with Texas ... Copyright Violations and Scrapbooking.

Tech Topics. (Using modern technology more effectively.) How Technology Is Changing Us ... Seek and You Shall Find: A Sign You're in the 21st Century ... The Price of Mobility ... How the Internet Can Make -- or Break -- Your Company's Reputation ... Shop At Home TV: A New Sales Opportunity? ... Using Search Engines More Effectively ... The Right-Click Bandits: Is Your Site Being Robbed? ... What Your Website Says about YOU? ... The Digital World of Scrapbook Designs.

1. New exhibitor to CHA? Visit www.chashow.org/exhibitor/coach.asp and sign up for the Coach/Mentor program. Your first show truly is a confusing madhouse. New exhibitors will be paired with a veteran exhibitor who can be very helpful answering questions and giving advice. And you veteran exhibitors, go to the same site and volunteer. Remember people being nice to you when you started? It's time to return the favor.

2. Laura Childs has published Bound For Murder, the third in her Scrapbooking Mystery series featuring scrapbook retailer Carmela Bertrand (who must be independently wealthy because she spends so little time in her store). It was a pleasant, light read, but I bet Lois Winston's novels are better.

E-COMMERCE. Statistics from Amazon's 10th Christmas are remarkable: Received orders for 2.8 million items in one day ... Shipped more than two million items in a day ... Shipped to 217 countries and delivered more than 100,000 shipments to overseas U.S. military personnel ... Sold more than half a million gift certificates after Thanksgiving ... Sold more than 13,000 copies of the DVD, Lord of the Rings, Return of the King, in one day.

HOT CATEGORIES. The 2004 Quilt Festival in Houston drew 53,989 consumers, a record ... Wal-Mart is running tv commercials on scrapbooking.

SURVEYS. U.S. housewares sales rose 7.4% to $62.2 billion, according to the 2004 State-of-the-Industry Report published by the Int. Housewares Assn., Retail Merchandiser reported. That's $578/U.S. household. U.S. housewares sales have risen an average of 4.9% annually over the past five years. The Report is available to IHA members for $100 and to non-members for $200. Contact Perry Reynolds 847-692-0109 or preynolds@housewares.org.

ACQUISITION. International Paper is selling its fine paper business, including Strathmore Artist Products, to Mohawk Paper Mills. The sales should be completed in the first quarter.

STATIONERY. The 2005 New York show is May 15-18. Call 914-421-3200; visit www.glmshows.com.

QUOTATION. "We lost some Target sites, but we picked up some Circuit City and Michaels. Circuit City and Michaels have done really well for us." – Jeff Baldwin, a spokesman for the Richmond, VA Salvation Army (Richmond Times Dispatch)

LAWSUIT. The parents of a 24-year-old Texas woman diagnosed as a manic-depressive and schizophrenic are suing Wal-Mart for selling her a shotgun which she used to kill herself.

TV. American Public Television voted Cutter Productions and NC’s public tv network UNC-TV the Most Successful Pledge Program, the second consecutive year a Cutter's/UNC-TV program has won the award. This year it was Kids Concoctions with John and Denita Thomas which generated the most contributor support when broadcast during their pledge drives. Kids Concoctions is a how-to show that creates crafts projects using household products ... Town & Country Crafts with Kathy Peterson has been renewed with the Family Net for 2005. This is the 7th year for this national series which airs every Thursday at 4 pm EST. For more, visit www.kathypeterson.com.

URL'S. Ellison has a new corporate website at http://corp.ellison.com that should be a model for manufacturers. It's colorful, informative, easy to navigate, and quick to download.

WORTH READING. Malcolm Gladwell, the author of The Tipping Point, one of the best business books ever written, has a new book, Blink: The Power of Thinking Without Thinking. Gladwell is a former CHA Show keynote speaker whose greatest talent is making the reader think and see things in a different way.

MEDIA. The new magazine from F + W Publications will be called PaperArts. The first issue of the quarterly will be on newsstands Mar. 22 and will cover cardmaking, mixed media, and collage. A preview issue will be available at the CHA winter show in Atlanta. For more info, contact Editor Jane Beard – 303-920-5365, jane.beard@fwpubs.com.

LOOKING TO HIRE. Major industry manufacturer in the Southeast is looking for a Dir. of Sales. Will pay for relocation. Contact Dionne Jordan-Heard at 404.321.6735 or email djheard@wetherbypartners.com.

QUOTATION. "China has pegged its currency to the U.S. dollar. As a result, the decline in the dollar has had little impact on the imported price of Chinese made merchandise. That is very likely to change. With the election over, the new administration will renew pressure on China to revalue its currency, which is likely to happen sooner as opposed to later. As the value of the Chinese currency rises, so too will the price of goods coming from China. For general merchandise retailers, maintaining margins in a rising cost of goods sold environment will be the biggest challenge they will face as a result of the trade issue." – Carl E. Steidtmann, chief economist for Deloitte Research, writing in Retail Merchandiser.

IMPORTS. As part of a World Trade Organization agreement, textile quotas expired Jan. 1. Many countries worry that Chinese textiles will flood the world markets, causing massive unemployment. In response to pressure from the U.S. and Europe, China said it will impose a new tax on textile exports, but no word on how stiff the tax will be. President Bush can still impose limits on Chinese textile imports. U.S. textile producers won the right to request such relief through 2008 as part of China's entry in the WTO. Retailers are lobbying the White House not to impose limits and some have filed suit to block the imposition of limits.

LOOKING TO HIRE. Leading craft/home dec manufacturer looking for a highly qualified Account Executive to assume responsibility for sales to Wal-Mart. Substantial volume presently being done with excellent growth potential. Must live in or be willing to relocate to Arkansas. Please email your resume in confidence to Mike Hartnett at mike@clnonline.com.

QUOTATION. "America is living beyond its means. Our government has been doing what the average American has been doing. While American families pile up credit card debt and re-mortgage their homes, the government is piling up national debt and mortgaging our future." – Tom Fenton, Sr. European Correspondent for CBS News

KUDOS. We're hearing unconfirmed reports that Sears is doing far more than required by law for its employees/military reservists who are called up for duty. Sears is voluntarily paying the difference in salaries and maintaining all benefits, including medical insurance and bonus programs, for up to two years. If that's true, it's a good reason to shop at Sears. ... G.I. Jobs magazine named Home Depot as the country's most military-friendly employer, followed by Sprint and General Electric.

LICENSING. Hello Kitty is now 30 years old. Sales in the U.S. hit $500 million last year and are growing about 20% a year, the Associated Press reported. About 400 new Hello Kitty products are launched each month. Sanrio is the licensor.

Note: CLN profiles only one company per issue, which will remain online for at least a year. A Profile is a perfect way for a new company to let itself be known to the industry, or for an established company to enhance its reputation by showing the industry its history, diversity of products, personnel, etc. For more on how your company can be profiled, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

THE CREATIVE NETWORK: JOB OPENINGS

To read the latest job openings, click on Jobs in the left-hand column or click HERE.

THE CLN RETAIL INDEX

A. C. Moore (ACMR). Last*: 28.70 ... Change**: -2.08
Hancock Fabrics (HKF). Last*: 10.39 ... Change**: -0.50
Jo-Ann Stores (JAS). Last*: 27.50 ... Change**: -0.25
Michaels (MIK). Last*: 29.96 ... Change**: -3.74
Wal-Mart (WMT). Last*: 52.73 ... Change**: -3.14
CLN Retail Index. Last*: 149.28 ... Change**: +.1.4%
Dow Jones Index. Last*: 10,783.01 ... Change**: +1.2%

(Note: Emailed from a subscriber.)

The little boy ask his father, "Daddy, how was I born?"

Dad says, "Ah, my son, I guess one day you will need to find out anyway. Well, your Mom and I first got together in a chat room on MSN. Then I set up a date via email and we met at a cyber cafe. We sneaked into a secluded room, where your mother agreed to a download from my hard drive. As soon as I was ready to upload, we discovered that neither one of us had used a firewall, and since it was too late to hit the delete button, nine months later a blessed little Popup appeared that said: 'You've Got Male'."

1. 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.

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