Date: July 4, 2005
Vol. IX, No. 13

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TABLE OF CONTENTS

COMMENTARY: A Solution to "Dumping"  

Regarding the anti-dumping article below: All vendors need a place to dispose of excess inventory, just as retailers need to "dump" merchandise that no longer sells. It's particularly true for memory vendors, since scrapbook consumers seem to constantly demand new products. A vendor sells three-fourths of a new line – and the last fourth sits in the warehouse collecting dust. If the vendor dumps the product in the U.S., it hurts his regular retail customer.

Here's a solution: Earlier this year CLN helped a scrapbook paper vendor dispose of excess inventory by selling it to an Australian distributor/CLN subscriber. Because scrapbooking is more mature in the U.S., the international markets don't recognize these products as "old." It's a win-win situation. The vendor gets rid of excess inventory, the overseas distributors get a good deal (especially now, with the weak U.S. dollar), and U.S. retailers aren't hurt by dumping.

Business-Wise. The latest news from the Fiber and Craft Entrepreneurial Development Center, which is establishing knitting co-ops for women in Rwanda, most of whom are widows due to genocide and AIDS.

"Benny Da Buyer". A scrapbook vendor is closing her doors, and retailer Lisa Kanak analyzes the problem.

New Trade Show Exhibitors. Names, booth #'s, brief descriptions, URL's, and links to companies exhibiting at the CHA summer show for the first time.

Category Reports. How can retailers and vendors grow a category? The report focuses on needlepoint, but the advice is valid for any category.

Memory, Paper & Stamps. One retailer thinks the great paper chase is a mistake. She recommends less paper, more stickers/embellishments. Is she right?

Scene & Heard. Comments from savvy industry veterans on the enormous Bead&Button show in Milwaukee – reactions to CLN's show report (see article below).

Tech Topics. Internet pro Lynn Carlisle offers simple, practical tips on using search engines to increase the number of surfers to your site.

Note. If it appears to be an "old" column, click the "Refresh" or "Reload" button of your browser.

The media is filled with results of presidential polls, so CLN might as well join the club. How do you think President Bush is handling the economy? The war? And what do you think of Congress? To vote, click on Industry Polls in the right-hand column or click HERE.

According to CLN subscribers, 2005 hasn't been that great thus far. More than a quarter of the retailers responding, 27%, said the year has been a mild disappointment, while 14% rated the year as "a serious disappointment." Only 18% said it was a "very pleasant" or "mild" surprise. The remainder, 41%, said the first half of the year had gone as expected.

Vendors had a similar view. Nine percent said it was "a serious disappointment" while 38% called it a mild disappointment. Sixteen percent were pleasantly surprised and 38% thought the year met their expectations.

ABRY Partners signed a definitive agreement to purchase F+W Publications for an undisclosed sum. Founded in 1913, F&W is an publisher and marketer of magazines, books, book clubs, and conferences. Publications include Memory Makers and CNA magazines, and Krause Publishing, which has a craft book division. F+W has 200+ media properties across its special interest categories with 1.9 million active magazine subscribers and books sold around the world.

ABRY partnered with David Steward, the new CEO, who is the former COO/President of Publishing of Martha Stewart Omnimedia. Steward also formerly served as President of TV Guide magazine. ABRY has $7+ billion of assets under management and since 1989 has completed $18+ billion of leveraged transactions in the media and communications industries.

1. Scrapbook retailers really need to walk the entire show (July 15-17), not just the scrapbook and new exhibitor areas. Almost all exhibitors will have something related to memory.

2. Vendors in search of free-lance and/or full-time designers, product developers, show- and tv demonstrators, etc., should attend the CHA/SCD Designer Forum in the Hyatt Grand Ballroom Fri., July 15, 6-8 pm. Sponsored by CHA and the Society of Creative Designers, it's the perfect opportunity to meet and discuss design needs with a wide range of professional designers, all in one place, at one time. Attendance is limited to exhibitors and visiting editors and publishers. Your show badge will be your admission.

3. "Selling on eBay: What are you Missing?" focuses on the basics of buying and selling on eBay and how to move discontinued and excess products effectively. Participants receive access to eBay’s "On Ramp" program, a series of personal phone calls to get the business running. It's Fri., July 15, 8-9 am and repeated Sat., 8-9 am.

4. The Retail Summit on Thurs. July 14, includes "The Art & Craft of Marketing Arts & Crafts: You and Your Target Market," by Susan Inglis, a specialist at developing market access for crafters ... "You Can Compete: Double Sales without Discounting," by Bob Phibbs, ("The Retail Doctor"), which presents highlights of his new book of the same name ... "Building the Dream Workforce," by Mark Mayberry, an international speaker, author, and consultant.

5. Online pre-registration is over, and space is limited, so register for the Summit and workshops as soon as you arrive at the convention center.

6. For more info, visit www.chasummershow.com.

7. Now for the serious business: The annual Camp Hochee Kochee Social sponsored by Toner Plastics will one again be held at the Knuckles bar in the Hyatt. 9:30 pm, Friday.

The stocks of the CLN Retail Index outperformed the Dow in the second quarter. The Index rose 3.8% while the Dow lost 2.2%. A.C. Moore led the way, gaining 18.6%, followed by Michaels, up 14%. Wal-Mart slipped 3.8%, while Jo-Ann's lost 6% and Hancock fell 10.8%. All of the percentages exclude dividends.

Others: Meredith rose 4.9% and Primedia tumbled 6.9%. Martha Stewart was a big winner, up 29.2%, and Target out-performed Wal-Mart once again, gaining 8.8%.

The CLN Retail Index has out-performed the Dow for the first half of 2005, too. The Index rose 3.3% while the Dow dropped 2.6%. Michaels is the year's leader, up 38.1%, followed by A.C. Moore, up 10.1%. Jo-Ann's has slipped 4% while Wal-Mart is down 8.6% and Hancock has fallen 36%.

Meredith is down 9.6% for the year and Primedia is up 7.1%. Martha Stewart is flat and Target is up 4.8%.

Observations after attending the annual Bead&Button show held recently in Milwaukee:

1. Everyone in the industry should attend a consumer show. It's good for the morale to see how enthusiastic enthusiasts are. And do they spend money....

2. The size! Attendance: 16,268 consumers, up 7%, all apparently spending lots of money ... Booths (469) and exhibitors (340), same as last year ... Classes: 370, up 24.6%. The attendance is far more than any other type of consumer show. In comparison, the recent Society of Decorative Painters convention happily reported about 3,500 attendees.

3. There appears to an entire bead industry out there that has little to do with the traditional "craft" industry. Very few of the exhibitors exhibit at craft trade shows.

4. Many of the exhibitors were truly glass artisans, producing remarkable glass beads; at least some of them probably couldn't produce many more than they're already selling.

5. Many exhibitors were selling higher-end beads than can be found in chain stores.

6. Many of the attendees were making money by selling their creations. It does not take long to make lovely earrings, bracelets, and necklaces and be able to sell them.

7. Most exhibitors offered substantial discounts for retailers and those with tax numbers. A CLN subscriber who opened a scrap/stamp/bead store last September said she bought her initial bead inventory ($10,000 worth) at the show last year.

8. It appeared that some of the exhibitors would not be capable of selling/servicing larger chain stores, so independent stores who want to offer beads that won't be found in Michaels or Wal-Mart (or at our trade shows) might very well think of attending next year.

9. A new store franchise operation has been launched. Visit www.beadniks.com or call 508-696-7609.

10. This is an embellishment world – knitting, crocheting, and stitching with beads; and using them for scrapbooks, quilts, crafts, etc. Beads are the #1 crossover category these days.

Next year's Bead&Button show is June 16-18 in Milwaukee, with classes starting June 11. Class registration opens Jan 17. For info, visit www.beadandbuttonshow.com.

(Comment: Because this was my first consumer bead show, I sent this to a number of industry pros who know far more about beads than I do. To read their comments, click on Scene & Heard in the left-hand column or click HERE.)

(Note: Received from Karen Ancona, editor of CNA magazine.)

We've said it many times in CNA: Any trend suffers when independents lose the ability to compete in the category. Though their sales may be tiny compared to the chains, their influence is enormous with consumers.

And we do it over and over and over again: enable the chains to discount beyond the stretch of independents. Then the little guys lose interest, change their focus, or go out of business – and we wonder where the consumers go. Well, they move on to whatever the local Main Street store is promoting. For the industry, it's called shooting yourself in the foot as it's soooo expensive to market a new trend, and risky.

Solutions: proprietary lines for independents, special programs, and yes, hand holding. Expensive marketing? You bet, but in the long run it keeps a trend viable. Call it investment in the future.

Think quilting...hard to learn, expensive to do, takes forever to complete one project, difficult for chains to 'own', has the lasting support of independents, and has kept the interest of many consumers longer than any other category I can think of. Hmmmmm.

(Note: The following is from a veteran scrapbook/craft vendor who has exhibited at scrapbook consumer shows for a number of years.)

Over the years, we've seen a lot. When the shows first started, there were lots of "cottage manufacturers" with new, innovative ideas. Very few manufacturers sold at the show; they were there strictly for education. That's changed.

Today, manufacturers align with "vendor/exhibitors" to represent their product. Some have even created "shell" companies so they can attend and sell direct to the consumer. Now we see outright DUMPING. Manufacturers exhibit with boxes and boxes of slow moving or overstock product and slash prices.

It particularly hit home this year when I struck up a conversation with a small vendor (10 x 10 and 10 x 15 booth size). He said he was struggling to find unique product to sell because his bread-and-butter product was being heavily discounted at the shows by "others." It didn't take me long to see what he meant: several manufacturers were dumping the product (75% or more off).

Vendors carrying the product couldn't compete; others had to do "specials" on similar products. This hit home again when I heard ladies who met up with friends just arriving at the show. "Stop whatever you are doing" one said. "Before you buy ANYTHING, go to booth XXX and spend your money there first; the buys are simply incredible."

The ladies went to the aforementioned booth. I followed them and checked an hour later at the mobbed booth; they were still there and had filled a big cardboard box with product. One lady in line, and six ladies adding to the box ....

There were others – liquidation deals on punches, embellishments, etc. I've never seen it to this extent, the dumping.

Manufacturers shouldn't dump inventories at a consumer show. The practice gets the consumer used to discounting and undermines value of product. I felt bad for those vendors/retailers who had invested in those same SKU's. They were being sold for less than the retailers could buy it for, even with a hefty 50/25 discount. Any time a consumer show is used to "blowout inventory," it ends up hurting local shops, too.

It makes me wonder if scrapbook manufacturers don't know of other "disposal" avenues, such as overseas distributors and even places like Treasure Island or Garden Ridge that turn over massive quantities of discounted overstock in those drive-aisle bins. At least it wouldn't be dumped at a consumer show which ends up hurting the other exhibitors and independent retail stores.– Name Withheld

The National NeedleArts Assn. and the Int. Needlework Retailers Guild in Columbus show topped last year’s numbers with 403 exhibitors, 72 of whom were new. More than 2,100 buyers attended. There were 881 booths, up 2.4%, and 106 classes, 51 of which were sold out before the show began. It was the 30th anniversary of TNNA.

The Tribute to Excellence in Needlework award went to Lois Caron of Caron Int. for her role in developing overdyed yarns for the stitching market. Other highlights included the Needlepoint Galleria, Yarn Group Fashion Show, and INRG's Sample It!, which allowed attendees a chance to see and purchase a wide array of samples.

Jubilee Awards were presented to recipients for their special contributions to the needlearts industry: Frank & Judy Bielec, Carrell Bolton, Gay Bowles, Nancy Brown, Laura Bryant, Susan Burge, Barbara Bush, Lily Chin, Edith Eig, Nicky Epstein, Tina Herman & Terri Richards, Jeane Hutchins, Catherine Leslie, Kent State U. ... Bonnie Lively, Sallie Luedtke, Mary McGurn, Sandy McKee, Gaby Monson, Betsy Mullen, SuZy Murphy, Don Pendray. Linda Pratt, Carolyn Russman, Jan Stahl, John Schatteles, Kris & Dave Stott, Susan Treglown, Bruce VanDamm, Deborah Wilson, and Diane Zangle.

Future shows: Aug. 28-29, Phoenix ... Jan. 21-23, 2006, San Diego ... June 10-12, 2006, Indianapolis. For info, call 740-455-6773; email tnna.info@offinger.com; or visit www.TNNA.org.

They may be more profitable than first thought, reported the Atlanta Constitution. John Gould, director of bank cards at TowerGroup, a financial services consulting group, told the Constitution an estimated $55 billion worth were sold in 2004, and about 10% go unused.

Retailers account for unused gift cards as a liability, but after a while, they can count them as income. For example, Home Depot recently counted $43 million in income from unused cards sold from 1998 to 2001.

The popularity of the cards is skyrocketing, too. They were the #1 gift this past holiday season, more popular than apparel, Thomas Miezejeski, VP of The Pelorus Group, a research firm, told the Constitution. When bank-issued cards are added to the total, Miezejeski estimates $109 billion worth will be sold this year and $120 billion worth next year.

Gift cards can be particularly useful for craft retailers of all sizes. They are a perfect solution for a husband wishing to buy a present for his wife, whether she scrapbooks, crafts, paints, knits, or sews. Other studies have also shown the typical card recipient, if she does redeem the card, usually buys more than the amount of the card.

1. To see craft projects with a Hispanic flair, that would also appeal to a younger, "hip" generation, visit Kathy Murillo's site, www.craftychica.com."Kathy Cano Murillo strikes us as one of those people who, stranded on a desert island with nothing but a volleyball, a deck of playing cards, and some coconuts, would not only craft a rescue vehicle and distress signal but whip up a spiffy castaway-themed wardrobe to wear as she did so. And she would be having a great time. And so would you." – USA Today

2. Saw my first scrapbook, half-hour, tv infomercial last week (Sat. afternoon, late morning, on the Peoria, IL NBC affiliate). To see the kit being sold (5,000 pieces, $39.95), visit www.tvscrapbook.com. Does this help or hurt scrapbook retailers? It helps if it attracts a novice and inspires her to want more. Otherwise, it decreases the value of products in our stores.

EK SUCCESS. Engaged Banc of America Securities as its financial advisor to help explore strategic alternatives for the company. CEO Chris Skinner said, "The company is actively pursuing several growth initiatives including -- the Shoppe within a Shoppe merchandising concept about to be launched at several retail locations across the country, and a new lifestyle advertising campaign that spotlights specific examples of creative crafting as being Another EK Success Story. These and other initiatives further our commitment to growth and continued market leadership, and we look forward to business as usual as we conduct this review." A company press release said this action will not necessarily result in any transaction and the company will not comment on the progress of the evaluation period.

SCRAPBOOKING. Visit www.coteriescrapbooking.com to see the new plans for Coterie Scrapbooking, led by Creating Keepsakes execs.

CROCHET. The News Star reported the effort of Lisa Gentry, who sat down in the Michaels store in Monroe, LA and attempted to break the Guinness world record as the "World Fastest Crocheter." Clerk Diana Jones counted the stitches and verified the result, which appeared to break the record. Now they're waiting for Guinness to acknowledge the effort.

MAGAZINES. All American Crafts is launching a new magazine, Creative TECHniques, at the CHA summer show (booth #608). PC Smart, author of numerous "Tech Topics" columns for CLN, is the editor. It's designed for the next generation of crafting, sponsors say, and will teach readers step-by-step to combine technology with traditional crafts to make home dec items, fashion accessories, quilting, etc., and better digital photos. It will be sold on newsstands and in retail stores.

YARN. Lion Brand Yarn has a new, free, email newsletter on yarn crafting for kids aged 5 to 15, By Kids For Kids. Kids can subscribe at www.lionbrand.com/byKidsForKidsRequest.html. The first issue mails this Thursday. Lion's adult email weekly newsletter has 370,000 subscribers.

STOCK. Hancock Fabrics' stock rose 11% one day late last month after BB&T Capital Markets upgraded the stock to Buy from Hold. "We see Hancock doing many things that should improve store sales productivity when fully rolled out," analyst Laura Richardson told clients, CBS MarketWatch reported.

LICENSING. Care Bears won three major awards from the Licensing Industry Manufacturers Assn. – Character Brand of the Year, Hard Goods, and Soft Goods. MCG Textiles has the Care Bears license for cross-stitch and latch hook kits ... According to a report by the Int. Licensing Industry Merchandisers Assn., royalties for art rose 1.8% to $170 million last year.

SOAP. The U.S. Consumer Product Safety Commission accepted a provisional settlement with Rose Art for failing to report product safety information to the Commission, Retail Merchandiser reported. The settlement imposes a $300,000 penalty against Rose Art for failing to inform the government in a timely manner about a defect in soap making kits that led to injuries to young children. Rose Art denies the soap kits were defective and that it violated the reporting requirements of the Consumer Product Safety Act.

WAL-MART. For an interesting analysis of Wal-Mart's relationship with China, visit www.agencyfaqs.com/news/stories/2005/07/01/11905.html.

ACQUISITION. Jarden Corp. is acquiring The Holmes Group, a manufacturer and distributor of select home environment and small kitchen appliances. Jarden, owner of Loew-Cornell and other industry-related companies, continues to seek acquisitions.

PHOTOS. Rite Aid is the latest company to offer consumers the opportunity to upload photos online and then pick up finished prints at a local drugstore in an hour. The chain also has partnered with Pure Digital to offer a disposable digital camera with a preview screen and the ability to delete images, Retail Merchandiser reported.

KIDS. Revell-Monogram, known for its plastic model kits and slot cars, is after the "tween" market with its new Style Studio line which enables girls to decorate and personalize items like footwear, belts, and purses. The company was one of the earliest supporters and exhibitors of HIA, back when the organization (now merged with ACCI into CHA) was dominated by hobby companies.

TOYS. Toys "R" Us CEO John Eyler and COO Christopher Kay resigned two days before shareholders approved the $26.75/share buyout offer by Kohlberg Kravis Roberts, Bain Capital, Vornado Realty Trust. The deal should close by the end of this month.

ROLODEX. Effective July 8, The Creative Network moves to 1325 SE Tech Center Dr., Ste. 190, Vancouver, WA 98683. The new phone # is 360-604-0802 and the fax is 360-606-0806.

MAGAZINES. Interweave Press will publish a second annual special interest publication, Interweave Crochet, which will be "devoted to the creative possibilities of crochet." It will be available in retail stores Sept. 7 for $7.99. Advertising closes July 1.

BOOKS. For the latest releases from Jeanette Crews, visit www.jeanettecrews.com/results.cfm?Subcategory=144.

TRADE GROUPS. The new Hobby Manufacturers Assn., born of the merger of the Int. Model Manufacturers Assn., the Model Railroad Industry Assn., and Radio Control Hobby Trade Assn., was incorporated effective July 1. There will be four divisions – radio control, plastics/die cast, model railroad, and general hobby. For more info, call Exec Director Pat Koziol at 973-283-9088 or email pat.koziol@hmahobby.org. The website is www.hmahobby.org.

PEOPLE. Richard Brown, formerly of Spinrite and currently a member of the CHA board of directors, is the new President of Point Distributors, Inc. of Plover, WI. Point currently specializes in the distribution of embroidery thread, backing and other related accessories to the commercial embroidery markets and specialty embroidery manufacturers, but Brown plans distribute industry products (e.g., Hot Off the Press) and will introduce proprietary products at the CHA Winter Show. Point has a distribution/warehouse facility in Elk Grove Village, IL and plans to open an additional facility in Kitchener, Ontario this fall.

PEOPLE. Hancock Fabrics promoted Marscia Mahoney VP of the Home Decorating division (home dec textiles, accessories, and seasonal products) and Dinah Smith, VP Quilting/Craft division (textiles, quilting accessories, and craft products). Ms. Mahoney began her Hancock career in 1974 as a sales clerk in Waterloo, IA and most recently was the buyer for decorator fabrics. Ms. Smith began at Hancock as a store manager in Dallas in 1990 and most recently was the buyer for fashion fabrics. Brad Berg remains VP of the Apparel division and Rick McCord remains VP of the Notions division. All of the merchandising VPs report to SVP of Merchandising, Dean Abraham.

PEOPLE. Ed Ogorzaly is President of retail operations for Dick Blick ... Terry Thom is the fine art buyer for Jo-Ann's, replacing Jeanine Anthony, who moved to paper crafting ... Toner Plastics named Robbin Burton Sales & Marketing Manager and Davi Lee Baker Product Development Manager ... Kandi Corp. named Mary Norwood of MNC Studio Designs as Program Manager for the Eye Kandi embellished stamping programs.

PAINTING. The Society of Decorative Painters is looking for an executive director. For more, visit www.decorativepainters.org and click on Career Opportunities.

CONSULTANT. Are you looking to better position yourself in the independent retail market? Consultant available for merchandising and packaging analysis, product mix analysis, focus group analysis for product positioning in regional markets, and more. Professional designer on-staff. We can help you – and your retailers – become more profitable. For more info about this consultant, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

CONDOLENCES. Our very best wishes to the family of Eric Berger, 93, who passed away last week. Eric fled the Nazis as a child, although he lost family members in the Holocaust. He and his sister made their way to America and eventually he was going to open a men's clothing store. Instead, he found a failing fabric store in Oakland, CA and bought it with the assistance of the Hebrew Free Loan Association. The business became New York Fabrics, and Mr. Berger grew it to a 19-store chain that he eventually sold to Jo-Ann's in 1991. "His life and his business were one and the same," his son Steve told the Contra Costa Times. "Fabrics defined his life." ... Wal-Mart heir and member of the board of directors John Walton was killed when the ultra-light aircraft he was piloting crashed in Grand Teton National Park. He was the second son of Wal-Mart founder, Sam Walton. Memorials can be sent to Children’s Scholarship Fund, 8 W. 38th St., 9th Floor, New York, NY 10018-6229 ... Harold Marks, 84, the former owner of Modern Miltex, passed away recently.

The Creative Network is the only personnel recruitment firm specializing in our industry. To see a partial list of the job openings, click on Jobs in the left-hand column or click HERE.

A. C. Moore (ACMR). Last*: 32.20 ... Change**: +2.17
Hancock Fabrics (HKF). Last*: 6.76 ... Change**: +0.73
Jo-Ann Stores (JAS). Last*: 26.51 ... Change**: -1.29
Michaels (MIK). Last*: 40.96 ... Change**: -0.77
Wal-Mart (WMT). Last*: 48.28 ... Change**: -0.65
CLN Retail Index. Last*: 162.46 ... Change**: -+0.1%
Dow Jones Index. Last*: 10,303.44 ... Change**: -3.0%

A city boy, Kenny, moved to the country and bought a donkey from an old farmer for $100. The farmer agreed to deliver the donkey the next day. The next day the farmer drove up and said, "Sorry son, but I have some bad news, the donkey died." Kenny replied, "Well then, just give me my money back."

The farmer said, "Can't do that. I went and spent it already." Kenny said, "OK then, just unload the donkey."

The farmer asked, "What ya gonna do with him?" Kenny, "I'm going to raffle him off."

Farmer, " You can't raffle off a dead donkey!" Kenny, "Sure I can. Watch me. I just won't tell anybody he is dead."

A month later the farmer met up with Kenny and asked, "What happened with that dead donkey?" "Kenny, "I raffled him off. I sold 500 tickets at $2 a piece and made a profit of $898.."

Farmer, "Didn't anyone complain?"

Kenny, " Just the guy who won. So I gave him his two dollars back."

Kenny grew up and eventually became the chairman of Enron.

REMINDERS

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.

2. If you want a hard-copy of this issue, click on "Printer Friendly version".

3. If your company is a paid subscriber, everyone in the main office is welcome to register, free. Just click on "Work for a paid subscriber? Click here to register."

4. If you want to recommend CLN to a friend, use the "Tell Your Friends" box on the home page.

5. Creative Leisure News is normally published the first and third Mondays of each month. Because of the CHA Summer Show, however, your next issue will be Wednesday, July 20. Happy 4th of July!

xxx

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