Date: April 16, 2007
Vol. XI, No. 8

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TABLE OF CONTENTS

COMMENTARY: INTERNET, TV, & CONSUMER SHOWS 

Not long ago, crafters' options to buy supplies were limited to mail order catalogs and stores. Now there's the Internet, tv, and consumer shows, too. The three newcomers offer challenges and opportunities for the industry's brick-and-mortar's.

The Internet allows consumers access to products they can't find in nearby stores, and with message boards sites create virtual communities to inspire consumers continue scrapping, knitting, etc. But they siphon off some sales from stores.

QVC and the Home Shopping Network appeal to the home-bound; the starter kits may attract interested newcomers who don't know where to start and are intimidated by stores. Years ago, I moderated a panel discussion of some of the largest retailers at the ACCI (now CHA summer) show. Before it started, a manufacturer asked me to ask the panel how they felt about their vendors selling on tv. Good question, so I asked.

The panel was unanimous. They encouraged vendors to sell on tv, provided they were not selling exactly the same sku's at a lower price. In other words, take a group of sku's, put them together as a set or kit, and sell them. The retailers thought consumers who had a good experience with their tv kit would then follow up by shopping in stores. Shopping shows allow products to be demonstrated so viewers can see what can be done with them far more easily than reading a package on a store shelf.

Consumer shows can be a very mixed bag. I think they hurt stores if the nearby show is filled with exhibitors who are merely dumping excess inventory at low, low prices. On the other hand, bead shows I've attended are filled with small exhibitors who are unwilling or unable to sell to many stores. Do attendees spend less in stores after attending a consumer show? Probably, at first. But I think the bead shows makes them more enthused about jewelrymaking, and ultimately that will pay off for stores.

Scene & Heard. Details about the Spring Swap-O-Rama in New York. The edited press release will give you a glimpse into the thought process of the growing underground craft movement.

Category Reports. Why sales of tools and accessories are critical to a store's success – even a yarn shop. Think there's no comparing knitting and woodworking? Think again.

Note: If a column appears to be an "old" column, click on the "Refresh" or "Reload" button on your browser.

Time to take out your crystal ball: Five years from now, what kind of fabric and craft department will Wal-Mart have, if any? Word is that the company is dropping bolt fabric and merging crafts with party goods in new and remodeled stores, with plans to eventually transform all stores to a fabric-less "celebrations" department. But there also appear to be cases where Wal-Mart has rescinded the order to drop fabric in certain stores when customers complain loudly enough.

So what do you think Wal-Mart will eventually do? To vote, click on Industry Polls in the right-hand column or click HERE.

Of the alternatives to brick-and-mortar shopping, voters in CLN's unscientific poll believe consumer shows are the most helpful for retail stores; almost 7 out of 10 (68.4%) believe consumer shows ultimately boost retail sales, while 15.8% think they hurt sales. Another 15.8% think the pros and cons cancel each other, and no voter was unsure.

Voters weren't quite so positive about home shopping networks and infomercials. Almost half, 45.5%, believe they help store sales, while 22.7% think they siphon off sales. Another 22.7% thought the pluses and minuses cancel each other, but 9.1% were not sure.

Only 21.7% believe the Internet boosts store sales, while 34.8% think it hurts. Almost 4 in 10, 39.1%, said the pros and cons cancel each other, and the remaining 4.4% were unsure.

Paper Zone filed for Chapter 11 bankruptcy protection and announced it would close its Memories & More stores. Paper Zone will continue to operate its 10 stores, 7 in Washington and 3 in Oregon, the Seattle Times reported.

The company's sales were $21.9 million in its last fiscal year, up 38.6% from the previous year, but the filing listed assets of $3.2 million and debts of $5.46 million.

Key unsecured creditors: $40,000+: Making Memories, My Minds Eye ... $30,000+: Enthusiast Media, ProvoCraft, QuicKutz ... $20,000+: Doodlebug Design, EK Success, SEI ... $10,000+: American Crafts, Basic Grey, Bazzill Basics, DG Inventive/Mari-Mi, Scrapbook Trends.

Paper Zone opened in 1992 as an outlet store for West Coast Paper, a paper distributor. In 2002 it was acquired by the investment firm Intracorp Capital. By 2005, Paper Zone had grown to 16 stores when it acquired 16 scrapbook stores from Memories & More.

According to the Times, the plan was to re-brand the M&M stores as Paper Zone outlets, but the audiences were markedly different, and converting M&M to Paper Zone's technology resulted in depressed inventories, which hurt sales.

"We have a great name in the area," Paper Zone General Manager Jim Nystrom told the Times. "We really just want to go back to who we are and who we're good at being."

On April 5, Provo emailed its retail customers saying that, as of May 5, it will remove the Cricut Personal Electronic Cutter (sku 29-0001) and the Cricut Expression (sku 29-0300) from its Minimum Advertised Price policy. This occurred after Michaels and A.C. Moore had advertised specific prices for the Cricut, both for $139. Also on April 6, A.C. Moore emailed a "price correction" to its customers saying "The price on the Cricut machine was sent in error on the April 6th Super Friday Sale. The ad should have read ... lowest price ever."

CLN has heard but could not confirm that the chains were clearing out their current inventory, and then would be sold a slightly different Cricut with a separate SKU which will not be covered by the MAP agreement, but the Provo letter indicates that might be a moot point.

Most retailers had a strong month due to Easter falling earlier than a year ago, and warmer weather in at least some parts of the country. But A.C. Moore, Jo-Ann's, and Hancock now only report sales by the quarter rather than monthly, so it's difficult to determine how the industry's chain stores performed.

Wal-Mart's same-store sales rose 3.4% in March, but said sales in its home department, which includes crafts/fabric, were soft. Comparable store sales for March were driven by the strength in average ticket and the number of transactions showed improvement. The company expects comparable sales in the U.S. for April to be flat to down 2%, and CFO Tom Schoewe warned Wal-Mart might may miss first-quarter earnings expectations. He said it will be "a challenge" to meet its forecast of $0.68 - $0.71/share.

Others: Nordstrom, +15.0% ... Target, +12.0% ... J.C. Penney, +10.6% ... Saks, +10.1% ... Sam's Club, +7.4% ... Duckwall-ALCO, +7.1% ... Costco, +6.0% ... Gap, +6.0% ... Dollar General, +5.5% ... Federated Department Stores, +2.3%.

(Comment: Look for April sales to be significantly lower because of the earlier Easter this year. Most analysts take March and/or April sales with a grain of salt, and look at the two months combined, compared to a year ago, to negate the effect of a changing Easter date.)

Chair/CEOPresident Darrell Webb and Exec VP/Merchandising & Marketing Travis Smith were interviewed by the Cleveland Plain Dealer recently. Among the highlights:

The Hudson, OH superstore has been remodeled. "The Hudson store features lower ceilings and brighter fixtures, larger signs and pictures, a wood floor, and a wider central racetrack around the store," wrote the Plain Dealer, and it carries 20% fewer SKU's.

Jo-Ann's is expanding its kids craft and jewelry-making departments, the stores' fastest growing categories.

Webb is optimistic about the future of the company's sewing sales, thanks to the Project Runway series sparking a new interest in younger consumers, Wal-Mart's apparent withdrawal from bolt fabric, and Hancock's bankruptcy.

Jo-Ann's is remodeling 20 older stores this year. Webb is not planning to phase out traditional stores.

The store offers more madeups/examples of finished projects, and is moving classes to the store's front windows. The company is also testing a custom machine-embroidery program from BagWorks. (CLN highlighted the program in the 1/15/07 issue. Visit www.clnonline.com and click on CLN Archives in the right-hand column.)

To read the Cleveland Plain Dealer article, visit www.cleveland.com/plaindealer and type "Darrell Webb" in the search engine.

The slowing scrapbook market is turning to men in an attempt to recapture the days of strong growth, reported the Wall Street Journal. The article cited Stampin Up, which released male-oriented products (papers that look like rusty tractors and weathered barn doors, and stamps of deer and war medals); a Seattle consultant for Creative Memories organizes scrapbook events for single fathers; Speed Scrap Design, founded by the sister of Dale Earnhardt Jr., offers stickers of lug-nuts and papers dotted with wrenches, checkered flags, or beer.

The article included anecdotes of male scrappers such as movie star Brendan Fraser, who has made scrapbooks of each of his movies; an Atlanta firefighter, nicknamed "Hobby Lobby" by his firehouse colleagues; men who use scrapping as a way to bond with their daughters; and film maker Wes Thomsen who made a documentary, Scrapped, and has sold 15,000 DVD copies at scrapbook conventions in the U.S., Australia, and New Zealand.

"Sales began to slip three years ago as the doodad glut, and the growing complexity of the hobby, scared off novices," reported the Journal. Others chose to post their digital pictures online instead. At Creative Memories, a direct-sales album maker in St. Cloud, MN, sales in 2005 fell 20% to $320 million, from 2003.

The article cited CHA research which indicates 1+ million scrappers are men, and that Toronto retailer (Scrapbooks by Design) Patrick Piette says 18% of customers are now men, up from none three years ago.

To read the article, visit http://www.yorkdispatch.com/business/ci_5617159.

Martha Stewart Living Omnimedia announced Martha's long-term endorsement with SVP Worldwide, the manufacturer of Singer, Husqvarna Viking, and Pfaff brands. Martha will promote the machines with sewing-related projects and material in her magazines, Martha Stewart Living, Blueprint, and Martha Stewart Weddings; on the Internet at www.marthastewart.com/sewing; and on her tv series, The Martha Stewart Show.

"My mother taught me the basics of sewing at a young age and I have had Singer sewing machines in my home since I was a girl. I used them to make many of my clothes in high school and college and I even sewed my wedding dress," Martha said. "Sewing is a wonderfully useful skill. It enables anyone to create beautiful and functional projects or even enhance something as basic as a paper gift bag. I'm delighted that sewing is enjoying a national renaissance since I know very well the pride and pleasure that can be derived from this rewarding pursuit."

SVP Worldwide said it had conducted extensive consumer research the past two years which indicated that prospective and beginning sewers are looking for a mentor. SVP is headquartered in Hamilton, Bermuda and does business in 190+ countries. For more, visit www.svpworldwide.com, www.singerco.com, www.pfaff.com, and www.husqvarnaviking.com.

Here's your chance to buy a beautiful sweater made by an industry knit/crochet "star" – and help a great cause in the process. Items to be sold via an online auction include original sweaters that were featured in national knit and crochet magazines. Designers include Nicky Epstein, Gayle Bunn, Doris Chan, and many others. Mary Engelbright has also donated two hand-signed lithographs for the auction. Proceeds will go to the Rwanda Knits Project.

The Rwanda Knits Project was founded in 2003 by Cari Clement and her organization, the Fiber and Craft Entrepreneurial Development Center, to provide U.S.-made knitting machines and technical and business training to low-income women in Rwanda, mostly widows from the genocide in Rwanda and AIDS. The program enables them to earn a living through knitting. Prior to F&CED, these widows were supporting their families as subsistence farmers, earning less than $1/day. The program has grown to 17 knitting cooperatives throughout Rwanda and has trained 1,500+ women.

In May 2006, Rwanda Knits conducted a four-day business training workshop for members of the 17 cooperatives. Since then, the cooperatives used their new business skills and secured orders for 1,000+ children's sweaters, a component of every school's uniform. Filling these orders will bring $500+ to each cooperative – but it requires the purchase of yarn.

Hence the auction. The auction begins Apr. 20 at 11 pm (EDT) and runs until 11 pm Apr. 29 at www.rwandaknitsauction.org. Half of the purchase price of each item is tax deductible. For more info, call Cari Clement at 802-229-9991, email cari@fiberandcraft.org, or visit www.rwandaknits.org or www.fiberandcraft.org.

A recent study of the $2.3 billion candle market indicates sales have declined by 7+% from 2005 to 2006, but consumer usage has continued to soar. According to a new study by Mintel, respondents who purchase candles rose from 2002 to 2006 from 64% to 77%. So why is usage up but sales are down? Lower prices. Close to one third of consumers said they purchase candles once per month or more often, but with the accessibility of low-cost offerings in the candle category, consumers are saving money and manufacturers are not seeing major profit margins.

"Candle manufacturers have to contend with cheaper alternatives and increased production costs," said Chris Haack, a Mintel analyst. "Petroleum is a key resource in the candle manufacturing process, and it has continued to soar in price over the last few years. This, coupled with the fact that major category competition prevents candle companies from passing along the added costs, is contributing to the downturn in sales."

1. There's been a bit of an uproar on various scrapbook blogs and message boards because Creating Keepsakes named an 18-year-old male, Mitchell Kraft, to its 2007 Hall of Fame. CK's being accused of ulterior motives (trying to appeal to a younger audience). To see his blog, visit http://web.mac.com/mitchellkraft/iWeb/mitchell%20kraft/welcome.html. To hear his interview with National Scrapbooking Assn. President Veronica Hugger, visit http://blogtalkradio.com/hostpage.aspx?show_id=17678.

Turning scrapbooking into a private club for middle-class, heterosexual, white women is a perfect way to take the category right down the drain. And to the complainers: get a life.

2. I will be on vacation and won't be back in my office until April 30. I'll be on a cruise with my wife, Barbara, but will try to check my mail periodically. Not too often, though, or Barbara will throw me overboard. Silly woman thinks that a vacation should be, uh, a vacation.

3. When you read the large amounts of money owed to vendors by a company filing for bankruptcy (Paper Zone in this issue, Hancock in the previous issue), don't assume those vendors will go bankrupt, too. Many vendors purchase receivables insurance

4. In the previous issue CLN told the story of designer Laurie D'Ambrosio, whom the IRS thought had earned $625,000 rather than the $625 she had, in fact, earned. Here's an update from Laurie: "Just thought I’d mention that it really does pay to have all of your paperwork in order. The IRS sent a letter that let me know that with my 'help' they were able to clear up the differences between my records and the payer's records. I don’t have to file a petition with the United States Tax Court – Woo Hoo! Now if I could just get my supplies as organized as the paperwork...."

CLN STOCK INDEX: A.C. Moore: $22.65, up $1.31 ... Hancock: $0.91 ... Jo-Ann's: $27.79, up $0.54 ... Wal-Mart: $47.40, up $0.45 ... CLN Index: $98.75, up 2.4% ... Dow Jones: 12,612.13, up 2.1%. (Note: Trading of Hancock stock stopped when the company filed for bankruptcy protection. All changes in price are since xx/xx and are exclusive of dividends.)

MARTHA. Word on scrapbook blogs is the Martha Stewart Crafts line will appear on Michaels' shelves Apr. 27 ... Has relaunched her website, www.marthastewart.com. It had originally been more of an e-commerce site. The new version is more of an information portal. It features 700+ videos, including daily episodes of the tv series and how-to clips.

PAINTING. Beginning today the Society of Decorative Painters will offer painting classes online. The cost is $20 for members ($30 for non-members) for three 30-minute sessions. High-speed Internet is required. The debut class is "Goldfinch Winter Plumage," a beginner project taught by Janelle Johnson. Future classes will be taught by Maureen McNaughton and Sherry Nelson. Visit www.decorativepainters.org.

LOOKING TO HIRE. The Society of Decorative Painters is looking for an Executive Director; 55K-65K + benefits; minimum BA + 3 years organizational management experience; current HR knowledge required; budgeting, pr, and experience working with boards preferred; travel/flexible hours required; see details at www.decorativepainters.org. Mail resume to ED Task Force, 393 N. McLean Blvd., Wichita, KS 67203-5068, or fax 316-269-9191.

PEOPLE, I. Colorbök named Chuck McGonigle as New President/CEO. He replaces co-founder and former President/CEO Bill Taylor, who will remain as Chair of the board, Chief Creative Officer, and Head of New Business Development. McGonigle began his career at Procter & Gamble, and most recently was COO, then President, of Cleo, Inc., a manufacturer of gift wrap products.

PEOPLE, II. David Blumenthal of Lion Brand was elected Chair of the Craft Yarn Council of America ... John Menzer, former CEO of the old Ben Franklin and now a top exec at Wal-Mart, has been moved to Chief Administrative Officer and will no longer be overseeing U.S. stores. Now the U.S. stores chief, Eduardo Castro-Wright, will report directly to CEO Lee Scott, rather than to Menzer ... Wal-Mart also named Bill Simon to the newly created position of COO and Pat Curren to Exec VP/People.

PEOPLE, III. Duncan named Keith Martino as VP of Operations. Martino has 20 years of operations experience, primarily in the electronics industry – Philips Components, Tyco Electronics, and Murata Electronics ... Bruce Smith, who recently resigned as Exec VP/CFO of Hancock, has joined Citi Trends as Sr VP/CFO ... CHA named Anthony Licata as Sr. Sales Manager and Tina Mercardo as Operations Manager; both report to Tony Lee, VP of Meetings and Expositions.

QUOTATION. "Whatever you think about Wal-Mart and its varied policies, it seems clear that the Bentonville Behemoth is undergoing an internal battle for its heart and soul as well as engaging in an external battle for the hearts and souls of its various constituencies." – Kevin Coupe, Chain Store Age

AWARDS. Wal-Mart was named one of the "2007 Top 35 Companies for Executive Women" by the National Assn. for Female Executives.

ACADEMICS. Pathways into Professional Needlearts (PiPN), TNNA's internship program in conjunction with the U. of Akron, was recently presented at the University's 6th annual Celebration of Excellence in Learning and Teaching. Later this month, PiPN will be highlighted at a meeting of the Ohio Assn. of Family and Consumer Sciences, where the focus will be "Not Your Mother’s Knitting: Introducing a Global NeedleArts Culture." In June, PiPN will be presented at the 3rd Int. Consumer Sciences Research Conference in Ulster, N. Ireland.

BOOKS. Recommended by Bob Ferguson (Ferguson Merchandising/Ben Franklin): "You were recently working on a project of establishing a code of sorts for businesses in our industry to use as a guideline. I have run across a book that you might find interesting that speaks directly to this subject. It is Profit with Honor: The New Stage of Market Capitalism, by Daniel Yankelovich. "Essentially the book speaks to how a 'perfect storm' of greater liquidity in world markets, new social expectations, and billions of new entrants into the market economy is driving a tectonic shift in the market economy. The traditional notion of corporate responsibility in which a company does good works to boost its image is being replaced by a new corporate ethic in which companies act in enlightened self-interest to search for opportunities to profit by advancing the public good."

CANCER. Yellow Fence, a supplier of scrapbook-related shirts, tote bags, etc., is offering a limited-edition shirt and bag that say "care. crop. cure." with the pink ribbon logo. A portion of the proceeds will be donated to the Susan G. Komen for the Cure Foundation. Available at www.yellowfence.com from May 5 through Oct. 31.

TRADE. CLN reported the U.S. government imposed tariffs on high-quality Chinese paper. Now Business Week reported that one of the U.S. paper companies, Cerberus Capital Management, whose complaint started the investigation that led to the tariffs, is led by John Snow, President Bush's former Treasury Secretary ... The U.S. later announced it was taking China to court at the World Trade Organization over suspected trade barriers and piracy of books, music, etc., the New York Times reported.

BANKRUPTCY. ASM Capital is trying to buy Hancock vendors' claims for 32 cents on the dollar for claims over $5,000. Call Jack Silverman at 516-224-6040, ext. 103 or email js@asmcapital.com.

GREAT CAUSE. Pacifica Radio (KPFA), a National Public Radio affiliate in Berkeley, broadcast an 11-minute segment about the Rwanda Knits project on the Full Circle segment. Host Donna Bellorado interviews founder Cari Clement, project manager Geofrey Katushabe, and two of the teachers, Esperance Nyirarusimbe and Furaha Mukamusoni. The program was in conjunction with the 13th anniversary of the 1994 Genocide. To hear the show, visit http://kpfa.org/archives/index.php?type=all.

ADVERTISING. Wal-Mart's in-store tv network is changing: The 125,000+ tv's will be replaced with flat-panel versions, at eye level, including some on endcaps. Vendors can buy commercial time just for individual screens in their department, USA Today reported.

HOBBIES. The 2007 Hobby Manufacturers Assn. iHobbyExpo, Oct. 18-21 in Rosemont, IL, has already sold 45,000 sq. ft. of booth space, up 15.4% from a year ago. The show has an interesting feature: The "Ticket to Ride" program reimburses retailers for their travel expenses if they place orders with participating exhibitors. Future shows: Oct. 16-19, 2008; Oct. 22-25, 2009; and Oct. 14-16, 2010, all in Rosemont; The '09 and '10 shows are a week later than the York Train Meets. For info, call 973-283-9088 or visit www.ihobbyexpo.com.

MEMORY. Nearly 3,650 scrappers, stampers, and paper crafters attended the Memories Scrapbooking Expo in Columbus, OH Mar. 30-31, – a 60% growth over 2006. There were 55 vendors in 105 booths.

EASTER. The 2007 Easter Consumer Intentions and Actions Survey conducted by the National Retail Federation revealed nearly 80% of consumers planned to celebrate Easter and expected to spend an average of $135.07/person, up 11% from a year ago.

SIGN OF THE TIMES? The 3/20 edition of the Wall Street Journal included a front-page article about the manufacturers of auto parts. They are no longer agreeing to cut prices to the Big 3 automakers. Ford, General Motors, and DiamlerChrysler have been squeezing their parts suppliers so they can maintain their margins while offering discounts and rebates to consumers. Finally, the Journal reported, the surviving vendors – many others went bankrupt – have had enough and are saying "No!"

LICENSING. Paper House Productions signed a licensing agreement with General Motors and will introduce a new line of die-cut photographic cards, magnets, and scrapbook products at the National Stationery Show next month. Images include a '59 Pink Cadillac, a '62 Red Corvette, and a '57 Chevy Belair. Visit www.paperhouseproductions.com.

To see the latest job openings listed by the only personnel recruitment firm specializing in our industry, click on Jobs in the left-hand column, or click HERE.

Emailed from a subscriber, reportedly from George Carlin:

New Rule: Ladies, leave your eyebrows alone. Here's how much men care about your eyebrows: do you have two of them? Okay, we're done.

New Rule: There's no such thing as flavored water. There's a whole aisle of this stuff at the supermarket: water, but without that watery taste. Sorry, but flavored water is called a soft drink. You want flavored water? Pour some Jack Daniels over ice and let it melt. That's your flavored water.

New Rule: Stop screwing with old people. Target is introducing a redesigned pill bottle that's square, with a bigger label. And the top is now the bottom. And by the time grandpa figures out how to open it, he'll be in the morgue. Congratulations, Target, you just solved the Social Security crisis.

New Rule: I'm not the cashier! By the time I look up from sliding my card, entering my PIN number, pressing "Enter," verifying the amount, deciding, no, I don't want cash back, and pressing "Enter" again, the kid who is supposed to be ringing me up is standing there eating my Almond Joy.

New Rule: Just because your tattoo has Chinese characters in it doesn't make you spiritual.... It translates to "beef with broccoli." The last time you did anything spiritual, you were praying to God you weren't pregnant. You're not spiritual. You're just stupid.

New Rule: I don't need bigger mega M&Ms. If I'm extra hungry for M&Ms, I'll go nuts and eat two.

New Rule: If you're going to make movies based on crummy old television shows, then you have to give everyone in the Cineplex a remote so we can see what's playing on the other screens. Let's remember the reason something was a television show in the first place is that the idea wasn't good enough to be a movie.

New Rule: If you ever hope to be a credible adult and want a job that pays better than minimum wage, then for God's sake don't pierce or tattoo every visible available piece of flesh. If so, then plan your future around saying "Do you want fries with that?"

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xxx

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