Date: April 6, 2009
Vol. XII, No. 7

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TABLE OF CONTENTS

COMMENTARY: SO HOW IS THE INDUSTRY DOING? 

The fourth-quarter sales figures for Michaels, Jo-Ann, and A.C. Moore, as reported in the last issue of CLN, were gloomy. Same-store sales are considered the most accurate indication of how a chain is doing: Jo-Ann, -2.9%; Michaels, -5.6%; and A.C. Moore, -8.7%. Meanwhile, the latest quarterly update of CHA's Attitude & Usage Study, the closest thing we have to an accurate size of industry study, indicated sales were down.

But the picture painted by these numbers may be deceptive. Consider:

1. Sales were down in large part because custom framing, perhaps the highest-ticket category in our stores, was down, as were sales of seasonal items. But in a real sense, that's not us, the folks who make, import, distribute, and retail craft, scrapbooking, knitting, sewing, wearable-art, painting, kids crafts, and DIY home dec supplies. In fact, the sales of our products appear to be equal to or ahead of last year. But those are lower-cost items and their sales could not overcome the decline of more expensive custom framing business.

2. Enthusiasts aren't buying as much because they already have so much – paper, yarn, beads, etc. They're still doing their thing, and eventually they will need to replenish their stash.

3. Hobby Lobby (see below) reported increased sales, and we're hearing reports that Wal-Mart is pleased with its craft sales.

4. I may be a cockeyed optimist, but it does appear the economy may have hit bottom, or close to it. For months now, consumers and businesses have hid under a rock as the economy tumbled down around us. The dust is beginning to settle, and as we crawl out from our storm cellars, we'll see the sun is still shining and the economy is in a recession, not a depression.

5. History tells us the industry does just fine in a recession. In fact, we're already performing better than the economy in general. The Commerce Department just announced the Gross National Product declined 6.3% in the fourth quarter, the worst drop since 1982. We had a tough quarter, but not that tough.

Business-Wise. How do you inspire employees during these perilous economic times? Here are seven basic strategies.

Kizer & Bender. Does your staff work together? Really work together? It's an integral part of good customer service.

Memory, Paper, Stamps. Paper scrapbooking, digital scrapbooking, and never the twain shall meet, right? Perhaps there's an another choice that might be the best of both worlds.

(Note: To read the columns, click on the column title in the left-hand column. If it's not the column you expected, click on the Reload or Refresh button of your browser.)

A vendor told CLN, "On top of the general downturn, we were hit with a double whammy over the last few months. Just before the end of the year, our $100,000 line of credit was canceled by our bank. We thought it was us, but our bank was CitiBank and soon after they laid off 72,000 employees and ask for $45 billion from the TARP. Needless to say this loss of credit sent our FICO score into the dumpster, and now all of our credit (lines and cards) has been lowered to what we already owe."

So here's the question: Has your business and/or personal credit line been cancelled or lowered in the past six months? To vote, click on Industry Polls in the right-hand column or click HERE.

Slightly more than half the votes in CLN's unscientific poll say no. The economy will weaken further, said 35.4%, while another 16.7% aren't sure, but think the economy's decline will continue. More than a fifth, 22.9%, think the worst is over, and one quarter aren't sure but hopeful the storm has passed.

(Note: Most of the voting took place shortly after the Mar. 23rd issue went online. Since then, the stock market has risen above 8,000, February factory orders rose 1.8% after six straight monthly declines, and consumer confidence surveys revealed a slight increase in consumer confidence. However, jobless claims rose to 656,750, the highest since October, 1982, and the unemployment rate climbed to 8.5%, the highest since November, 1983.)

In a speech to Samford University business students, Hobby Lobby Founder/CEO David Green reported same-store sales are up 5% this year and the company has plans to open 25-30 new stores, the Birmingham (AL) News reported. Annual sales for Hobby Lobby and its subsidiaries have reached $2 billion, slightly higher than the $1.9 billion reported by Jo-Ann.

Green attributed the company's success to a) following Biblical principles; b) a hands-on approach to merchandising – he spends about 80% of his time with HL's buyers; and c) empowering employees – "We feel we need to make entrepreneurs out of all our people, from our store managers to our buyers."

An important lesson Green shared with the students (one many people in the industry should learn): explaining the difference between a business person and a merchant: a merchant is more concerned with discovering customer's needs instead of crunching numbers. "A lot of times, if you're not careful, you let the numbers drive decisions," the Birmingham News reported.

(Note: In 2004 when Forbes listed David Green as one of the richest men in America, CLN asked readers how did David grow from a single store in 1972, considering stores are closed on Sundays and do not have a checkout scanning system. Readers responded, and the result is "Vendors Discuss Hobby Lobby's Success." To read the article, click on Business-Wise, then scroll way down the right-hand column and click on the headline.)

Encouraged by the initial success of WhereCreativityHappens, Michaels is re-launching the site with designer Jo Pearson in seven new webisodes, each featuring step-by-step instructions for designing one-of-a-kind jewelry, updating outdoor entertaining spaces, etc. The previous webisodes received nearly a million views on the company's site and on YouTube, the company reported. Visit www.WhereCreativityHappens.com.

"Our customers are telling us that they want to spend more time on do-it-yourself projects not only to save money but as an inexpensive activity the whole family can enjoy," said Michaels Chief Marketing Officer Stuart Aitken. "We will introduce a series of new webisodes in 2009, along with in-store events and hundreds of project ideas, to provide inspiration and value to our customers."

Last Saturday Michaels had a a free kids event in all its stores in conjunction with the new film Monsters vs. Aliens™. There were free supplies for kids to create their own finger-puppet version of 3D monsters, as well as pages to color.

Reports to CLN indicate that our industry, while it did not have an outstanding first quarter, performed better than most retail industries. Apparently Wall Street agrees. The Dow Jones Industrial Average fell 13.3% in the first quarter. (Comment: Gulp. Our 401k's that had become 201k's are now 101k's.) But our publicly-held retailers performed much better.

Despite its report of declining sales, A.C. Moore's stock rose 76.6% in the first three months of 2009. Hancock increased 34.0%, and Jo-Ann rose 5.5%. Despite its reports of increases sales and countless media descriptions of recession-weary consumers turning to Wal-Mart, the stock fell 7.1%. Martha Stewart Living Omnimedia declined 4.2%.

1. The Bead Fest in Santa Fe was considerably smaller than the Bead&Button show in Milwaukee, but was an excellent example of proportionality. The number of booths and attendees seemed just right for each other. The exhibitors were pleased with the crowd, and all of the classes sold out. A good show for everyone means the correct correlation between the number of buyers and sellers.

2. Beading classes may be more important to a retailer's sales than any other product category. The multitude of consumer shows and mail order/Internet sites such as Fire Mountain Gems offer a wider variety of product than any bead store or department. Beaders don't need much from local stores – but they want to learn, and will buy what the teacher tells them to buy.

3. Introducing bead enthusiasts to a new type of jewelrymaking, such as polymer clay or metal work, can boost tool sales because each type seems to need its own special tools.

4. Because of the consumer shows and mail order/Internet sales, the category is far larger, more lucrative, than one would assume simply by walking the bead aisles in stores or visiting the jewelry booths at trade shows.

5. Beaders will use products that seemingly "belong" to other categories (see below).

Retailers may often be selling "non-jewelry" products to jewelry enthusiasts without realizing it:

1. Scrapbooking. Nice paper and embellishments can be encased in resin to make a pendant, bracelet, or earring part. Rivets, eyelets, and eyelet setters are used in layering metals for jewelry parts.

2. Rubber stamps. Can be used with polymer clay.

3. Crafts. Almost anything can be enclosed in resin to make a bead, so various kinds of glitters, doll parts, silk flowers, etc., are all fair game. Mod Podge is recommended to coat paper before drowning it in resin. Glues of various kinds.

4. Painting. Certain paints can also be used on polymer clay. That means brushes, too.

5. Leathercrafting. Various items can be useful for hole-punching and stamping metal. Jewelry-makers working with metal need hammers, rulers, files, etc.

6. Miscellaneous. Small ribbons, interesting yarns, and fabric scraps can enhance jewelry.

7. Sewing. Buttons and even safety pins.

8. Organizers. Beaders have an unquenchable need for containers, organizers, etc. The carryalls that scrappers use can work just as well for beaders.

For example, the 10th series of Beads Baubles and Jewels, produced by KS Inc. Productions for PBS stations, will include "working with bronze clay, the secrets of fabric beads, fused glass pendants, incorporating natural materials into designs, metal stamping, lining glass beads with silver, how to set flat stores, cutting edge tools, and much more." The series uplinks with stations May 6, and is sponsored by Interweave, Rio Grande, Beadalon, Bead Stopper, Rings & Things, and TierraCast.

Last week CLN moderated a webinar, "Schmooze 'Em or Lose 'Em: 12 Essential Tips for Growing Your Bead + Jewelry Business," sponsored by Interweave Press and CGM, a bead/jewelry product distributor. Approximately 100 retailers participated, listening to and asking questions of the speakers: Sally Roesler (The Bead Goes On, a wholesale Internet and catalog bead distributor, and the national retail franchise, Beadniks); Stephen Koenig, VP of Sales/Marketing and Book Publisher for Interweave; and Rich Kizer and Georganne Bender, well known retail consultants, speakers/authors, and CLN columnists.

Interweave is planning a second webinar for retailers, "Bricks + Mortar + Online = Profits: How independent retailers can achieve online success," which will be Tues., June 16. Details to follow. The first webinar is still available online, and will be for the next 11 weeks. To access it, click HERE 

Hancock has an interesting promotion/contest, The Ultimate Prom, in which three students from NYC High School of Fashion Industries will compete to design not only their own prom dress, but also a dress which a panel of fashion-industry experts will judge as the "perfect" prom dress.

The contest is a type of Project Runway for teens, and is using teenagers' new media outlets to promote it. The students' triumphs and travails will be chronicled via "webisodes" at YouTube and through the Hearst Teen Network, which includes Seventeen.com, Cosmogirl.com, MisQuinceMag.com, and MyPromStyle.com. Initial webisodes are now accessible at www.hancockfabrics.com/prom. The webisodes run through June 12.

The winning design will be worn by Universal Motown artist Kat de Luna at The Ultimate Prom on June 5th at Chelsea Piers in Manhattan, and Simplicity Pattern will create and produce a pattern from the design which will be available in Hancock stores in early 2010.

The 27th international Handarbeit & Hobby needlework and craft trade show in Cologne attracted 8,788 attendees from 54 countries – almost exactly the same size attendance (8,900) as a year ago. There were 212 exhibitors from 24 countries. The attendance drop of 1.3% is less of a decline percentage-wise than most recent U.S. trade shows.

A press release from the show sponsor said, "One thing is clear – knitting is back in with young people. In keeping with the times, people best like handicrafts that result in an attractive end product which is quick and easy to make. Hobbies of this kind currently fulfil a basic need to express creativity and traditional values. Fun hats and scarves made of pompom wool are the rage, as well as machine embroidery, basic mending, and decoration with applications or accessories."

Attendees voted the first best new product award to Bernina Int. for the Bernina 830 sewing/embroidery computer with 1,100 stitches per minute in sewing mode and 1,000 stitches in embroidery mode.

The 2010 show is Mar. 26-28 in Cologne. Visit http://www.handarbeit-hobby.de/en.

The U.S. magazine market just got a little more crowded. While some magazines such as Simple Scrapbooks have fallen by the wayside, Traplet Publications, a 30-year-old British publisher, is taking the plunge into U.S. waters.

In addition to a variety of hobby publications, Traplet publishes Craft Stamper, Beads and Beyond, Sewing World, and Patchwork and Quilting, all monthly magazines. Currently there are no plans to sell them on newsstands, but Garry Owen, head of the U.S. office, told CLN they will be available for sale in retail stores. The website is www.traplet.com.

Owen added that the magazines are also interested in considering designs/projects from U.S. designers. Designers interested in submitting projects – and companies interested in receiving information on ad rates – should call 217-355-2970 or email garry.owen@traplet.com.

1. Acting Chair of the Consumer Product Safety Commission Nancy Nord wrote to President Barack Obama to appoint a new CPSC chair to deal with mounting complaints about the consumer product safety law that has left retailers stuck with more than $1 billion of goods they can't sell, the Wall Street Journal reported. One of three commission chairs has been vacant for nearly three years, and Rep. Henry Waxman (D., Calif.), chair of the House Committee on Energy and Commerce, said he would hold a hearing to examine the issues, but wants to wait until President Obama names a new agency head.

2. The Toy Industry Assn. helped sponsor an "Amend the CPSIA" fly-in, rally, and Congressional briefing on Capitol Hill to education Congress on CPSIA's impact. The rally, which included six members of Congress, was broadcast over the Internet. An archive of the rally will be posted soon to www.AmendTheCPSIA.com.

3. The Consumer Product Safety Commission has posted "Standard Operating Procedure for Determining Total Lead (Pb) in Non-Metal Children's Products" on its website. Visit www.cpsc.gov/about/cpsia/CPSC-CH-E1002-08.pdf.

4. There's also a statement by Acting Chair Nancy Nord on the request for exclusions from the lead content limits to CPSIA. Visit www.cpsc.gov/pr/nord040309exclusions.pdf.

A major concern bead retailers had during the recent Interweave webinar was what to do with old inventory – a topic for all retailers of all sizes in all categories. Some suggestions:

1. Divorce yourself emotionally from the poor-selling products. Just because you like them doesn't mean you should keep them on the shelves indefinitely.

2. Create new made-ups with the products. Give your customers new ideas about how to use them. You inspire consumers and they will buy.

3. Move the products to another part of the store. Show them in a new place, in a new light, adjacent to different product lines.

4. Create mystery grab bags and sell them at an irresistible price.

5. Donate them to schools.

6. There are countless charities that can use yarn, scrapbook paper, beads, etc. Donating to a non-profit can help your taxes.

7. Discount, discount, discount until they're gone.

The bottom line: dead merchandise sitting on your shelves takes up space and makes your store look boring. Remember, turnover is more important than margin. The money you paid for these dead products is long gone. It's time to move on.

(Note: Any other suggestions for moving dead merchandise? Email your thoughts to CLN to share them with retailers. Send emails to mike@clnonline.com.)

The following was published in the March issue of 0 Magazine: "Take up knitting. According to research at the Harvard-affiliated Benson-Henry Institute for Mind Body Medicine, the repetitive motion and focus of needlework can elicit what's known as the relaxation response – a calming meditation-like state that slows heart rate and causes blood pressure to drop. In addition, a study published in the Journal of the American Geriatrics Society suggests that knitting is associated with a lower risk of dementia for those 65 and older."

CLN has heard unconfirmed reports that a major art material company is cancelling its newsletter for painting teachers and stopping its pay-for-publication program – a classic example of short-term thinking, of a new owner buying a good company, then not listening to the employees who made the company worth buying in the first place.

How important are teachers in art materials? Years ago when there were a gazillion acrylic paint lines in the market, DecoArt came out of nowhere to become one of the category's top sellers. How? By giving away countless bottles of paint to teachers. Enough teachers liked the paint, told their students, and the rest is history.

Now a company's beancounters are looking at teacher support as an expense rather than an investment. But as one subscriber wrote, "Needless to say, that artist/designer is now going to promote another line." A year from now, when sales have fallen, the beancounters will pat themselves on the back and say, "Boy, good thing we cut costs a year ago."

Supermodel Christie Brinkley has partnered with Jo-Ann to create an eco-friendly collection of fabrics. They are made with organic cotton or recycled polyester that’s made from plastic bottles. The printed designs are created using a water-less process, a green method that has virtually no waste water. The fabrics include a seersucker stripe, and a variety of prints on both recycled polyester and organic cotton blended matelasse.

"I wanted to design fabrics that are great looking and casual but, as a mother of three and a longtime environmental advocate, I also wanted the fabrics to be environmentally friendly," says Christie Brinkley, who studied art and design in Paris prior to becoming a model.

Other American design "names" at Jo-Ann include Liz Claiborne, Nautica, Christopher Lowell, Tommy Bahama, and Waverly.

Even Mrs. Butterworth®. The most powerful brand in maple-flavored syrup in the distinctive bottle is turning to crafts to boost sales. The company, Pinnacle Foods Group, has teamed with CHA members to offer kids craft projects using empty, washed Butterworth bottles. The first three, designed by Sarah Hodson, are available at http://launchpadserver.com/mbw/crafty/beta. Additional projects by Terri O. and Kathy Petersen will follow in July and September.

This isn't the first time a non-craft product has been used as a base for craft products. For 18 years Craft Marketing Connections created craft projects for their client, Renuzit air fresheners. During that span the company was sold three times, but each owner used CMC. President Cindy Groom-Harry said, "Over the span of 18 years we worked with all three companies on that brand, distributing over a million craft project sheets and how-to's, hundreds of original designs, and millions and millions of magazine impressions. It was a great ride!"

1. Last week I was startled – but shouldn't have been – by how similar the bead retailers' questions at the webinar were to those I've heard from scrapbook, craft, yarn, cross stitch, and art material retailers. "How do I attract new customers?" "What's the best way to spend my ad dollars?" "How do I keep customers loyal when they have so many chain-store, Internet, and consumer-show options?"

It's one more reminder that independent retailers who sell creative products have the same challenges, regardless of the products.

2. Talk about consumers shopping down, Saks Fifth Avenue lost $98.75 million in the fourth quarter ended Jan. 31. A year ago the quarter's profit was $39.47 million. Nordstrom's fourth-quarter profits dropped 68%. CFO Mike Koppel said the chain had 10 times more markdowns this past holiday season.

LEGISLATION. Three major bills have been introduced in Congress regarding shoplifting: a) the Combating Organized Retail Crime Act of 2009, sponsored by Senate Majority Whip Richard Durbin (D, IL); b) the Organized Retail Crime Act of 2009, sponsored by Rep. Brad Ellsworth (D, IN); and c) the E-Fencing Enforcement Act of 2009, sponsored by the House Judiciary Committee Crime, Terrorism and Homeland Security Subcommittee Chair Bobby Scott. (D, VA) All three address the growing problem of shoplifters stealing large amounts of merchandise, then selling it in venues ranging from flea markets to the Internet.

SHOWS. Retailers can now register online for The National NeedleArts Ann. show in Columbus, OH, June 13-15. Online registration for others begins tomorrow. Classes purchased on site will be $20 higher/class and there's a refund of up to $50 available. Complete info is available in the Attendee Registration Brochure or call 800-889-8662. To download it, click HERE 

CHA SHOWS. CHA continues to accept 2009 Summer workshop applications. For info, email Avery Dykman at adykman@craftandhobby.org. ... CHA reports 20,000+ sq. ft. of exhibit space has already been sold for the Super (consumer) show. ... Hotel rooms for the Orlando shows are going fast. Visit www.chashow.org.

HISPANICS. Wal-Mart doesn't make many mistakes when it comes to demographics, and it is now accelerating its efforts to service U.S. Hispanics. It's opening new small-format "supermercado" stores, as well as a Latino-focused version of its Sam’s Club warehouse concept, the Financial Times reported. (Comment: Isn't it time our industry paid more attention to Hispanics, the fastest growing population group in the country?)

CHARITY. The Wal-Mart Foundation awarded $5 million to the American Red Cross. The company's charitable giving reached a record level of $423 million in 2008, a 25% increase over the prior year. ... The Cleveland Plain Dealer reported Jo-Ann donated $656,000+ in cash and products to nonprofit organizations in 2008. ... Plaid employees are paying to take evening painting classes from Belinda Harris, a Master Artist and accredited Priscilla Hauser teacher, who is Plaid's Consumer Services Manager. All proceeds go to the American Cancer Society. Plaid is a Bronze Corporate Sponsor for Gwinnett County Relay for Life®. Employee participation in silent auctions, book sales, lunches, and other activities throughout each year have raised over $100,000 to the American Cancer Society.

SHOWS. The Empire State Development Corp. board of directors approved a $463 million expansion of the New York's Javits Convention Center, home of Toy Fair and the NY International Gift Fair.

PRICING. Toys R Us is introducing $1-$2-$3 Fun! shops in the front of its stores to help parents provide affordable fun for their kids. Each shop features about 100 items for $3 or less. CLN has learned that Michaels is also testing a concept of bins of low-priced products.

YARN. The National NeedleArts Assn.'s Yarn Group has posted a video of its fashion show held during TNNA's Winter show. Visit www.YarnGroup.org.

PAINTING. The Decorative Arts Collection has added Gail Czech (The Creative Network), Valerie Bernardino, and Linda Heller to its Board of Trustees. The DAC is also preparing to publish The Book of Painted Quilts. For a preview, click http://www.decorativeartscollection.org/portfolios/highlights_cms.asp 

WAL-MART. In a filing with the U.S. Securities and Exchange Commission, the company said groceries accounted for 49% of U.S. sales for the fiscal year that ended Jan. 31, up from 47 % the previous year. ... Speaking at a Morgan Stanley conference, COO Bill Simon said the company was confident Congress will not pass the Employee Free Choice Act, which would make it easier for employees to form a union, Reuters reported.

AWARD. The Simplicity Creative Group received the 2008 Flamie award for the Best Crochet Hook by a Corporation during a pod cast on www.gettingtloopy.com. To see the awards, visit www.catbirdstudios.net/clf/2009Flamies.html.

BEST WISHES. To Dene Van Winkle, owner of Imagine That! Scrapbooks in Rosewell, NM, whose husband Ronnie is fighting a rare form of cancer. To read Dene's journal and to leave a message of your own, visit www.caringbridge.org/visit/ronnievanwinkle. Dene is known to many from her "Pebbles the Rock" fund raiser described in Kizer & Bender's articles and seminars. Visit http://kizerandbender.blogspot.com/2008/11/clandestine-retailing.html.

PAPER. Martha Stewart Omnimedia signed a deal with Crane & Co. to create the Martha Stewart Stationery Weddings Collection, a full line of wedding stationery products, to be released this spring, the Boston Globe reported. (Crane is the company that makes the paper for U.S. currency.)

MEETING. Jo-Ann's annual shareholders meeting is Thurs., June 11, at 9:00 a.m. ET at the Jo-Ann Stores Conference Center in Hudson, OH.

STOCKS. A.C. Moore: $2.12, up $0.38 ... Hancock: $0.45, up $0.01 ... Jo-Ann: $16.65, up $1.85 ... Wal-Mart: $53.80, up $4.21 ... Dow Jones: 8,017.59, up 10.2%. (Note: All changes in price are since 3/20 and are exclusive of dividends.)

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

1. Junk: something you've kept for years and throw away three weeks before you need it.

2. There is always one more imbecile than you counted on.

3. Experience is wonderful. It allows you to recognize a mistake when you make it again.

4. By the time you can make ends meet, they move the ends.

5. Thou shalt not weigh more than thy refrigerator.

6. Someone who thinks logically provides a nice contrast to the real world.

7. It ain't the jeans that make your butt look fat.

8. Men are from earth. Women are from earth. Deal with it.

9. No man has ever been shot while doing the dishes.

10. If you had to identify in one word the reason why the human race has not achieved and never will achieve its full potential, that word would be "meetings."

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