Date: May 4, 2009
Vol. XII, No. 9

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TABLE OF CONTENTS

COMMENTARY: MAKING CONNECTIONS 

CLN has three functions: to inform, to stimulate, and to connect. I try to report the news, publish pieces that make you think, and bring people together. Connecting people is one of the most satisfying parts of my work. I don't know a lot, but after 30 years reporting on the industry, I know a lot of people who do. I may not be able to solve a problem, but often I can put the caller or email-er in touch with someone who can. Sometimes those connections result in articles; often they don't, but if they help make life a little easier, it's worth it. Here's a brief list of the connections in the past two weeks:

A small vendor wanting to sell his company. ... An e-commerce site looking to expand in art materials, looking for distributors. ... A vendor looking for lawyers in certain states. ... A vendor looking for relief from retailer chargebacks. ... A chain buyer looking for vendor names and contact info. ... A manufacturer looking for research data on sewing. ... A trade association staffer looking for a list of publicly held industry companies. ... A retailer, a designer, and a medical researcher each looking to promote crafting as a tool for good physical health. ... A manufacturer looking for background information in order to effectively nominate someone for an industry award. ... An industry veteran venting about losing his job. ... A designer wondering if what she read about yarn's exemption from CPSIA regulations is true. ... Various industry people looking for email addresses for various other industry people.

Business-Wise. Still have questions about CHA trade and consumer shows in Orlando? CLN interviewed Tony Lee, CHA's VP of Meetings & Expositions for the answers.

Category Reports. TNNA formed a committee concerning the Consumer Product Safety Improvement Act. Their report to members was the most coherent and concise analysis of the law's impact CLN has heard thus far. And it's a call for action.

"Benny Da Buyers". When will the economy bottom out and begin to rebound – and how will we know? CLN asked two retailers with extensive backgrounds in economics, Jim Bremer, owner of the Tall Mouse craft stores in Southern California, and Mike Dolan, a retired banker who with his wife Shelly operates Scrapbook 911 in San Antonio.

Tech Topics. What you need to know about using Twitter as a marketing tool.

Kizer & Bender. Tips for making each customer feel special.

Industry Research. How to access or buy CHA's updated Attitude & Usage Study.

(Note: If you click on a column and it's not the column you expected, click the Reload or Refresh button of your browser.)

Has the flu pandemic affected your business – increased absenteeism by employees, less traffic in stores, etc.? If it hasn't affected your business, are you worried that it will? To vote, click on Industry Polls in the right-hand column or click HERE.

There aren't as many people working in our industry these days, according to the latest CLN poll. A whopping 56.8% said that since the economic downturn last Fall, they or their employer has laid off employees and reduced the hours or pay of the remaining employees. Another 27.0% said their company has not laid off any employees, but has had to reduce hours or pay. Only 10.8% reported that their company has not laid off any employees, nor has it reduced hours or pay.

A mere 5.4% said their company has added employees or expanded employee hours.

The updated version of Craft & Hobby Assn.'s Attitude & Usage Study indicates industry sales for the 12 months ending Dec. 31 are down 14% to $27.3 billion, but there's a major caveat to the dollar amounts in the Study: the margin of error is 11%. (Comment: For a little perspective, the U.S. Commerce Department announced that the Gross National Product, the sum of the value of the country's goods and services, declined 6.1% in the first quarter of '09.)

The largest general category, General Crafts (which includes scrapbooking and jewelrymaking, among others), is down the most, 21%. Paint and Finishing Crafts dropped 12%, Needle and Sewing Crafts fell 9%, and Floral Crafts declined 6%.

A key to the decline in General Crafts is the percentage of U.S. households participating is this broad category; it dropped from 39% to 34%. The other categories were basically flat.

For just about every product category, survey respondents in crafting households spent less money, completed fewer products, and spent less time crafting. Scrapbooking remained the top category in terms of dollar sales, but declined 3% to $2.5 billion. Respondents increased their spending on Floral Arranging, up 21% to $1.5 billion, and Crochet, up 17% to $1.2 billion.

Where consumers shopped showed sharp drops, too. (Comment: again, remember the margin of error for the dollar portions of the Survey is 11%). Sales in local craft stores were down 57%, 15% in craft chain stores, 4% in discount stores, and 1% in fabric/craft stores. Meanwhile, e-commerce sales grew 19%, to 7% of total sales.

Subcategories showing the greatest increases in terms of dollars spent were Needlepoint/Plastic Canvas (up 29%), Floral Arranging (up 21%), Wreathe-making/Floral Accessorizing (up 18%), Crochet (up 17%), and Stenciling (up 7%). The greatest declines were in Ceramics (-45%), Do-it-yourself Framing (-41%), Candle Making (-38%), Rubber Stamping (-37%), Wedding/Bridal (-33%), and Jewelry Making (-31%). (Comment: The declines in Stamping and Jewelry Making are probably due to enthusiasts using their stash rather than buying more supplies. That could also account for the decline in Scrapbooking.)

What asked what new crafts respondents in crafting households expect to try in the coming year, the leader was Decorative Painting (3.9%), Scrapbooking (3.2%), Home Dec Sewing (2.9%) Needlepoint/Plastic Canvas (2.9%), and Home Dec Painting/Accessorizing/Finishing (2.9%)

Assorted facts: Respondents who categorized themselves as heavy (21+ projects/year) crafters comprised 26% of the respondents, but purchased 62% of all supplies. ... Magazines once again were the leading source of project ideas. ... Consumers who attend classes spend more than twice as much ($624) on supplies as those who do not; the results were comparable for those who attend home parties vs. those who do not.

The complete report – with far more details – is free to CHA members under the "Research" tab at www.craftandhobby.org. Company member ID and password are required. For questions about the ID # or the research, call Keri Cunningham at 201-835-1229 or email kcunningham@craftandhobby.org. Non-members can purchase the Study for $500. Email Keri Cunningham at kcunningham@craftandhobby.org.

As reported in the last issue of CLN, Hobby Lobby announced raises for all full-time employees. That set off a media firestorm and a public relations gold mine for the company. The newspaper in almost every city with an HL store reported the news – far too many to report in a newsletter – and the news media spread the word, too. Here's one example, from Barbara Farfan, who writes about the retail industry for About.com:

"The blogosphere and Twitterspere were buzzing this week with lavish praise for Hobby Lobby's decision to give a pay raise to approximately 6,900 full-time employees. Their $1.8 billion in revenue made for a pretty good 2008. So, instead of CEO David Green putting $15 million in his pocket and flying the corporate jet to get a $9,200 physical exam in between appointments with his bankers in the Cayman Islands, Green gave back to his employees.

"The viral news of the Hobby Lobby pay raises moved through social networks at lightning speed. If the deluge of posts and tweets that I read were any indication, Hobby Lobby just earned itself about $1 jillion worth of goodwill among American consumers. It made me wish I had a hobby just so I could go spend some money in Green's stores."

About the time Hobby Lobby raised the wages of its employees, Best Buy demoted many senior sales associates at its stores, a move that will cut their salaries by as much as 50%. One report said the demotions will affect 8,000 sales associates and lead to 1,000 job cuts.

The company's recently filed 10K report reveals predictions and plans for this fiscal year, in addition to the sales/earnings report that was reported in the 3/23 issue of CLN, which is still available in the CLN Archives.

"As we look ahead to fiscal 2010, we are hopeful that the economy will begin to improve in the second half of the year. However, we believe it is prudent to expect and plan for negative trends in both customer transactions and average ticket in the near term. Therefore, we have not assumed any improvement in sales trends for fiscal 2010."

Sales may not improve, but the company is working to improve profits:

1. Better margins due to a) increased direct imports, b) lower freight expenses, c) buying less fashion and seasonal merchandise, and d) new systems rolled-out last year are expected to provide additional tools for managing markdowns and create new promotional capabilities.

2. Improving the customers' shopping experience – more emphasis on value, enhance the education and in-store demo programs, and expand the Joann.com website.

3. Continuing to update the store base. The pace will be similar to last year – approximately 20 new stores and 30 remodels – but will cut capital spending, net of landlord allowances, by approximately 50%.

4. The company has approximately 110 leases expiring, 37 of which have renewal options, and believes there are opportunities to improve the lease terms.

The Consumer Product Safety Commission published a Guide to the Consumer Product Safety Improvement Act (CPSIA) for Small Businesses, Resellers, Crafters and Charities (www.cpsc.gov/about/cpsia/smbus/cpsiasbguide.pdf), and word spread through industry message boards that yarn was exempt.

Not so fast, and not so clear: A) This appears to be only an interim statement; B) It is not certain that it pertains to all yarn or just 100% natural fiber; C) The National NeedleArts Assn.'s CPSIA committee believes that it does not include metallic yarns and threads and various embellishments used in needlework. Hence the plea to continue to pressure Congress. (Click on Category Reports in the left-hand column.)

Roxanne Int. contracted with The Colonial Needle Co. to run its daily operations, including production supervision, order fulfillment, and customer service. Roxanne's Dierdra (Didi) McElroy will continue to oversee the creative side of the business.

Roxanne's product line includes Roxanne Thimbles in polished bronze, bronze plated with 14k gold or sterling silver, and solid sterling silver; Roxanne Appliqué, Basting, Quilting, and Sharps needles; Roxanne Quilter's Choice Chalk Marking Pencils in white and silver; and Roxanne Glue-Baste-It and Mini Glue-Baste-It.

Colonial Needle's product lines include Colonial quilting, sewing, and knitting notions; Colonial Rosewood and Blonde Wood knitting needles; and fine English tapestry, needlepoint, sewing, and quilting needles sold under the brand names Colonial, John James, Richard Hemming, Mary Arden, and S. Thomas & Sons. Visit www.colonialneedle.com.

Effective immediately, all Roxanne products will be shipped from, and inquiries should be directed to, Colonial Needle in White Plains, NY. Call 800-9-NEEDLE (800-963-3353).

Interweave celebrated Earth Day by offering two free digital issues of the current Quilting Arts and Cloth Paper Scissors magazines for a week ending Apr. 29. Could this be the future for magazines? Consider:

1. The obvious savings in printing and postage. CLN has continued while Craftrends, CNA, and Scrapbook Retailer have died in part because of reduced costs.

2. Saving trees.

3. Increases the potential for overseas subscriptions.

4. Advertisers can include a link to their websites in their ads. How many hard-copy readers have been interested in an ad's products, but get distracted with the result that the ad never turns into a sale?

5. Readers can see the artwork in better detail; zoom in and out to better read the text; and easily search the issue for specific articles.

6. Many industry manufacturers have moved their catalogs online.

To see another example of an industry e-zine, see the Spring edition of Dynasty e-zine from FM Brush at www.dynasty.brush.com.

The key to the eventual evolution of print magazines into e-magazines, particularly for how-to publications, may be the quality of the reader's printer.

CLN often receives calls from people inside and outside our industry looking for research information about our industry in general or a specific category. Often the callers are desperate for any/all available data. In addition to trade associations (CHA's Attitude & Usage Study) magazine publishers often survey their readers. So if you have any recent research, send CLN a note so the "Industry Research" section can be updated. Provide some highlights and contact info for readers who want to read/buy the survey results. Send it to mike@clnonline.com.

CLN received the following email: "I'm wondering if you've received complaints/comments from other vendors regarding excessive and unreasonable charge-backs from Michaels for incorrect labeling. This is a very frustrating situation – especially when our company bends over backwards to take care of Michaels and does everything possible to work as a 'partner' – only to get slammed with unreasonable charge-backs. We're working off slim margins to begin with – and now those slim margins are turning into negative margins. You just can't win with Michaels."

Has CLN received complaints? Yes, for years, and not just about Michaels. But has the situation become worse? CLN asked a few long-time vendors and learned one solution from a relatively small supplier.

"I have been on the 'good list' lately. I try to talk to my buyer and to the people who maintain the label requirements. I have not been getting any charge-backs since I tightened my communications with all of my contacts at Michaels.

"I found the employees for the most part very eager to help me out and in the beginning stages of learning their system, they were very flexible with me and reversed most of the charge-backs.

"I also had a very serious talk with all of my staff and impressed on them the zero tolerance from Michaels for any booboo's. I also told my staff that their errors were going to be deducted from their paychecks. I also created visual examples of what a finished box is supposed to look like with examples of all the labels that are required (Michaels Shipping for Dummies).

"They have been flawless in their handling of the Michaels' distribution orders which I double check personally before every shipment is released.

"We also drop-ship direct to all of the Canadian stores. You should see the dog-and-pony show that goes on here every Wednesday. The orders come in via EDI. We have to generate ASN's via EDI; we have to apply three labels on each small box with paper documentation – and it goes on and on. My staff takes their time; they are not allowed to listen to the radio during the Michaels Wednesday; they are not allowed to distract each other.

"Long story short: I really believe that a strong communications is required with Michaels to see exactly what they want from the vendors. They have all of their information on their VendorsConnect.com site. So a vendor cannot plead being uninformed.

"Then the second important step is the vendor's staff needs to know that they must step up to the plate and make every hit a home run, or it is going to be a costly mistake for THEM."

Another vendor told CLN, "We have not had any chargebacks (as yet) related to labeling with Michaels; however, we are struggling with the new labeling requests from JoAnn, wherein they want vendors to label every inner pack (these are inside the master case and a master case can have as many as 30 inner packs) with their specific sku#. You can imagine, even prior to this request, shipping to a chain was challenging with all the paperwork they demand (and getting fined for the slightest mistake); now that is multiplied by a factor of 20 or 30."

But another vendor told CLN, "The reality is, fines are a profit center for the retailers. My argument with them is that it's okay to have a system, but keep the punishment proportionate to the crime. [He cited a four-figure fine from one retailer because of a two-figure over-shipment.] Ironically, Michael's system is the least onerous of the three ( A.C. Moore and Jo-Ann being the other two ).

"Equally ironic, the world's largest retailer doesn't have a fine system. Go figure."

CLN recently received an email from a subscriber/vendor. Here's an excerpt: "I read about this in your recent newsletter and now I am part of it, too. Over Easter I received two lawsuits in regards to preferential payments. One is for the bankruptcy of Rag Shop, the other for Paper Zone. I am sure I am not the only one. I checked with my local attorney and he cannot represent me. Can you recommend attorneys that can represent me in: the Eastern District of New York State for the Rag Shop case and the Western District of Washington State for the Paper Zone case."

What he's referring to is an element in the bankruptcy law that requires any vendor who received any payment from a customer within 90 days of the customer filing Chapter 11 is supposed to pay it back. This is particularly galling in the case of Rag Shop. A couple of years ago, the private equity owners, Sun Capital, told vendors that they'd file for bankruptcy unless vendors agreed to take 25 cents on the dollar. The vendors reluctantly agreed, saving Sun Capital millions. A few months later, Rag Shop filed for bankruptcy anyway and shut down.

So the vendors were nailed twice, and now lawyers want to do it a third time.

The Professional Scrapbook Retailers Organization and the Great American Scrapbook Conventions are sponsoring The Great American Retail Conference June 3 in Arlington, TX, just prior to the annual Great American Scrapbook Convention. 

The all-day (9 am-5:00 pm) conference will cover increasing store traffic, inventory management, business trends, increasing the average sale, building traffic with clubs and classes, and how to stretch a marketing budget. 

Speakers include Tamara Lipori, retail consultant and author of A PSRO Guide to Scrapbook Retailing, and the forthcoming Marketing Your Scrapbook Store: An Owners Guide; Beth Mauro, marketing expert, writer, and former editor of Scrapbook Retailer and CNA magazines; and Susan Turchik, successful retailer, CPA, and president of Crafter's Home.

The seminar costs $99, $89 for PSRO and/or Crafter's Home members. For more info, visit www.greatamericanscrapbook.com/Show.aspx?ShowId=18.

The Int. Art Materials Trade Assn. (NAMTA) and American Artist magazine have launched a new industry study, the first large-scale survey of industry size and trends, business best practices, and the needs and preferences of artists in more than a decade.

Suppliers, retailers, and artists are encouraged to take an online survey. Suppliers at www.hartbusinessresearch.com/AMS.htm, retailers at www.hartbusinessresearch.com/AMR.htm, and artists and users of art supplies at www.ArtistSurvey09.net .

The results will be compiled as part of the landmark report on art materials and artists in the U.S.: Artists & Art Materials USA 2009, to be announced in Fall 2009. The report will be independently researched and written by Hart Business Research. An executive summary will be made available to all survey participants.

1. The last issue of CLN detailed many of the problems industry businesses were having with banks refusing to give them credit. The morning the issue went online, the Wall Street Journal reported that banks which are the biggest recipients of taxpayer aid either made or refinanced 23% less in new loans in February, the latest available data, than in October, the month the Treasury kicked off the Troubled Asset Relief Program.

What are those banks doing with all that money?

2. In case you're wondering about the vendor looking for a bankruptcy lawyer, I contacted subscribers in Washington and New York whom I thought might know of someone, and I was able to send him referrals who have taken his cases.

MAGAZINES. The Milwaukee Journal Sentinel recently profiled Kalmbach Publishing on its 75th anniversary. The company started in 1934 when Al Kalmbach published Model Railroader, which is still published today. The company now publishes 15 magazines (including Bead & Button, Bead Style, and Art Jewelry) whose combined revenue is $50+ million with a circulation of 1+ million. The company also publishes books, sells various products, and produces the Bead&Button show. To read the article, visit www.jsonline.com/news/waukesha/43134077.html.

ROLODEX. Scott Publications moved to 2145 W. Sherman Blvd., Muskegon, MI 49441. Call 231-755-2200; fax 231-755-1003. The company publishes a variety of industry-related consumer magazines (scrapbook/stamping, card making, dollmaking, miniatures, polymer clay, etc.) Visit http://scottpublications.com/catalog.

PEOPLE. Meredith transferred Scrapbooks Etc editor Melissa Inman to Parents.com. No word yet on Melissa's replacement.

BOOKS. The April 6 edition of CLN included a report on the various "non-jewelry" products, including scrapbook products, that are purchased by jewelry-makers. Now Kalmbach Publishing has published Hip Handmade Memory Jewelry by Cathy Jakicic, editor of the company's BeadStyle magazine. It includes 20 projects that use basic craft and bead supplies to turn photos and other mementos into necklaces, earrings, bracelets, etc. Visit www.beadandcraftbooks.com/62748.html. ... The projects in Interweave's Fabulous Fabric Beads by Kristal Wick call for a wide variety of craft and fabric products.

QUOTATION. "As the recession drags on, more retailers are finding they cannot get consumers to buy much of anything unless they offer huge sales, symbolized by significantly high double-digit percentage discounts. The deals, signaled by '% off' designations in ads, appear to be winning out over descriptions of specific prices, like 'was $39.99, now $19.90,' or promotions like 'buy one, get one half off' ...." – Stuart Elliot, New York Times.

FOR SALE. A manufacturer of rubber stamps and stamping accessories for sale. Distribution includes Canada, Australia, Scandinavia, the U.K., and independent stores and one chain in the U.S. Business can be moved easily and the seller is willing to assist in the transition. Sale includes trademarked name, inventory and packaging, website with retail and wholesale ordering capability, all artwork and licenses, and a new 10' x 30' trade show booth. For more info, in complete confidence, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

PHOTOS. Sponsors report the recent Photo Marketing Assn. show drew a 40+ % increase in attendance from the pro photographer and the specialty retail photo store segments. Attendance from the chain store and e-commerce categories grew by approximately 20%.

MARTHA. Martha Stewart Omnimedia reported a loss of $15.5 million for the first quarter, compared to a loss of $4.5 million a year ago, primarily due to declines in magazine ad revenue and income from the Kmart merchandising program, which is nearing the end of the contract. No specific numbers were cited for Martha Stewart Crafts lines, but the company said they have "continued to benefit from expanded distribution and integrated marketing initiatives."

TNNA. Announced the list of matched hosts and interns for its sixth year of the Pathways into Professional Needlearts (PiPN) program. The students are from the U. of Akron, Carnegie Mellon U., and Western Michigan U. The hosts are hosted by Bagsmith, Cestari, Ltd/Hand Painted Knitting Yarns, Coats & Clark, Fine Points, Knitgrrl, Pick Up Sticks, London's Royal School of Needlework, SoHo Publishing, Stitch Cleveland, and Wool and Willow Needlepoint. The program consists of training in various needle arts, then working in the hosts' businesses.

For more info, call Sherry Mulne at 614-237-0700 or email bdirect@columbus.rr.com.

MERGER. The National Retail Federation and the Retail Industry Leaders Assn, two groups representing large retail chains, agreed to merge to create a single lobbying voice for retailers. NRF President/CEO Tracy Mullin announced she will retire in late 2009.

LEGISLATION. A new Maryland law makes it illegal for manufacturers to impose minimum-pricing agreements on retailers, the Wall Street Journal reported. The measure goes into effect on Oct. 1. The law also covers e-commerce sales, even when the website's owner is based out of state. That could potentially affect manufacturers throughout the country. The Journal quoted legal experts who said more than 30 other states might follow suit.

SEMINARS. Audio CDs, CD-Roms, and online versions of business seminars from the CHA Winter show are now available as a group or individual seminars. Click HERE 

PAINTING. The environmental artist Wyland unveiled a 4,000 sq. ft. mural at the El Capitan theater in Hollywood for the premiere of Disney/Nature's film, Earth. The 100-ft.-long image was printed on Fredrix wide-format mural canvas that was created by Fredrix Print Canvas and Astek Wallcovering. The printed mural was incorporated into the design of the theater allowing film goers an opportunity to walk through a Wyland work of art. To see pictures of this remarkable work, visit http://taramaterials.com/printcanvas/wyland_disneypremiere.aspx.

PAINTING. Hotels and classes for the Society of Decorative Painters Convention in Peoria, IL June 16-20 are selling out. For info, visit www.decorativepainters.org. The 2010 (May 18-22) and 2011 (May 17-21) conventions will be in Wichita.

PEOPLE. David Glass, Wal-Mart's first CEO after Sam Walton, is not running for re-election to the Wal-Mart board. Glass, who retired as CEO in 2000, is the owner of the Kansas City Royals baseball team. ... CHA named Natalie Cohn as VP of Finance and Administration. She had been VP of Merchant Services Business Development for American Express.

STORES. Do consumers want crafts? More than 200 crafters lined up at the new Michaels store in Lake Havasu City, AZ for the grand opening. Some stood in line for 90 minutes and some held up "We Love Michaels" signs, the Havasu News-Herald reported.

KITS. Beadalon introduced Bead Master kits that have a unique feature: each of the 21 kits includes the supplies, but also a CD that has computer-based animation with on-screen, detailed instructions; play, pause, rewind, and fast-forward controls; and interactive flash technology so it can be used as a teaching aid for classes and workshops in a bead/craft store. For an example, visit www.beadalon.com/silverosemystery.asp.

BANKRUPTCY. Creative Memories cut 10% of its staff and canceled its custom art framing business, part of a restructuring as CM attempts to emerge from bankruptcy, the St. Cloud (MN) Times reported. CM and its parent, Antioch Co., filed for Chapter 11 bankruptcy protection in November. CEO Asha Morgan Moran said CM will focus on traditional and digital scrapbooking, and reported that digital scrapbooking has grown 40% in the past year.

STOCKS. A.C. Moore: $2.99, up $0.45 ... Hancock: $1.02, up $0.12 ... Jo-Ann: $18.26, up $0.67 ... Wal-Mart: $50.05, down $0.15 ... Dow Jones: 8,212.41, up 0.1%. (Note: All changes in price are since 4/17 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.

Note: The Creative Network is offering a $1,500 rebate to any company who hires a permanent or contract worker from The Creative Network during May, June, or July.

1. "If in the last few years you haven't discarded a major opinion or acquired a new one, check your pulse. You may be dead." – Gelett Burgess

2. "Would that there was an award for people who come to understand the concept of enough. Good enough. Successful enough. Thin enough. Rich enough." – Gail Sheehy

3. "If everything is under control, you're not going fast enough." – Mario Andretti.

4. "A financier is a pawnbroker with imagination." – Arthur Wing Pinero

5. "I loathe people who keep dogs. They are cowards who haven't got the guts to bite people themselves." – August Strindberg

6. "There are moments when everything goes well; don't be frightened, it won't last." – Jules Renard

7. "Here's my Golden Rule for a tarnished age: Be fair with others, but then keep after them until they're fair with you." – Alan Alda

8. "My father didn't tell me how to live; he lived, and let me watch him do it." – Clarence Buddington Kelland

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3. If you ever have trouble with your password, click on "Trouble with your password" in the right-hand column of the main page. The computer will then email the correct information to you.

4. CLN is published the first and third Mondays of each month, so your next issue will be Monday, May 18.

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