Date: July 20, 2009
Vol. XII, No. 14

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TABLE OF CONTENTS

COMMENTARY: CONSUMERS' CHANGING BEHAVIOR 

As CLN subscribers have read, a few years ago my wife, a hardcore non-crafter, got hooked on jewelry making, soon realized she couldn't possibly wear all the jewelry she made, and so now we sell her creations at summer art fairs in the area. This season we're seeing some differences from last year, differences we assume are due to the economy and that have implications for the entire industry.

1. Sales have been better than we expected, given the drop in the economy. My theory is cash-strapped consumers will forego buying that expensive new dress, but will treat themselves to something less costly. They'll spruce up the old dress with a new necklace.

2. Much less use of credit cards this season. If customers don't have the cash, they don't buy anything. That philosophy is good for them, good for the country, and saves us a few dollars.

3. There are many more exhibitors (jewelry, kids clothes, floral arrangements, candles, etc.) at shows this year; we assume they are trying to make a little money from their hobby. But the minute a consumer becomes serious about selling her creations, she starts looking for the lowest prices for her supplies. In the past, that has meant trying to bypass the retail store.

4. There is some good news, too: Donna Pyka, who has operated her Pink Flamingo Beads shop in Powell, OH for 10 years, wrote, "I have also noticed a change in the buying habits of my customers. The total number of sales is actually up, but each sale is smaller. We also are seeing more new customers than we did a year ago. I think this may have to do with fewer people taking big vacations and more people staying closer to home."

(Retailers, are you seeing changes in your customers' shopping patterns? Vendors, are you seeing any changes in your retail customers shopping patterns? Email your thoughts to me at mike@clnonline.com.)

NEW COLUMNS THIS ISSUE 

Business-Wise. The latest updates on the upcoming CHA Summer Show and the (consumer) Supershow in Orlando.

Kizer & Bender. How you and your staff answer the phone makes a big, often permanent impression on the caller. And that impression can help – or hurt – your business.

Category Reports. An update on the Sewing & Craft Alliance. (If you had any doubts that sewing was a growth category....)

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

This has been an amazing year. But then it always is, one way or another, in this vital, trend-oriented industry. The summer trade shows always mark the year's midpoint, so look into your crystal ball and tell CLN how you think the remainder of the year will be for your business. To vote, click on Industry Polls in the right-hand column or click HERE.

Recently CLN asked voters to rate the value of their local Chambers of Commerce, and the CC's didn't fare well. Now we've turned our attention to the industry's trade associations – CHA, TNNA, NAMTA, TIA, etc. – and the results were better, but may include some warning signs.

A large majority of CLN voters in this unscientific poll, 86.8%, belong to one or more trade associations, but only 43.2% believe the benefits are worth the dues they pay. The remainder is split between those who do not think the benefits are worth it and those who are unsure. When asked if trade associations had become more or less valuable in recent years, 36.1% said "More Valuable" while 55.6% voted "Less Valuable" and 8.3% were "Unsure."

Colorbök, Inc. announced it has acquired Heidi Grace Designs and Cloud 9 Designs from Fiskars® Brands, Inc. Fiskars made a strategic decision to exit the consumables business and focus on its tool business.

"We are very excited to be adding these strong brands to our paper crafting product portfolio," said Colorbök's CEO Chuck McGonigle. "Fiskars has done an outstanding job of managing and growing these brands in the past three years. We plan to continue this commitment with Fiskars' existing retail customers and also expand the brands into even more retail outlets in the future.

"We are also happy to announce that Heidi Grace Kress, the creative force behind Heidi Grace Designs, has agreed to join the Colorbök family and help us to ensure a smooth transition of the brand that she created," McGonigle added.

Colorbök is a leading marketer and distributor of scrapbooking, kids crafts, and gift-stationery products. Founded in Finland, Fiskars has been producing cutting tools for 360 years (yes, 360 years).

1. The Consumer Product Safety Commission (CPSC) ordered Hobby Lobby to pay $50,000 and Michaels to pay $45,000 in civil penalties for violations in 2007 and 2008. In the settlement, the retailers deny CPSC’s allegations that they knowingly violated the law.

2. Inez Moore Tenenbaum was sworn in as the ninth Chair of the CPSC. Her term ends October 2013. She had served as South Carolina's State Superintendent of Education for nine years and prior to that was a lawyer specializing in health, environmental, and public interest law. She stated, "Parents should know that CPSC will improve the standards for toys and durable nursery products to help keep kids safe. We will also create a system that uses third party laboratories, tracking labels, and CPSC staff at major ports, to do our part to ensure that product imports are safe and comply with U.S. safety rules."

3. The CPSC Commissioners turned down a request from various organizations, including the Fashion Jewelry Trade Assn and the National Retail Federation, to exclude crystal and glass beads, including rhinestones and cubic zirconium from the testing provisions. The Commissioners have not yet voted.

4. CHA's recent webinar, an update on CPSIA, is still available. Visit http://chaimpactlearning.org and scroll down to the appropriate item.

5. Reminder: CHA's free seminar, "CPSIA: The Consumer Product Safety Improvement Act of 2008 – What You Need To Know" is Wed., July 29, 7-9:00 am, during the Summer Show in Orlando. Visit www.chashow.org.

6. An analysis of CPSC recall data by the Toy Industry Assn. revealed that the total number of toy recalls during the second quarter of 2009 decreased 75% versus the same time period last year.

7. Wilton Industries cookware division recalled about 142,000 Copco Harmony Tea Kettles because the lid on the tea kettle can come loose during handling, posing a burn hazard to the consumer. There have been at least 25 incidents of the lid coming loose, causing in some cases second-degree burns to hands and fingers. They were manufactured in China and Thailand. ... Hobby Lobby recalled about 500 leather butterfly chairs made in India because the legs can detach unexpectedly. There have been nine reports of collapsed chairs. ... About 29,000 Chinese-made Chelsea's necklace and bracelet sets distributed by D&D Distributing were recalled because small parts can detach from the necklace and bracelet when the elastic strings break, posing a choking hazard. No injuries have been reported.

8. Berwick Offray filed a petition with the U.S. Dept. of Commerce and the U.S. Int. Trade Commission asking the U.S. to charge antidumping duties on narrow woven ribbons imported from Taiwan and China.

The bad news: same-store sales, the most common way to evaluate a retailer's sales performance, were down. The good news: the decline for many was not as bad as expected. A handful even posted sales gains (TJX, +4.0%; Walgreen's, +3.4%; BJ's Wholesale Club, +1.0%).

The worst performers were clothing and department stores (Gap, -10%; Limited Brands, -12%; Dillard's, -14.0%; Abercrombie & Fitch, -32.0%). Others included Costco, -1.0%; Saks, -4-4%; Kohl's, -5.6%, Target, -6.2%; JC Penney, -8.2% and Macy's, -8.9%.

(Note: Wal-Mart, Michaels, Jo-Ann, and A.C. Moore only report sales quarterly, not monthly. And privately held Hobby Lobby does not have to report at all.)

CIT Group is a source of funding for thousands of small and medium-size businesses, and the Federal Reserve's "stress test" discovered the company would need $4 billion to cover its losses. But after talks with the Federal Reserve, the company said "there is no appreciable likelihood" it will receive government support, the Wall Street Journal reported. The company has hired bankruptcy attorneys and is in talks with JPMorgan Chase and Goldman Sachs about short-term financing as it looks for ways to avoid bankruptcy, Reuters reported.

Note: This morning various media were reporting that CIT secured about $3 billion in emergency financing from a group of creditors.

Some 300,000 retailers rely on CIT loans. the Journal reported. "CIT is most certainly too important to the retail industry to be allowed to fail, and the retail industry is too important to the economy to be placed under additional stress," said Tracy Mullin, president of the National Retail Federation.

In a letter to U.S. Treasury Secretary Timothy Geithner, Retail Iidustry Leaders Assn. President Sandy Kennedy asked federal officials to "reconsider action to ensure that this situation does not create further pressures on the current credit market. Any additional tightening of the credit markets will only exacerbate the constraints on our members’ ability to provide the products that consumers seek and most importantly, to maintain millions of retail jobs across the nation,"

The New York Times summarized the situation this way: "For the nation’s already struggling retailing industry, the collapse of CIT would send yet another wave of pain through the supply chain, wiping out suppliers’ capital, depleting retailers’ credit, and leaving the racks and shelves of the nation’s stores sparsely stocked – just in time for Christmas."

(Note: The following is by Bud Izen of Scrapbook Fever, an independent store in Salem, OR.)

When we moved to the area, I personally visited (i.e. shopped) every bank around, and asked about their minimum required balances as well as charges associated with their various accounts, their bounced-check processes, etc. I also paid close attention to how long I had to wait in line, and how I was greeted.

I noticed a big difference between the service I received, as well as the individual policies, at "name brand" banks versus local banks.

We ended up with Bank of the Cascades, an Oregon-based bank. I have never made a better business decision.

The bank treats its employees well, so there is a low turnover rate. As a result, when we go in, people know our names, and we know theirs. I made a point of getting to know the manager. Getting on a first-name basis with your local bank manager is one of the best moves you can make as a small business person. Once they get to know you as a person, your success rate, when it comes to getting a loan, becomes much better.

Among other things, I got a no-charge business account, free online banking, a free joint checking account, and an interest-bearing checking account with a low minimum balance requirement. Overdraft protection was a mere $4.00 (recently raised to $5.00) per transaction. Checks were free.

After we opened our business, several years after opening our account, we wanted to establish a line of credit. Using our inventory as collateral, we got a decent line of credit on basically our signatures. (We are sole proprietors, not incorporated.) All that was required was that we make sure that the line was paid off totally at least one month a year.

Having a personal relationship with the manager of a local bank is the way to go. You are just not going to get anywhere trying to do the same with a large bank that has rapid turnover. The manager of a larger bank may not be around long enough to do you any good.

Duncan Enterprises has changed its name to iLoveToCreate™. The 63-year-old company was founded by Erma Duncan as a ceramic company. It diversified into the craft industry in 1975 and has launched several proprietary brands, including Scribbles and Crafty Chica, and has acquired other major brands such as Tulip, Aleene's, and Rainbow Rock.

"Our business is strong and it will only continue to grow stronger," said Larry Duncan, President/CEO and Erma's grandson. "We ended our fiscal year with double-digit growth over the previous year, and our projections predict continued growth. Our team is absolutely dedicated to success; that dedication has allowed the company to remain family-owned and private for 63 years and counting.

"I believe that our new business name will support our continued growth and diversification while also allowing us to more distinctly promote our brands in the marketplace," Duncan added. "Our overarching goal is to the be best in the world at developing proprietary new product lines that ignite consumers' creativity and I am confident this change will dramatically affect our ability to achieve success."

The Grand Rapids Press profiled Notions Marketing on Friday. Among the highlights:

1. The company was founded by CEO Herb Lantinga's father in the family basement in 1938. (Herb is currently serving on the CHA board of directors.)

2. Today, Notions carries approximately 100,000 SKU's and employs 432 full- and part-time workers.

3. A growing portion of the company's sales are by Internet fulfillment – filling orders for e-commerce sites.

4. As the company grew, it expanded into and rehabbed five old factory buildings, one more than a century old, for which city officials are grateful: "Notions has a history of rehabilitating and making use of otherwise difficult properties to improve. We're quite thankful for that," Eric Soucey, Grand Rapids' economic development coordinator, told the Press.

5. "I describe them as the Cabela's of the craft world," Soucey, added.

6. The city recently approved a tax break for a $2 million purchase of computerized conveyor equipment that is expected to create 21 jobs.

1. The House version of the health care bill would penalize employers who do not offer health insurance to their employees. Companies with a payroll under $250,000 would be exempt. Employers with a payroll of $400,000 or more would pay a penalty of 8% of their payroll. Employers with payrolls between $250,000 and $400,000 would pay less.

2. The National Retail Federation and the world's largest retailer are at odds over health care legislation. As CLN reported in the previous issue, Wal-Mart announced it could support a fair employer mandate in legislation being drafted by Congress. Target also said it could accept an employer mandate. The NRF announced it was against any form of employer mandate and urged its members to "come out swinging" against it. Wal-Mart is not a member of the NRF.

3. President Obama met with labor leaders and said he remained committed to passage of the Employee Free Choice Act, which would allegedly make it easier for employees to form unions, the Associated Press reported. He did not offer any time-line, however.

4. Chair Henry Waxman (D, CA) is planning a hearing of the House Energy and Commerce Committee in the coming weeks to review the CPSIA, the Toy Industry Assn. reported. In a letter to Waxman, TIA president Carter Keithley urged "swift legislative action and for Congress to give the CPSC the clear authority it needs to provide relief from the harmful consequences of CPSIA implementation."

1. As the economy remains mired in recession and enthusiasts are using their stash rather than buying additional industry supplies, a class, "How To Sell on Etsy," could help consumers make money and use up their stash.

2. Most customers probably have some old jewelry from their mother or grandmother – jewelry they don't want to wear but can't bring themselves to throw away. Those old pieces probably have some nice beads and findings. A class on "Remaking Old Jewelry" could teach customers to de-construct grandma's necklace and use the good parts for new creations. Those ideas for new pieces using some old beads will probably require buying additional supplies. (And new pieces from mom's old jewelry make great Christmas presents for daughters, nieces, and granddaughters.)

3. How about the bride-to-be and her attendants meeting together at the store to design and make the jewelry they'll wear at the wedding? And if the bride wants to wear something old, she can take the class listed above.

 1. A private equity-backed company is looking to purchase scrapbook companies that have current placement in the major accounts. It is also interested in purchasing other brands or very well-known, established artists and designers within the industry to launch products through this newly formed company. The company execs have 45+ years of combined experience in the art/craft/scrapbooking market with direct experience selling to all of the mass merchants, craft chains, distributors, and independents. For more info, interested parties should contact email stuartmergers@gmail.com in complete confidence.

2. The Creative Network is also offering professional assistance to small businesses that are interesting in selling. Small firms are often too small to attract the services of professional mergers/acquisitions firms. Call Gail Czech at 360-604-0802. Confidentiality is assured.

There are 50+ new exhibitors at the CHA Summer Show. Here's a sampling:

Cruise and Crop (#1231). The company organizes cruise "retreats" for your business that combine the fun of a cruise with a product category. www.cruiseandcrop.com

Pisgah Yarn and Dyeing (#963). Specialty cotton, rayon craft and apparel yarns, including Peaches & Creme, America's Best, Honeysuckle, and Spindale Spun. www.elmore-pisgah.comwww.elmore-pisgah.com

Trimcraft (#1157). Scrapbook manufacturer from the U.K. introducing new lines in the U.S.: Dovecraft, Laura Ashely, and Smirk. www.trimcraft.co.uk

Baumgartens (#1510). Six styles and types of erasing options for students, plus scissors for kids and adults. www.b3.net

Stampee.net (#1310). The producer of Stamp-N-Foil with new lines for rubber stamping and crafting. www.stampee.net

Ever After albums (#1332). Family owned/operator of scrapbook albums. www.everafteralbum.com

EasyArranger (#1408). Flower arranging tool. www.easyarranger.com

The complete exhibitor list with web addresses is available at www.chashow.org.

"Regarding CLN's report on on-demand, in-store print technology, I am reminded of the system called Personalize It at Hallmark. It was the first print-on-demand card system in the industry and it was very good. Wonder where that went? Everyone thought it would be here forever, especially in the East where retail space is so limited.

"For the first two years it did great, then little by little it died. Was it the $1,000 a month to lease the equipment? Cost of supplies? Customers lost interest, even though the quality was top-of-the-line for an in-store printed card. Did they want the 6-8 colors of a printing press, or was it just too difficult for the staff to manage?" – Linda Franzblau, Books Marketing Manager-Trade Sales Manager- Distributed Titles Manager, Kalmbach Publishing.

1. Regarding Linda Franzblau's note about CLN's report on in-store book printing services: one of the first industry-related articles I wrote, almost 30 years ago, was about this new concept of craft classes – on videotape. Since then I've reported on numerous technological innovations – CD's, cable craft shows, e-commerce, etc., etc., etc.

What did they all have in common? They all failed – at first. You can have a great idea, but if it's too far ahead of its time, look out.

2. Regarding the trade associations' ratings in the CLN poll: I suspect the ratings will be better when the industry improves, because deep in our hearts what we all say to the trade groups is .... "Fix my problems!"

3. When CHA announced the Summer Show was moving to Orlando from Illinois, some people said, "Ugh! Florida in July?" Well, when I first wrote this a week ago, in Illinois, the heat index was 103. It can't be any worse in Orlando, can it? Can it?

JEWELRY. Kalmbach Publishing, sponsor of the recent Bead&Button show in Milwaukee, reports the show broke records: number of people signed up for classes, and the company's sales of products, books, and magazine subscriptions were up over last year. Attendance was about 13,500.

CLOSING. Scrapbook Update reported Luxe Designs will be closing. Direct consumer sales ceased June 30, and wholesale operations cease the end of this month. The goal is to have remaining inventory and fixed assets liquidated by Sept. 30.

NEEDLEPOINT. TNNA's Needlepoint Group has made new additions to its website, www.worldofneedlepoint.com, including its Market Buzz! section, which looks at the new designs that debuted at TNNA's recent summer show. The site also now highlights its Featured Retailer; in July it's Susan Burge, owner of Designing Women in El Dorado, AR. Special ad rates are still in effect for Needlepoint Group members. Call Sherry Mulne at 614-237-0700 or email bdirect@columbus.rr.com for more info

JEWELRY. The Motley Fool is one the most popular stock-market-advice websites and newspaper columns in the U.S. Recently one of its bloggers had a hot tip on how to diversify and invest in gold and other precious metals. Make jewelry: "By making your own, you can avoid the huge markups at the jewelry store," advised the blogger, lemoneaters CAPS. "If you wish, practice by making some copper jewelry (find supplies at Hobby Lobby); copper looks great for the fall, and even the summer, if someone has a great tan."

CHARITY. Springs Creative Products Group, Hancock, the Susan G. Komen for the Cure, and Creative Home Arts magazine have launched the "Brave and Beautiful Design Challenge." To participate, crafters must purchase an Anne’s Collection cloche hat from Hancock, personalize it with embellishments, photograph the result worn by a friend or relative, and submit the photo. First prize is $500, with $250 for second place and six $25 awards for honorable mention. Springs will donate $10,000 to Susan G. Komen for the Cure. In conjunction with the Challenge, Springs unveiled Anne’s Collection, a selection of ready-made women’s accessory items, including a cloche hat, a reader wrap, a stadium wrap, and a scarf that can be purchased exclusively at Hancock.

GREEN. Wal-Mart is requiring its 100,000+ suppliers to submit sustainability data for all their products. The retailer will then create a label similar to nutrition information on food packaging and may include data on solid waste, greenhouse gases, and community development, the Wall Street Journal reported. "The cost to suppliers could be high," the Journal reported, "but Wal-Mart insists there will be no exemptions." One Wal-Mart vendor told CLN, "Truthfully, I don't see this moving forward for a few years. The labeling part doesn't concern me as much as coming to some empirical value to measure a company or their products."

THE JOYS OF RETAILING. Dangerously strong winds knocked down a large chunk of a Hobby Lobby sign in Ames, IA. Remnants of the sign blew onto a major thoroughfare, snarling traffic. No one was injured, the Ames Tribune reported.

PEOPLE. Ana Cabrera, formerly Social Media Manager for CK Media, is the new Director of Online & Social Media for Northridge Media, publisher of Scrapbook Trends, Simply Handmade, Cards, and Bead Trends.

BANKRUPTCY. Ritz Camera announced to the bankruptcy court that it is unable to raise the money it needs to operate through the summer and will sell its assets. An auction is scheduled for July 20. If the sale is unsuccessful, there were media reports that Ritz will seek permission to liquidate and close by July 24, but the company denies it. "I believe Ritz Camera will continue on and provide our customers with cameras, digital products, and 1 hour imaging products and services for a long time to come," CEO David Ritz said. The chain began in Atlantic City 91 years ago as a portrait studio. The company already has closed about 400 stores.

DOGS! If you called Plaid one day recently and thought you heard a dog, you did. It was the annual Bring Your Pet To Work Day during which employees paid a "tax" to bring their bowser to work. The tax goes to the Gwinnett County Humane Society. (Comment: A great, inexpensive way to improve employee morale.)

RESEARCH. Back-to-school sales are often a harbinger of the all-important Christmas selling season. According to the National Retail Federation’s 2009 Back to School Consumer Intentions and Actions Survey, the average family with students in grades kindergarten-12 is expected to spend $548.72 on school merchandise, down 7.7% from 2008.

SHOWS. Online registration for TNNA's Fall Needlecraft Market Sept. 26-27 is still available for TNNA members. To register or for a brochure, call 800-889-8662 or visit www.tnna.org/TradeShows/FallShow/tabid/159/Default.aspx. ... The deadline to submit proposals for educational 2010 classes is Aug. 5. Download the form at www.tnna.org.

AWARDS. CHA was a finalist in two categories at the 2009 American Business Awards, for its public relations efforts related to the 2008 "Celebrate the Season with Crafts" campaign and for the leadership of CHA’s PR Manager, Victor Domine. The "Season" campaign secured garnered some 365,241,344 media impressions, more than 10 times impressions in the previous year's campaign. Victor's efforts resulted in 1.3 billion media impressions for CHA, of which 60% were generated by CHA members using PR tools Victor provided.

STATS. According to the National Retail Security Survey sponsored by the National Retail Federation, shoplifting averaged 1.52% of retail sales in 2008, up from 1.44% in 2007.

TV. Author Debbie Macomber, who has written various novels in which knitting was a key element, is having a movie made of her book, Mrs. Miracle. It will be a Hallmark Christmas movie entitled Debbie Macomber's Mrs. Miracle. Doris Roberts, formerly Raymond's mother in Everybody Loves Raymond, will star. It's the second made-for-tv movie from a Macomber novel; the first was This Matter of Marriage.

QUOTATION. "Life was a lot simpler when what we honored was father and mother rather than all major credit cards." – Robert Orben

STOCKS. A.C. Moore: $3.31, down $0.10 ... Hancock: $1.12, up $0.08 ... Jo-Ann: $22.01, up $1.69 ... Wal-Mart: $48.49, up $0.70 ... Dow Jones: 8,743.94, up 5.6%. (Note: All changes in price are since 7/3 and are exclusive of dividends.)

To read 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 July.

(Note: Emailed from a subscriber, but it sounds like David Letterman.)

1. CEO's are now playing miniature golf.
2. I got a pre-declined credit card in the mail.
3. I went to buy a toaster oven and they gave me a bank.
4. Hotwheels and Matchbox stocks are now trading higher than GM.
5. McDonalds is selling the 1/4 ouncer.
6. People in Beverly Hills fired their nannies and are learning their children's names.
7. The most highly-paid job is now jury duty.
8. Motel Six won't leave the lights on.
9. The Mafia is laying off judges.
10. If the bank returns your check marked as "insufficient funds," you have to call them and ask if they meant you or them. 

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