Date: October 19, 2009
Vol. XII, No. 20

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TABLE OF CONTENTS

COMMENTARY: WHY ALL THE RESEARCH? 

This and recent issues of CLN have included a number of items regarding market research on our industry's products or industry-related products – art materials, photographs, crafts, etc. Most of the time these may be of only mild interest – until you need them.

Last week I received a frantic email from a designer, desperate to find sales data on a particular category. It seems she was making a book proposal to a publisher who wanted to know if the category was worth his investment. We found some data, she made her presentation, and now will probably receive the book contract.

Many business owners may read the research findings and shake their heads because the data doesn't quite jibe with their company's sales. (The data almost never jibes with an individual company because national studies are averages, and no particular business is average.)

They may question why their trade association spends their membership dues on such studies – until their bankers want to see facts and figures. And in this age of tight credit, the more facts and figures the better.

But everyone needs the research numbers at a different time. That's why CLN has a section, "Industry Research," so when you need information from a particular study and can't remember which CLN issue included a summary, you can visit click on Industry Research in the left-hand column to find the contact info you need.

Kizer & Bender. How to handle an irate customer. Doing it correctly can turn an angry consumer into a loyal fan. Doing it wrong and who knows how many others will hear the story.

Category Reports. Highlights of the new Artists + Art Materials Study conducted by Interweave and the Int. Art Materials Trade Assn. (NAMTA)

Industry Research. Details on accessing the new Artists + Art Materials Study and the 2009 PMA U.S. Consumer Photo Buying Report.

Mike's Blog. Tales from a Professional Crafter. Mike and Barbara's experiences selling her jewelry at Midwest art fairs.

(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.)

Retailers, how's your bill-paying going these days? Are you paying more slowly than you were a year ago? Manufacturers, are your receivables slowing down? To vote, click on Industry Polls in the right-hand column or click HERE.

More than half of CLN voters, 51.1%, said they are "very concerned" about the healthcare legislation being debated in Congress. Another 9.0% are "somewhat concerned." Almost a quarter of the voters, 24.4%, said they support healthcare reform, and 13.3% aren't sure one way or another. Finally, 2.2% think it's a moot question because no legislation will pass.

Approximately 70 customers of Hancock stores in the northern Wisconsin towns of Stevens Point and Marshfield who had used a debit or credit card discovered unauthorized transactions were made using their account information at ATMs in the Milwaukee area, a couple hundred miles away. Stevens Point Detective Sgt. Greg Bean said Thursday the scam might be traced to old credit card readers. The amount of theft ranges from $300-$3,000, Bean said.

Meanwhile, a similar situation has occurred thousands of miles away in the Napa Valley and Sacramento areas of California, according to the Napa Valley Register. At least 50 people have reported strange purchases or ATM withdrawals from locations around San Francisco, and the Sacramento County Sheriff’s Department informed Napa police of at least five card swipe machines tampered with at other Hancock Fabric locations.

Hancock has replaced its machines, but police are advising Hancock customers who have recently made a purchase with a credit or debit card to notify their bank, close the account, open a new one, and change their personal identification number.

Victims should get their money back, as many financial institutions absorb losses when fraud is involved.

Is the glass half full or empty? Consider:

Half Full: Many retailers posted better-than-expected same-store sales figures and showed improvement over the results earlier this year. Retail Metrics said U.S. chain's same-store sales rose 1.1% and 70% of retailers reported better than expected, Bloomberg reported. The Johnson Redbook Same-Store Sales Index for September rose 0.6%, the first gain since April; 36% posted positive same-store sales comps, up from 24% in August. The International Council of Shopping Centers said September comparable chain-store sales rose 0.1%, the first gain since July 2008.

"Retail is not out of the woods yet, but consumers felt comfortable enough last month to spend on more than just necessities," said Rosalind Wells, Chief Economist, for the National Retail Federation. "As we head into the essential fourth quarter, retailers will likely continue aggressive promotions and discounts to bring people back into stores."

Half Empty. Yet for many retailers the figures were still negative. Furthermore, the comparison with September, 2008 was easier than previous months because September is when the economy began to decline. Also, the late Labor Day (Sept. 7) probably pushed some back-to-school sales into September that normally would fall in August.

Retailing Today wrote, "October will likely be a different story, as back-to-school shopping has ended, and consumers are not ready to start spending for the holidays, despite retailers' best efforts to convince them otherwise. Halloween may offer some opportunity, but it's likely this year will be more about home-made costumes than the latest Miley Cyrus get-up."

A sampling of retailers' results: Aeropostale, +19.5% ... Ross Stores, +8.0% ... TJX, +7.0% ... Kohl’s, +5.5% ... Costco, +3.0% ... Gap, -1.0% ... Target, -1.7% ... Macy's, -2.3% ... Nordstrom, -2.4% ... Dillard's, -6.0% ... Abercrombie & Fitch, -18,0%.

(Reminder: Many industry-related retailers, such as A.C. Moore, Jo-Ann, Michaels, and Wal-Mart, issue quarterly rather than monthly sales statements.)

The new Artists & Art Materials Study conducted by Interweave Press and the Int. Art Materials Trade Assn. (NAMTA) reveals data that is relevant to numerous facets of the industry. Beyond the basic details – 4.4 million active artists who spend $4.2 billion on art-related materials and services – consider these findings:

1. The majority of artworks created in 2008 were not paintings or drawings. In fact, the largest category, 30%, was "Handmade books and cards; art using found objects, sculpture, fabric, mixed media; collage."

2. Just as the digital age is affecting scrapbooking, so it is for art. Eighteen percent of the artworks created in 2008 were "Digital art." That was more than "Paintings using oils, watercolors, etc.," which came in at 17%.

3. Of the $4.2 billion dollars, 18% was spent in craft chain stores, and 28% online. Art supply chain or independent stores comprised 36% of sales.

4. All specialty retailers may wish to compare their stores with art supply retailers, 64% of whom made a profit in 2008: There are about 700 art material retailers operating about 900 locations; median store sales, $551,000 on a median sales floor of 3,000 sq. ft.; average turnover rate, 2.0; median number of suppliers, 25; 42% of the inventory is purchased from distributors.

Officials expect the Study to be repeated every 2-3 years. For info on accessing the Executive Summary or purchasing the entire Study, click on Industry Research in the left-hand column. To read a further analysis of the Study's results, click on Category Reports.

There are two major industry trends quietly growing but certain to have a major impact:

1. More and more large vendors are launching their own e-commerce sites, selling directly to consumers the products they traditionally have sold only to retailers and distributors. Why? Three major reasons:

A) Margins have been squeezed so much by retailers. And while consumers may want free shipping, they aren't nagging about ad allowances, charge-backs, and shipping fines.

B) Many retailers are cherry-picking a line and/or reducing the number of SKU's in the plan-o-gram, leaving vendors with some SKU's and nowhere else to sell them.

C) They receive calls from consumers looking for a particular product that isn't sold in the area. "I'm not in business to turn down business," one vendor told CLN.

2. Large retailers, under pressure from stockholders or private equity owners, are doing much more direct importing. Why? Margins should improve if the middle-man is eliminated, and it's a way to offer products the competitors don't carry.

The end result is cyclical. Vendors who lose retail business because of a customer's importing policies are more inclined to start an e-commerce site. Meanwhile, the distinction between a retailer and a manufacturer is blurring. For example, the rules for the upcoming CHA Craft Supershow [consumer] in Anaheim say retailers can sell at the show, but manufacturers cannot. So a chain "retailer," who directly imports a substantial number of products, can sell at the show, but a "vendor" who has a substantial e-commerce site, can not?

(Note: What do you think will be the long-term consequences of these trends? Good for the industry, or harmful? Email your thoughts to CLN at mike@clnonline.com.)

The Federal Trade Commission is strengthening the rules regarding testimonials and endorsements, and the changes, which go into effect Dec. 1, could affect a wide variety of industry companies:

1. Manufacturers who use a celebrity, such as a well known teacher or designer, to endorse their products. Is there a "material connection" between the company and the individual?

2. Manufacturers who send free products to designers and consumers in hopes of a favorable mention in blogs.

3. Bloggers of all types who receive free products or payment.

The purpose of the tougher regulations is to protect consumers from unsavory ad and marketing practices ("I lost 15 pounds in two weeks!") but as is often the case with new legislation or regulations, the wording is vague and broad.

Scrapbook Update 's Nancy Nally explains: "... if I review a book that is sent for me for free and actually like it and tell Scrapbook Update’s readers that I do, it will be considered an endorsement or advertisement under FTC rules because I received the book for free. This means a whole slate of FTC rules will apply to what I say, including the fact that the company can be fined for any claims that I personally make about the product that are untrue."

Nancy cites this example: "Say I was sent a paper trimmer to review and in my testing of it was able to cut three sheets of cardstock at once. So I write that it can do that. But the trimmer wasn’t actually designed to do that and it can break the blade. If I received the trimmer for free to review, and the review is positive of the product, the company is legally liable for my saying that it can cut that much cardstock when it isn’t intended to."

To read the 81-page document, click HERE.

(Comment: CLN suspects this will be similar to the Consumer Product Safety Improvement Act, written with good intentions and having unintended consequences.)

The Association of Corporate Counsel (ACC) has tried to explain the new FTC rules regarding endorsements and bloggers:

"The FTC noted that the advent of consumer-generated media means that, in many instances, it is the endorser, rather than the advertiser, that disseminates the endorsement. Accordingly, the FTC has taken the position that, in those situations, it is the endorsers that are primarily responsible for disclosing material connections with the advertiser. This conclusion appears to be motivated by, again, the belief that consumer impression is that consumers do not generally know or understand that advertisers provide freebies to bloggers, and therefore, consumers would otherwise (without a specific disclosure) expect a blogger/endorser’s product review or evaluation to be free of any financial connection with the advertiser."

The ACC added, "On a related note, the revised Guides suggest that an advertiser that participates in a blog advertising service that matches up advertisers with bloggers who will promote the products on their personal blogs may be held liable for any misleading or unsubstantiated representations made through the blogger’s endorsement. The blogger also is subject to potential liability for the misrepresentations and failure to disclose the payment."

Crafting a Better World is an initiative designed to give crafters a way to give back to their community by crafting. The initiative kicked off in honor of the 133-store chain's 24th anniversary with a partnership with Boys & Girls Clubs of America.

CEO Rick Lepley said "Our first Crafting a Better World partner, Boys & Girls Clubs of America, is an ideal fit for our company with its emphasis on kids, education, and creativity. Our 133 stores will work with their local chapter of that organization to help their customers give back to their own community. As we move forward, we look forward to partnerships with other non-profit organizations throughout the regions we serve."

During the next five weeks, stores will host craft parties for participants in local Boys & Girls Clubs. Meanwhile, customers will be encouraged to drop off new or gently used craft supplies for donation to their local Boys & Girls Club. Customers can also add $1 to their bill at check out for donation to Boys & Girls Clubs and A.C. Moore will donate an additional $500 to the organization to honor its store which raises the most money.

"Arts and crafts programming is a key component to all our local clubs, but maintaining a variety of necessary supplies has been a problem. The parties will give hands on opportunities for our members to become excited about crafting, and the supply donation will help us keep them crafting," said Glori Burrell, Boys & Girls Clubs' Director of Corporate Development for the Northeast region.

The new 2009 PMA U.S. Consumer Photo Buying Report includes sales data on sales of new cameras, digital image printing and storage, and other issues relevant to scrapbooking and memory crafts. Some highlights:

Digital camera penetration in the U.S. reached 73% in 2008, but only 61% of digital camera owners made paper prints from their digital images. (Hard to scrap a photo if it's hiding in a computer or camera.) A third of U.S. households made or ordered photo publishing products in 2008. Camera phones were present in 58% of U.S. households in 2008, more than double the percentage in 2005.

The basic report is free to PMA members. Nonmembers may buy the report for $299. Visit www.pmai.org.

Caron International reached a product distribution arrangement with Clearsnap Holding (Clearsnap), a major manufacturer of inks and stamping products, many of which are sold under the ColorBox brand name. Under the terms of the agreement Caron will be Clearsnap's main distributor in the U.S. and will sell the products to chain and independent craft stores in the U.S. and abroad.

Caron's Director of Marketing Ed Hamrick said, "This agreement not only broadens Caron's product base, but also helps position the company for future growth, and continues the strategic goal of diversification."

For orders, call Caron's Hampton Art division at 800-981-5169 and products will soon be available at www.ShopHamptonArt.com.

The New York Times reported on the latest retail price war, this one between Wal-Mart and Amazon. Last Thursday Wal-Mart said it would take pre-orders for 10 yet-to-be-published hardcovers for $10 each on its Walmart.com site. Later that day Amazon matched the price for the same titles. So Wal-Mart lowered its price to $9, a markdown of 59-74% off the list price. Friday morning Amazon matched the $9 price and by late afternoon Wal-Mart lowered its price to $8.99. Both will be selling the books below cost, the Times reported.

The books, all expected to be bestsellers, include new titles by Sarah Palin, John Grisham, Stephen King, Barbara Kingsolver, and James Patterson.

The Times interviewed various retail and publishing execs who talked about the long-term harm such a price war could have on book chains, independent book stores, publishers, and emerging writers.

1. ShowBiz Connections will be a weekly digest sent to registered exhibitors and attendees. Retailers check off their product category interests when they pre-register. Exhibitors list their product categories. Each week buyers will be sent a list of appropriate exhibitors and exhibitors will be sent a similar list of buyers.

Official notice of the program and instructions on how to best utilize it will be emailed to members around Oct. 30. For more info, email registration@craftandhobby.org.

2. CHA is giving exhibitors an opportunity to enhance their listing in the printed and online show directory by adding a product image or company logo; plus, a brief company bio can be included in the online directory.

Exhibitors can start the process by visiting www.chashow.com; click on the Exhibitors tab, then Show Directory Update. Enter your email address and follow the prompts.

The deadline for the print directory is Dec. 9. For more info, email Kevin Allison at kallison@craftandhobby.org or call 201-835-1219.

1. The new Artists + Art Materials Study is very interesting, informative, and helpful. But do not try to make its data jibe with the art materials data in the recently revised CHA Attitude & Usage Study. It will drive you crazy. The methodologies are completely different. They're both accurate within reason, but since we haven't died and gone to heaven, they both have flaws.

2. It seems there has been an unusually high number of media reports on how frugal consumers can save money by making Halloween costumes. That's the same logic here that we saw last holiday season when the media "discovered" the value of making Christmas gifts.

3. I am not sad to report that the blog, Scrap Smack, is now defunct. "The reason why Smack is gone, is because it was time," said the owner. "Smack had degenerated to the point of name calling and nothing more than bullying. There was rarely adult conversation going on any longer.... An attempt was made to clean up the place a bit, to keep us on task, but alas there were too many princesses in the tower, some of whom preferred the gay bashing and fat children comments. I decided that was enough."

To me, it was more than enough months, if not years, ago.

QUILTS. An early report from Ellie Joos on the Quilt Market in Houston, which was still in progress at CLN's deadline: "For most exhibitors I spoke with, it was better than expected. The number of exhibitors was down, although not by much, and there were 39 new exhibitors. Because the show was three weeks earlier than usual, there were quite a number of last-minute registrations and walk in enrollments. It was the 30th anniversary of the Market and the 35th anniversary of Quilt Festival, quite an accomplishment!"

PEOPLE. Bill Gardner, former editor-in-chief of Craftrends magazine, has been named Communications & Media Relations Consultant for Clover Needlecraft. He will produce a quarterly newsletter, assist in all marketing communications initiatives, oversee the company's ad program, and act as media liaison for editorial requests. He can be reached at bill@clover-usa.com.

NEEDLEPOINT. Last week's issue of Newsweek included a full-page, four-color, mail-order ad for needlepoint kits from Ehrman Tapestry. Visit www.ehrmantapestry.com.

NEEDLEWORK. The National NeedleArts Assn.'s Nashville show will be Feb. 20-21, but is moving to the Embassy Suites in Nashville South/Cool Springs. Visit www.tnna.org.

YARN. Interweave 's past president Marilyn Murphy will step down as Editorial Director of the Yarn Group Apr. 1 to do consulting for the company and remain as Exec Director of Knitting Daily TV. Tricia Waddell, currently Editorial Director of books will replace Marilyn as Editorial Director of the Yarn Group. The group includes knitting and crochet magazines, newstand special issue publications, online businesses, tv programs, and instructional videos.

YARN, I. Next Monday The Craft Yarn Council of America will mail 10,000 Learn To Knit posters "Life Skill and Home Ec" teachers across the country, who will have the opportunity to order free knitting kits for their classes.

YARN, II. Coats & Clark's Red Heart yarns and WomenHeart: The National Coalition for Women with Heart Disease have joined forces to create the HeartScarves project, in which consumers make a red scarf that is given to women with heart disease as a symbol of care and support. Inside each kit is everything to knit, crochet, or weave a red scarf – one skein of Red Heart® Super Saver™ yarn, Susan Bates knitting needles or crochet hook, and interesting tidbits as to why knitting and crocheting are good for a person's heart health. Visit www.redheart.com and www.coatsandclark.comwww.womenheart.org.

CHARITY. Warm Up America! teamed up again with Save the Children Foundation, rallying volunteers nationwide to knit and crochet caps for newborns. Called "Knit One Save One," the program ended earlier this year with 100,000+ caps being donated. Thousands of the caps were distributed to Save health facilities in Africa in the spring and the remaining shipment of 50,000 caps was sent to El Salvador. Warm Up America! is strongly supported by the Craft Yarn Council of America.

TNNA. The National NeedleArts Assn.'s Pathways into Professional Needlearts apprentice program is expanding. Next year it will offer the program to college students across the U.S. and a program for needlearts enthusiasts not in a needlearts business or enrolled in a college program. The current program with the U. of Akron will continue. A complete overview, plus host and PiPN applications, can may be downloaded at www.TNNA.org. For more info, call Sherry Mulne at 614-237-0700 or email bdirect@columbus.rr.com.

AWARD. AccuQuilt's GO!™ Fabric Cutter was selected as a finalist in the 2009 International Design Excellence Award program. The honor puts AccuQuilt in the company of winners such as NIKE, Samsung, Dell and Coca-Cola.

HIGH FINANCE. The Wall Street Journal reported that The Blackstone Group, half owner of Michaels with Bain Capital, plans to sell several of the companies in its portfolio, either by an initial public offering (selling stock) or selling to other private equity companies. The Journal did not mention Michaels.

QUOTATION. Forbes' mini-bio of David Green, who ranked #123 on Forbes' 400 richest Americans with an estimated net worth of $2.5 billion: "Son of poor preacher worked at local 5-and-10 store in high school, opened first arts and crafts outfit Hobby Lobby with $600 loan 1970. Today sales of $2 billion. Company has no long-term debt. Believes the way to good business is to follow biblical principles: "He is the only one who knows the future." Plays Christian music in stores. Has delivered over 420 million copies of the Gospel to children in 100 countries through Book of Hope ministry."

AWARDS. Hosley Int. received Wal-Mart’s Supplier of the Year for FY2008 as well as Supplier of the Quarter for the fourth quarter of FY2008 in the Crafts/Floral/Potpourri category.

WEDDINGS. Condé Nast is halting publication of Elegant Bride and Modern Bride magazines. (Comment: Apparently the high-end bridal market is declining. But the marriage rate isn't, so there must be more do-it-yourself weddings.)

SHOWS. Online registration for the CHA winter show in Anaheim Jan. 24-27 is now open. CHA is also offering a one-year free membership to exhibitors who are currently not CHA members, and discounts to returning exhibitors who increase their booth space. Visit www.chashow.org.

BEADS. Interweave is merging Step by Step Beads into Beadwork magazine next spring. The last issue will be Jan./Feb. and the editor, Leslie Rogalski has assumed the role of Online Editor for Beading Daily (www.BeadingDaily.com). Step subscribers will have their subscriptions fulfilled with Beadwork.

PHOTOS. Online registration is now available for the PMA show Feb. 21-23 in Anaheim. Visit www.pmai.org.

SIGN OF THE TIMES. Mary Petto, owner of Cropperware®, has put the company up for sale. Where did she announce it first? On Twitter. Email info@pagesinprogress.com for details. The website is www.cropperware.com.

WASHINGTON. Scrapbook Update reported Sen. Bob Bennett (R-UT) secured an earmark of $5 million in Defense Department funds to be used to create digital scrapbooks for military units. Remember My Service, a program currently being rolled out by the U.S. Army and the Salt Lake-based company Storyrock, compiles photographs and records to tell the stories of National Guard units. (Comment: Why don't retailers give special coupons or discounts to military wives whose husbands are overseas?)

QUOTATION. "The situation when it comes to credit is just as bad as it has been for months. But it's now that we see some signs of a potential recovery that we need credit the most. Without credit, the recovery is not going to happen." – Todd McCracken, President of the National Small Business Assn. (Reuters)

PAINT. People Country Special, a special edition of People magazine highlighting country music stars and their homes, includes a two-page spread showcasing clever solutions for organization and personalization using Plaid's FolkArt® Chalkboard Paint. It's on sale through Nov. 9.

SALES. The National Retail Federation has forecast holiday retail sales to decline 1%. That's significantly below the 10-year average of 3.39% growth, but better than last year's decline of 3.4%.

PBS. Recently tv personality and CHA spokesperson Terri Ouellette was featured on the crafty pledge drive for PBS channel KAET. The result was so successful it will be re-aired in December and three DVD's are available for a tax-deductible donation. The special was supported by Jo-Ann, Herrschners, Scrapbook Adhesive 3L, and ColorArtz by Testors. Visit www.azpbs.org/gift and click on "Creative Crafts with Terri O."

STOCKS. A.C. Moore: $5.27, up $1.32 ... Hancock: $1.32, up $0.02 ... Jo-Ann: $30.35, up $4.47 ... Wal-Mart: $51.22, up $2.14 ... Dow Jones: 9,995.91, up 5.4%. (Note: All changes in price are since 10/2 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.

... You get winded from knocking on the door.
... You have to have another kid chew the candy for you.
... You ask for high fiber candy only.
... When someone drops a candy bar in your bag, you lose your balance and fall over.
... People say, "Great Boris Karloff Mask," and you're not wearing a mask.
... When the door opens you yell, "Trick or..." and can't remember the rest.
... By the end of the night, you have a bag full of restraining orders.
... You have to carefully choose a costume that won't dislodge your hairpiece.
... You're the only Power Ranger in the neighborhood with a walker.
... You keep having to go home to pee.

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