Date: November 2, 2009
Vol. XII, No. 21

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TABLE OF CONTENTS

COMMENTARY: TAKING A BREAK 

The CLN schedule will be a little different this month. Your second November issue will be Nov. 23 instead of Nov. 16 because I will be on vacation. I am a firm believer that if a vacation is going to be helpful, it has to be a real vacation. In other words, I'm not going to check my email every hour, or call home to get my messages. I'll answer everyone when I return home, but probably not until then. As Julie Baird wrote in Newsweek, "... you have to wonder what we are distracting ourselves from – and who we could be if, every now and then, we paused."

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

Mike's Blog. "Trade Show Disasters." As vendors plan their trade show schedule for 2010, here's a list of disasters that have happened at previous trade shows – raining on your booth in the convention center, naked in a hotel hallway, and more. To read it, click HERE 

Scene & Heard. Ellie Joos' report on the trends she saw at the recent Quilt Market.

The N Files. The first of two parts on the social media. Is Facebook and the others a great new marketing tool? Well, maybe.

"Benny Da Buyer". Is scrapbooking fading? CLN asked Scrapbook Update's readers. Here are excerpts of particular interest to retailers.

"Vinny Da Vendor". Scrapbook Update's readers weigh in on manufacturers and publishers.

(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.)

Our industry's trade shows stretch from Orlando to Southern California, with Columbus, Chicago, Houston, and Las Vegas in between. Do you have a favorite?

To vote, click on Industry Polls in the right-hand column or click HERE.

CLN POLL: PAYING YOUR BILLS

More than a third of the retailers in CLN's unscientific poll, 37.5%, report they are paying their bills more slowly than a year ago. Another 45.8% claim they are paying their bills at the same speed as before, while 16.7% aren't sure.

Manufacturers think the situation is worse than that. More than half, 54.6%, claim they are being paid more slowly, while 36.4% reports "same as usual," and 9.1% aren't sure.

A company press release announced that TowerBrook Capital Partners L.P. and Deutsche Bank Trust Company Americas are the new majority owners of Wilton Holdings, the parent company of Wilton, E.K. Success, Dimensions, K & Co., and other divisions.

Wilton had been owned by the investment firm, GTCR Golder Rauner, which will continue to own a minority interest, but in July the creditors had filed suit against Wilton Holdings, trying to force it into involuntary bankruptcy. A settlement was reached in August.

TowerBrook is an investment firm based in the UK and the U.S. and owns a wide variety of businesses, none of which, until now, appear to be related to our industry. Deutsche Bank Trust Company Americas is a corporate and investment banking firm that announced earlier this month that it expected its pre-tax income for the third quarter 2009 will be in the range of 1.3 billion euros.

Wilton also announced CEO Richard Conti has resigned. Board Chair Jerry Levin will serve as interim CEO until a permanent replacement has been named.

Wilton has certainly been in the news this year. Some highlights:

1. In January E.K. Success filed a patent infringement lawsuit against Michaels, regarding Michaels' "Seasonal Punch" products asking for damages for EK's "losses, Defendant's profits, the costs of the action, attorneys' fees, and interest." The suit also asked for triple damages "because of Defendant's willful infringement."

2. In March Wilton announced the Dimensions division would be integrated into other divisions and the Reading, PA facility will be closed by the end of 2009, resulting in the loss of 100+ jobs. Manufacturing would be outsourced and product design and development should shift to E.K. Success.

3. In July E.K. Success Founder Chris Skinner stepped down as Chief Creative Officer to become a Senior Adviser for an 18-month transition period.

4. In July, lenders holding more than $208 million in debt owed by Wilton Holdings, the parent company of Wilton Brands, filed a petition to force Wilton Holdings into Chapter 11 bankruptcy reorganization. The action was taken as a result of "certain breaches of our loan covenants," according to Wilton.

5. In August, a settlement was reached with creditors and bankruptcy was avoided.

Crafts have finally arrived in the Manhattan. Michaels has opened its first store at 97^th St. and Columbus Ave. It's the retailer's "first urban footprint," CEO John Menzer told Bloomberg News.

The grand opening week included a book signing with Martha Stewart, demos and workshops with Michaels' creative expert Jo Pearson, an American Girl make-it/take-it, a Wilton cake decorating demo, and Halloween events.

The 30,000+ SKU, 14,700 sq.-ft. store was tailored to fit the "artsy" feel of the neighborhood, which is home to many schools, including Columbia University.

It is the first store (perhaps in the industry's history) to offer a delivery service.

The major departments are designed in a "store-within-a-store" concept with the art materials and custom framing departments at the front. Here's a description of some of the departments:

The art materials area includes an expanded canvas selection, 230+ brushes and a broad selection of acrylic, oil and watercolor paints. Brushes and other products are arranged by skill level from student to professional. Custom framing is more interactive to create a customer-centric area that encourages a hands-on design experience. Frames are color coded by price range, and customers can lay out their artwork combining mats and mouldings on an open-style design workstation.

The scrapbooking department is organized by themes such as birthday, holiday, sports, and vacation. The jewelry department has 5,600+ SKU's and offers design trays for use in choosing beads, pendants, etc., to make unique combinations. The kids' department features an expanded assortment of kids' art supplies for school projects, the largest selection of Crayola products in any store, kids activity kits, products under $5, and support for the company's The Knack projects and shopping lists.

There is a grand opening website; visit www.michaels.com/manhattan.

"This will be a learning lab for us," Menzer told Bloomberg News. "We’ll try different things in Manhattan and use what we learn at the next couple of urban stores we open up."

Don't believe everything you read, at least not just yet. In an article detailing the competition for trade shows between Los Angeles and Anaheim, the LA Times reported Los Angeles will be the site for four CHA shows in the next decade.

CHA officials, however, denied the report. "We have not yet signed a final contract for the 2011 show or beyond," explained CHA's President/CEO Steve Berger. "We are still considering all our options and we plan on making the final announcement for venue selection at the 2010 Winter Show in Anaheim, after all proposals have been carefully reviewed and evaluated based on their individual merits."

Mark Liberman, President of LA Inc., the Los Angles Convention and Visitor's Bureau, said, "I certainly apologize for the statement that appeared in the Los Angeles Times and realize your organization is considering several options for your annual meetings, and in no way did we intend that the story would influence the future announcement regarding your venue selection."

CHA officials said in efforts to keep show costs to a minimum, CHA regularly looks at ways to reduce spending by exploring better rates among various show venues, including the Los Angeles and Anaheim convention centers, plus several locations in Las Vegas.

The Times said a key element in choosing a convention site is access to hotel rooms. Anaheim offers nearly 4,500 rooms within a quarter-mile of its convention center, while Los Angeles has only 900 – but in February a new 1,001-room hotel complex with a Marriott Marquis and JW Marriott-Ritz-Carlton will open. The convention center area also has a new entertainment complex, LA Live, with theaters and several restaurants.

Nearby hotels are important, the Times reported, because of shuttle busses, which cost a show's sponsor approximately $3 per attendee per day.

Negotiating for conventions has become ubiquitous these days because the competition among convention centers is intensifying for two reasons: A) Trade shows are smaller. The Times cited a survey by the Professional Convention Management Assn. which indicated convention planners booked 21% fewer rooms at convention halls in 2008 than they did in 2007, and rented about 8% less exhibition space; and B) Las Vegas, which offers far more exhibit space and hotel rooms, saw convention attendance drop almost 60% this past summer.

Moving the winter show, if it happens, is not unusual. Since 1979 the show has been held in Washington, DC, Chicago, St. Louis, Houston, Dallas, San Diego, San Francisco, Anaheim, and Las Vegas.

No decision has yet been made concerning the location of the 2010 summer show.

Recently CLN was asked to contribute to Scrapbook Update, so we asked the question: A number of independent stores, and even magazines have gone under. On the other hand, perhaps the industry is simply consolidating and the enthusiasts are dipping into their stash during these tough economic times. The item elicited a huge number of responses. To read all of the answers, click HERE. Some major conclusions:

1. Consumers are scrapping as much as ever, but using their stash rather than buying so much. And in many cases, their stash is huge.

2. Numerous analyses of the state of the independent retailer, or LSS. Highlights of those comments are in Benny Da Buyer.

3. Too many new products which are too similar or too expensive? Compliments – and criticisms – of scrapbook manufacturers are detailed in Vinny Da Vendor.

4. Respondents disagreed on the importance and value of digital scrapbooking.

5. Consumers will always make scrapbooks in one form or another; much of the consolidation that has taken place was inevitable.

Clearly, a major challenge for scrapbook vendors and retailers is encouraging scrappers to use their stash. That's no doubt true for the entire industry: inspiring enthusiasts to use what they already have.

Stanislaus Imports, one of the industry's pioneers, suffered a bad fire recently. The fire started a few buildings away from the warehouse/office, but the Pacific winds whipped up the flames and touched six other warehouses, Stanislaus being the last one. President Stan Siou, one of the industry's real good guys, told CLN it was a 5-alarm fire which took three days to control and what the fire didn't consume, the water from the high powered water hoses did.

"We did recover our hard drive and large amounts of our documents and invoice files," Stan said. "We are presently operating out of another building while our property is being re-built, which will take six to nine months. Basic items for our largest clients are being air freighted to us. We have notified our key customers re the fire and have started shipping from October 7."

The address is 50-13th St., San Francisco, Ca 94103. The phone and fax numbers are unchanged – 415-431-7122 and your fax is 415-431-4365.

Stanislaus Imports was founded in 1957 and been a strong industry supplier ever since.

As retailers plan for the holiday shopping season, they may wonder about how much importance to place on offering gift cards and emphasizing their e-commerce sites. Here are some statistics from the 2008 holiday selling season, courtesy of the National Retail Federation:

The average amount of each card purchased last holiday season was $40.54. Consumers who purchased gift cards bought an average of 3.6 cards, and spent just under $150.

Gift cards should be particularly helpful in our industry because they are the solution for non-crafting relatives of craft enthusiasts. For example, a husband would like to buy a scrapbook, bead, or yarn present, but is bewildered because his wife already has such a huge stash. A gift card solves his problem.

Gift cards are poised to make a comeback this holiday season, Reuters reported, and can be an effective source of revenue after Christmas, because consumers who redeem their cards typically spend more than the value of the card.

As for e-commerce, 44% of all holiday shoppers did some buying online, and 72.8 million consumers shopped online from work. That's why the Monday after the Thanksgiving weekend is now called Cyber Monday; on that day 84.6 million people shopped online.

As for the retailers, 78% of e-commerce retailers offered free shipping with conditions.

Senate Majority Leader Harry Reid and Finance Committee Chairman Max Baucus are crafting an amendment that would add an expanded operating loss "carryback" provision to unemployment insurance legislation being considered, according to the National Retail Federation. The amendment is expected to give large and small businesses the ability to "carry back" net losses suffered in the current recession in order to claim a refund from taxes paid in previous years when they made a profit.

Carryback is normally limited to two years, but economic stimulus legislation passed in February expanded the period to five years for companies with up to $15 billion in annual gross receipts. The Reid/Baucus amendment could expand the five-year period to all businesses that suffer a loss regardless of size, and could give businesses the choice of using the carryback for losses from either 2008 or 2009 rather than just 2008 as provided in the stimulus bill.

House Speaker Nancy Pelosi also expressed support for an expanded carryback period.

In the previous issue CLN reported on the price war between Amazon and Wal-Mart on soon-to- be-released books that are expected to be best-sellers. Since that report, Target joined the fray.

Now the American Booksellers Assn., the trade organization of independent booksellers, has asked the Department of Justice to investigate, charging that the chains are engaging in "illegal predatory pricing." The ABA says publishers have confirmed that they are not selling to these retailers at special prices, so the three chains are losing money on every sale, as much as $7.50 per sale on a $35 book.

Now Amazon, Wal-Mart, and Target are limiting the number of copies they allow customers to buy in an effort to prevent other booksellers, particularly independent book stores, from reselling the discounted titles. Amazon has a three-copy limit on certain books, while Wal-Mart's limit is two and Target's is five.

Independents buying from a competitor rather than a distributor is not new. Years ago when decorative painting was at its zenith, some chains were selling acrylic paint as a loss leader, charging less than what independent retailers paid to distributors. So some savvy independents would go to their local Michaels and buy all of the white paint – the most common color. Michaels' replenishment system was so antiquated in those days it could take weeks before the shelves were refilled.

Recently CLN published a report on the death of Bob Fisher, a very popular veteran of the art materials industry. To make matters worse, Bob's widow Jennifer might lose the family house because of medical costs. A fund-raising efforts has been launched by the Int. Art Materials Trade Assn., and now David Pyle, VP/Division Publisher for Art, Jewelry + Yarn for Interweave Press, has self-published a book, 18+18, and all of the net proceeds go to Jennifer.

The book is a collection of 18 paintings and 18 drawings based on David's travels. To preview the book, visit http://www.blurb.com/bookstore/detail/912269. In addition, if you vote for 18 + 18, it could win a cash prize for travel books in the "Best Blurb Books Contest," the proceeds of which will be shared with the Fisher family.

(Comment: CLN has previewed the book – David is an excellent painter and photographer. 18 + 18 would make an excellent Christmas gift.)

The Alliance for American Quilts has many programs to help keep the mission of saving and documenting the stories behind quilts and quiltmakers, past, present, and future. AAQ programs are documented in the Folk Life Center of the Library of Congress and board members are historians, industry leaders, journalists, and artists. AAQ also has the largest cultural digital image base in the country.

A group of 25-30 quilts are presented each week for auction, and many are created by well known artists from the quilt community. To bid in support of the organization over the next three weeks (bidding begins at $50.00 per quilt block) go to eBay and search for: "Alliance for American Quilts" or visit www.allianceforamericanquilts.org.

1. I am delighted Michaels has opened a store in Manhattan. For years/decades I have periodically received phone calls from New York stock market analysts, investment companies, and others who apparently have never been in a craft store. And they are uniformly condescending about the industry. For example, when the Wall Street Journal reported on Martha Stewart's deal with Michaels, the WSJ called the industry "dowdy." That was typical.

Maybe now, finally, these knuckleheads will begin to understand that we're far, far more than what Boy Scouts do on a rainy day.

2. Recently I recounted in my blog the adventures – and misadventures – my wife Barbara and I have had selling her jewelry creations at outdoor art fairs. Jean Leinhauser of Creative Partners added this note: "Many years ago I was into paper mache, and at an outdoor craft fair I had a whole booth full of brightly colored mushrooms mounted on wood bases. One woman carefully inspected my wares, then shouted loudly to her husband, several booths away, 'George! Come over here and see what you can do with no talent!'"

3. In the previous issue I wrote about how the definitions of manufacturer and retailer are blurring together, and how that could complicate who can and cannot sell at CHA consumer shows. For example, because of all of its direct importing these days, Michaels might be the industry's largest "manufacturer." And numerous "manufacturers" have extensive e-commerce sites. Here's a clarification: If a vendor with an e-commerce site wanted to sell at a consumer show, it would have to take out a second CHA membership, a retailer membership, for its e-commerce site.

4. All these changes at Wilton – is this some sort of sign the industry is in trouble, considering how pervasive the company's products are in cake decorating, scrapbooking, needlework, etc.? No. It's simply an example of a private equity firm using borrowed money and paying too much to buy companies, just like too many people bought houses they couldn't afford.

LOANS. The Obama administration announced that government-guaranteed loans made to small businesses through the SBA 504 loan program should be made available for up to $5 million in financing – up from $1.5 million. The loan limit for small manufacturing businesses should also be increased from $4 million to $5.5 million.

PHOTOS. According to the Photo Marketing Assn. study, the volume of prints (all sizes) made from digital still camera images decreased by 2% in August. Online ordering activity remained constant. Printing volumes at retail mini-labs and instant kiosks fell 4% and grew 1%, respectively. Home printing fell by 5%.

IMPORTS. Import cargo volume at the nation's major retail container ports is now expected to total 12.7 million containers for 2009, according to the National Retail Federation. That's significantly below last year, but better than was forecast this summer.

INSURANCE. While Congress debates healthcare reform, many small businesses say they are facing the steepest rise in insurance premiums they have seen in recent years, the New York Times reported. Insurance brokers and benefits consultants told the Times their small business clients' premiums are increasing an average of about 15% for the coming year – double the rate of last year’s increases. That would mean an annual premium that was $4,500 per employee in 2008 and $4,800 this year would rise to $5,500 in 2010.

$$$. The dollar continues to fall against international currencies. That should result in U.S. products costing less in overseas markets, and an increase in the number of international buyers attending the CHA winter show.

QUOTATION. "We will not be beaten in price this holiday season...." – Eduardo Castro-Wright, Wal-Mart Vice Chair

CONFERENCE. The 2010 Yarn Market News Smart Business Conference will be held at the W Hotel in downtown Seattle Mar. 14-16. Topics for the seminar include open-to-buy/cash-flow management, negotiating skills for small businesses, balancing life and work, and comprehensive visual merchandising and branding workshops. Cinda Baxter, retail consultant and founder of the 3/50 Project, will be the keynote speaker. Visit www.yarnmarketnews.com/sbc2010/index.php.

LICENSING. Michaels is now selling a line of American Girl craft kits and supplies aimed at girls 8 to 12. Items such as stamps and stickers, jewelry-making kits, and scrapbooks will be priced from $1.99 to $29.99. The line was developed with EK Success, which had previously developed the Martha Stewart Crafts line. A new website, www.americangirlcrafts.com, will be available soon, according to the Wisconsin State Journal. ... Michaels ranked 103rd in Forbes annual listing of the largest privately-held companies in the U.S, with sales of $3.86 billion.

FINANCING. Michaels is looking to extend a $1 billion portion of its $2.3 billion term loan by three years and is offering to increase the interest it pays investors, according to Leveraged Finance News.

LAWSUIT. A clerk at a Hobby Lobby in Rochester, MN hurt her ankle and ended up in a wheelchair. Her leg did not heal, so she remained in the wheelchair. But HL has a policy that clerks must be able to carry 40 pounds up a ladder. Eventually she was fired and filed a complaint with the U.S. Equal Employment Opportunity Commission, which filed a lawsuit against Hobby Lobby last September, tv station KTTC reported. The court sided with the clerk, who will receive $35,000 in a trust account for her medical expenses. HL will also clarify its policy about its accommodating employees who are temporarily impaired. HL offered her a job, but she says her health is worse and she can no longer work.

STOCKS. A.C. Moore: $4.78, down $0.49 ... Hancock: $1.29, down $0.03 ... Jo-Ann: $26.62, down $3.73 ... Wal-Mart: $49.68, down $1.54 ... Dow Jones: 9712.73, down 3.0%. (Note: All changes in price are since 10/16 and are exclusive of dividends.)

CONSUMERS. Still debating whether or not to participate in the CHA consumer show in Anaheim? CHA conducted a survey of attendees at the Orlando consumer event, and the results are online at www.craftandhobby.org/promotions.html.

TV. KS Inc. Productions has created new seasons of how-to series for PBS stations. The 5th series of Quilting Arts is hosted by Pokey Bolton and is sponsored in part by Interweave, Bernina, Cedar Canyon Textiles, Sulky of America, eQuilter.com, J.T. Trading, Simplicity Creative Group, Rit Dye, Rowenta, The Electric Quilt Co., The Warm Co., Pellon, and Kaleidoscope Collections. It uplinks to stations Dec. 27. ... The 7th series of Bake Decorate Celebrate! uplinks for PBS stations Dec. 20. The series is hosted by Nancy Siler, Melanie Glasscock, and Beth Madland and sponsored in part by KraftMaid and KitchenAid.

AWARDS. Lion Brand's blog, http://blog.lionbrand.com, won PR News’ annual Platinum PR Award for "The Lion Brand Notebook." Lion Brand tied for the award with Southwest Airlines and won over other entries such as GE Corporate, Holland America Line, and H&R Block. ... The company also won the Forrester "Groundswell Award" in the "Talking" category for its use of podcasts and blogs. Lion Brand competed against the U.S. government, Obama Town Hall, Delta Airlines, HBO, Aflac, and Bank of America.

CPSIA. Still confused about the Consumer Product Safety Improvement Act. Here's a Q.&A. from the CPSC: www.cpsc.gov/about/cpsia/leadpolicy.pdf.

SHOWS. Some Southern California retailers are apparently unhappy CHA will have a consumer show in Anaheim, Jan. 22-23, so close to a Scrapbook Expo show in Costa Mesa.

FTC. In the previous issue, CLN reported on the confusion created by the Federal Trade Commission's new guidelines regarding bloggers. CHA had Michelle Cohen, a partner with Thompson Hine, and The Small Business Success Index, to try to clarify the rules. Michele, a Certified Information Privacy Professional, designated by the Int. Assn. of Privacy Professionals, wrote an article that can be found HERE.

WEB. Plaid launched a new community section on its website. Among the features: a) A "Community Gallery" allows artists to post their own work created with Plaid products and include a statement about their inspiration for projects; b) Art will be pulled periodically from the Gallery to showcase as a "Hot Project"; c) The "Featured Artist" column gives artists space to post photos, talk about themselves and their works, and link to personal blogs and websites; d) "Fresh and Fun" features unique websites, news from friends and Plaid, etc. Visit www.plaidonline.com/craftingcommunity.aspx.

PEOPLE. Dave O'Neil is Sr. Advisor for ad sales for DRG, publisher of Creative Knitting, Quilter's World, CardMaker, Crochet!, and Crochet World, among others; and an extensive Internet presence. Dave is the former CEO/VP-Group Publisher for CK Media.

HOBBIES. The Hobby Manufacturers Assn. will have a pavilion for U.S. member vendors at the 2010 Nuremberg Toy Fair Feb. 4-9. For info, call 973-293-9088 or visit www.hmahobby.org.

TNNA. The attendee registration brochure for the 2010 Long Beach show is available for download HERE. Each attendee pre-registered for two classes receives one additional class free (up to $50 value). Not available after Dec. 17, 2009 or on-site. The class listing and teacher bios are HERE. Questions? Call 800-889-8662.

To see the latest listings by the only personnel recruitment firm specializing in our industry, click HERE.

Ralph was afraid his wife Alice wasn't hearing as well as she used to, and he thought she might need a hearing aid. He called the family doctor to discuss the problem.

The doctor told him there is a simple test the husband could perform: "Stand about 40 feet away and say something in a normal conversational speaking tone and see if she hears you," the doctor advised. "If not, go to 30 feet, then 20 feet, and so on until you get a response."

That evening Alice is in the kitchen cooking dinner, and he was in the den. He says to himself, "I'm about 40 feet away, let's see what happens." Then in a normal tone he asks, "Honey, what's for dinner?" No response.

So Ralph moves closer to the kitchen, about 30 feet from Alice and repeats,

"Honey, what's for dinner?" Still no response. Next he moves into the dining room where he is

about 20 feet from his wife and asks, "Honey, what's for dinner?" Again no response.

So, he walks up to the kitchen door, about 10 feet away. "Honey, what's for dinner?"

Again there is no response. So he walks right up behind her. "Honey, what's for dinner?"

"Ralph! For the FIFTH damn time, it's CHICKEN!" 

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