Date: December 21, 2009
Vol. XII, No. 24

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TABLE OF CONTENTS

COMMENTARY: CHANGE IS THE NORM 

This is the last issue of the year – and of the decade. Every mid/late December, I wade through the year's issues for a "Big News of the Year" summary, and I'm always startled by the number of changes. Now multiply that by 10.

Here's a sampling of major, important companies in the "Big News of 2000":

Wang's, Ames, Rag Shops, MJDesigns, Singer, and Bob Perlmutter/Pearl Arts & Crafts. Scrapbooking was growing, and inspiring enthusiasts to open stores. Cross stitch was worried because consumers were learning to use these newfangled scanners and posting copyrighted books, projects, and charts on the Internet. Candlemaking was making a resurgence.

To read what the year 2000 was like, click HERE.

The moral? Look around the industry. What it is today ain't what it will be tomorrow.

Business-Wise. The industry is performing better than most retail industries, so why are so many of us unhappy? Mike Hartnett explains.

The N Files. What happened to our information networking within the craft industry?

Kizer & Bender. A computer glitch caused some readers to miss Rich and Georganne's last issue, but it's online now: "It's the Customer's Definition of Service That Counts, Not Yours."

Mike's Blog. Need some Christmas cheer? Here's a collection of humor pieces that appeared in previous Christmas issues, including the most popular humor piece in CLN history. Click HERE 

(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.)

Pretend you're a teacher. The final exam is just about over, and it's time for a grade for 2009. To vote, click on Industry Polls in the right-hand column or click HERE.

Almost one in five retailers, 18.8%, in CLN's unscientific poll said they were "very happy" with the holiday selling season thus far, and an equal number said they were "somewhat" pleased. But almost the same number, 12.5%, were "unhappy" and 31.3% were "somewhat disappointed." The remainder felt the season was going as expected.

The results filtering back to the vendors were equally mixed. An equal percentage, 5.6%, thought their retail customers were very happy as thought they were very unhappy. But 44.4% thought retailers were "somewhat pleased," while only 11.1% were "somewhat disappointed." The remaining third thought retailers were doing as expected.

(Note: This is not necessarily an accurate reflection of industry sales. Whether voters' hopes and expectations were met or not depends in part on their expectations, and most readers voted before the weekend blizzard in the Northeast.)

The latest figures from the U.S. Department of Commerce indicate retail sales rose 1.3% in November, higher than analysts expected, but still in line with the National Retail Federation's research that forecast a 1.0% decrease in holiday sales.

The U.S. Consumer Product Safety Commission will extend a stay of enforcement on testing and certification on toys and other children’s products as it works towards accrediting more testing labs. It also approved a new policy on component part testing.

The stay of enforcement was approved unanimously by CPSC’s commissioners. It remains in effect while the CPSC works to recognize testing labs. Independent, third-party testing and certification will only be required for 90 days after CPSC publishes the laboratory accreditation requirements. To learn more visit HERE. 

Promotional Products Business has an article, "The Consumer Product Safety Improvement Act: Five Steps You Need to Take Before February 2010." It may be a bit dated, given the late-breaking news mentioned above, but it gives a good overview of the Consumer Product Safety Improvement Act and basic advice for manufacturers, distributors, and retailers. Visit HERE.

Two of the leading names in cross stitch have joined forces. DMC 's acquisition of the Craft & Fabric division of Charles Craft should be completed by Jan. 31. Charles Craft fabric will continue to be manufactured in the same mill in the U.S.

Joe McCabe, President/CEO of DMC North America said, "Charles Craft became the leading manufacturer of needlework fabrics and ready-to-stitch products as a result of the company's commitment to quality and innovation. This is the same philosophy that drove DMC to become the leading embroidery floss manufacturer in the world.

DMC Marketing VP Steve Mancuso added, "There could not be greater synergies between two product lines. All of our current marketing efforts to support DMC embroidery floss also support the needlework fabric used with embroidery floss."

Beadalon, the manufacturer of bead stringing wire and jewelry-making products, acquired Artistic Wire, supplier of permanently colored copper wire and tools, for an undisclosed sum.

"The timing of this transaction could not be better. Metal-smithing and wire wrapping are among the fastest growing trends in the fashion craft market right now," said Michael Shields, Beadalon's VP of Sales and Marketing. "This acquisition gives Beadalon and our customers immediate access to the very products that consumers are craving. In addition, we will introduce over 225 new products in January, many of which are for wire working, and this combination will keep our brand in front of the market. Plus, Artistic Wire has a strong presence in scrapbooking and the paper craft segments, which helps to diversify our business."

For info visit www.beadalon.com and www.artisticwire.com, or call 866- 423-2325.

The British media is reporting that the chain's management is believed to be exploring a buy-out from the firm's family owners. CEO Chris Crombie is believed to be exploring the buy-out option from the founders, the Haskins family.

With 39 stores, Hobbycraft is the country's largest craft chain – and a successful one at that. The media reported the company's sales through Feb. 22 rose 11% to £68.7million and profits were up 67%. Same-store sales have risen 9%.

Toy News reported, "People familiar with the matter said the management has decided to explore buy-out options to find an investor that would be able to help the group quadruple the amount of stores it has. Hobbycraft declined to comment."

(Note: We have since learned from Chris that Hobbycraft has 45 stores, not 39.)

The year began with reports that the 2008 Christmas selling season was tough, but our industry fared better than most, thanks to countless media reports that cash-strapped consumers were making gifts, staying home more, and reverting to basic activities. That trend remained fairly constant throughout the year.

Sales. CHA's research indicated total industry sales fell $3 billion to approximately $27 billion. A major cause appeared to be the economy and less spending by hardcore scrappers, knitters, painters, etc., who were using their stash rather than buying new products. Winners of the year: basic crafts, kids crafts, wearable art/jewelry-making. .... Losers: seasonal items and custom framing.

Comings & Goings. Creditors TowerBrook Capital Partners and Deutsche Bank Trust Co. Americas became the new majority owners of Wilton Holdings, the parent company of Wilton, E.K. Success, Dimensions, K & Co., and other divisions. Previously creditors had tried to pressure Wilton into bankruptcy. ... Creative Memories emerged from bankruptcy and Ritz Camera declared bankruptcy. ... Simple Scrapbooks and Memory Makers died. ... Xyron closed its direct sales company, I Remember When.

Independents. Sierra Pacific Crafts continued to grow with the addition of Merry Maxim and six stores recently purchased by The Strang-Thatcher Corp. (dba Ben Franklin Crafts) in Richmond, VA. The stores had been sold to Pepe Piperno, the veteran head of Sbar's. ... Many independents suffered cash flow problems.

Chains. Jo-Ann had a good year; A.C. Moore did not. ... Hancock continued to make strides after emerging from bankruptcy. ... Wal-Mart continued to phase out fabric and merge scrapbooking and party goods into a Celebrations department. As usual, there were numerous rumors about the company scaling back its craft inventory.

Michaels. John Menzer, formerly of Wal-Mart and the now defunct corporate Ben Franklin, became CEO. Michaels improved its sales and profits, increased its direct importing, was the subject of a patent infringement lawsuit brought by EK Success, opened a store in Manhattan, and was listed by Moody’s Investors Service as one of 283 companies that may have a high risk of default on their debt. Later Michaels amended its credit facility so it can issue secured or unsecured debt to refinance its current senior secured debt.

Vendors. CPSIA. ... Problems with insurance companies (receivables, product liability) and lenders ... Seeing their major customers increase their direct importing. It was a long year.

Mergers. The pace of acquisitions has declined dramatically since the economy went sour in the fall of 2008. Colorbök acquired Heidi Grace Designs and Cloud 9 Designs from Fiskars. ... CK Media (Creating Keepsakes, etc.) was sold to New Track Media. ... Caron Int. reached a product distribution arrangement with Clearsnap Holding. ... Aldik employees Mike Stadlberger and Zury Segal acquired the name from the company's creditors and formed Fifth Element Design, doing business as Aldik. ... F. A. Edmunds acquired Connexxions. ... Colonial Needle acquired Lee's Needle Art. ... American Crafts acquired Pebbles ... Tinkering Ink was acquired by Creativity (Westrim, DMD, Crop-in-Style, Blue Moon Beads, Autumn Leaves) ... Chartpak has exclusive North American distribution rights to the premium brands of Schmincke. ... Roxanne Int. contracted with Colonial Needle to run its daily operations

Highlight. During the depth of the recession Hobby Lobby increased the minimum wage of full-time hourly employees to $10/hour, 52% higher than the national minimum wage of $6.55. The increase and other raises for full-time hourly employees earning up to $13/hour raised the pay of 6,900+ employees.

Government. In addition to the Consumer Product Safety Improvement Act causing problems, the Federal Trade Commission strengthened the rules regarding testimonials and endorsements, which could also cause problems for vendors and bloggers.

Trade Shows. CHA, TNNA, and NAMTA shows saw a decline in attendance by buyers and exhibitors, thanks to the economy, but most attendees felt the shows met their probably lower expectations. CHA moved the summer show to Orlando and launched a successful consumer show. Later CHA announced the summer show would return to Rosemont, with a consumer show. Rumors spread the winter show would be held, at least once, in Los Angeles.

Rest in Peace. Once again the industry lost a number of old friends: Moe Gherman, publisher of CNA. ... Kris Stott of Norden Crafts. ... Harold Gager, who opened one of the first craft stores, Gager's Handicraft, in Minneapolis in 1948. ... Bob Fisher, a long-time industry veteran in art materials. ... Harold Carstens, one of the early leaders of the fledgling HIA, a precursor to the CHA. He served as President of the HIA board in 1970-71. ... Jean H. Barr, CEO of JHB. ... Ron Van Winkle of Imagine That! Scrapbooks & Gifts. ... John Ruiz, a long-time art materials veteran.

This is the last CLN issue of the decade, so we asked a number of industry veterans – retailers, vendors, designers, service suppliers, and others – what they thought were the most important milestones and trends in this first decade of the 21st century. (The answers have been compiled with our own thoughts.) These are not necessarily in order of importance.

1. According to CHA research, the industry grew to about $30 billion, but has lost some ground recently. The decline can be blamed on the recession – and the fact that there are fewer stores carrying our industry's products.

2. The eventual success of e-commerce. (Almost all of the first efforts failed.)

3. Mergers, acquisitions, and the influx of private equity into the industry. (Primedia, Michaels, EK Success, Wilton, etc.) The result? Fewer but larger companies and the new owners trying to squeeze out more profit to repay debt.

4. The rise and then the consolidation of scrapbooking, including the decline in the number of independent retailers and the resulting effect on distributors and vendors. The trend helped spur interest and sales in cardmaking, stamping, altered art, collage, and decoupage.

5. The merger of ACCI and HIA into CHA and the deaths of the Home Sewing Assn. and the Society of Creative Designers.

6. The continuation of the trend to import goods, by retailers and manufacturers alike. The chains' increased reliance on direct importing is cutting out some vendors who have supported the chains for 20 years or more. Loyalty doesn't seem to be part of the formula anymore, if it ever was.

7. The rise of the professional manager, as company founders and entrepreneurs retired, died, or sold, and veteran buyers were succeeded by more numbers-oriented buyers.

8. The gradual decline of decorative painting and counted cross stitch, and the resurgence of knitting/crochet, basic crafts, wearable art, and kids crafts. Jewelry continued its decades-long, roller-coaster tradition of being up, then down, then up, then....

9. Technology, I: UPC codes, auto-replenishment, check-out scanners, EDI, and websites.

10. Technology, II: Facebook, Linkedin, MySpace, YouTube, Twitter, and email, and Etsy.

11. Technology, III: Computerized sewing machines, electronic die cutters, digital photography, digital scrapbooking, etc.

12. Advertising in consumer magazines has declined as budget-tight vendors reduced their ad budgets and diverted some marketing dollars to websites, email, and the social media. The reduction in the number of independent retailers and vendors' lower margins caused the death of the industry's craft trade magazines, Profitable Craft Merchandising, CNA, and Scrapbook Retailer. Besides CHA's Portfolio, CLN is the only craft trade publication.

13. Far more favorable national media attention paid to crafts, and many more celebrities involved in the industry.

14. The "green" movement: The effect of the consumer's growing environmental awareness on companies and their products.

15. Impact of the Consumer Product Safety Improvement Act on new product development. It takes longer and is more expensive.

16. Margins have shrunk for vendors as the consumer continues to demand a "bargain." It's getting difficult to find a product that's not on sale and "Manufacturer's Suggested Retail Price" has become an antiquated term.

17. The decline of the independent craft store (sometimes because the owners retired and closed their stores) and the decline's impact on wholesalers.

18. The emergence of the indie crafter. She's not the industry's typical crafter.

19. The resurgence of consumer shows.

20. Wal Mart changing direction a few times and now eliminating fabric and splitting scrapbooking and party goods into a "Celebrations" department. How much of the decline in total industries sales could be attributed to Wal-Mart and others making similar moves?

(Note: Agree with the list? Disagree? Did CLN miss anything? Send your thoughts – on or off the record – to mike@clnonline.com.)

(Note: Here are some additional suggestions that didn't make the trend list above.)

1. "How about dumb-ass decisions by inept managers that resulted in driving a perfectly good company into the ground, causing dozens of people to lose their jobs?" – Publisher

2. "For most of the decade much of the retail growth was from our industry taking market share from other retail segments; now that's reversed with other retail segments taking market share from craft retailers or other stores that had a craft department." (Comment: One example is seasonal goods. The Lowe's hardware chain now has almost as big a Christmas decoration inventory as our chain stores.) – Consultant

3. "The dependence of the industry on China is dangerous, as China switches to more high tech industry, the value of the yen versus the dollar, and the fact that most U.S. manufacturers have gotten rid of their equipment." – Consultant

4. "The sacrifice of tomorrow’s innovation for today’s short-term profits by management who are foreign to this business and what makes our consumers tick – or worse, by management who are seasoned at destroying our types of businesses by knocking off vendors. Taking a seemingly-low risk on creativity is, in reality, high-risk because of the danger of losing consumers to more creative retail/e-tail choices in the future." – Manufacturer

5. "The contrast between the upbeat enthusiasm of the craft industry in 1999 compared to 2009 -- basically because of the economy. ... The prevalence of mail order offers for free patterns, video tapes, education materials, and samples in 1999, which leads to the belief in the importance of education in 1999 compared to the dismissive attitude (or lack of understanding) about it now. ... The demise of craft bazaars and local craft shows, although there are still some regional shows, and with the Indie movement it may grow again." – Service Provider

The lead in an article in last Thursday's WSJ: "If you're having trouble figuring out what to buy for someone on your gift list, perhaps you shouldn't buy them anything. Instead, consider making something yourself."

The reporter decided to do just that and visited four craft stores in search of supplies and assistance "in an attempt to create a personalized mosaic-tiling present." The end result? "... a couple of projects we deemed gift-worthy – and a couple of others we're keeping under wraps."

The visits yielded some interesting results that defy stereotypes. The best customer service was at the new Michaels store in Manhattan. The worst was Lee's Art Shop, an independent store in New York City, although the manager said the cause was temporary staffers hired for the season.

Each store – the others were an A.C. Moore on Long Island and a Hobby Lobby in a Chicago suburb – had pluses and minuses in terms of inventory selection, helpful service, and the eventual success of the project. No store offered classes in mosaics. To read the article, click HERE.

Vendors, are you unveiling new products at the TNNA and/or CHA shows next month? If so, tell CLN. The Jan. 4 issue is prior to both shows, and the Jan. 18 issue is online before the CHA show. Send CLN a brief description, the show(s) attending, booth numbers – and a link to your website so savvy buyers can check the products while they're making their "booths to visit" list. Send appropriate material to mike@clnonline.com. Any questions, email or call 309-925-5593.

(Note: The previous issue of CLN included a commentary on the possible long-term negative consequences of chains importing directly and cutting out vendors. The following is from a long-time supplier to the chains.)

Thanks for writing this! I hope the chains read it, but then again most of these bigwigs could care less about us. They just want to focus on their next bonus check, while many on my side wonder how long we can keep open our doors!

I dream of changing my company to one that just sells directly to the consumer and offers "exclusives" that can be only found on our website – although that's not great for the small retail accounts who are caught in the middle of this. However, it may be the only chance we may have to fight these chains besides opening our own stores.

Why roll out new lines when they will just knock you off after the first order? All of us will be in the same boat. Moving forward, I can see companies like ours not even doing trade shows but doing consumer shows instead.

We all will need to start to change big time the way we do business. – Manufacturer

Last week the New York Times reported that Facebook and Twitter had been hacked. The culprits were sending spam and viruses to the "friends" of a hacked account without the victim's knowledge. Two days later Twitter's home page was defaced and the site was knocked offline by a group calling itself the Iranian Cyber Army, Information Week reported.

The Times also revealed that a person's info remains in the Facebook computers even after de-registering. CLN knows of at least two instances where industry people had their Facebook info hacked and fraudulent emails were sent to their "friends" without their knowledge.

1. For those of you congratulating yourself for having survived the last decade, consider this: DMC is 260+ years old.

2. I have de-listed, or de-registered from Facebook because of the hacking problem. So if you ask me to be your "friend," and I don't respond, that's why. And if you receive an email from me, but it's via Facebook, don't answer it or click on a link, 'cause it ain't me.

3. Recently CLN profiled the jewelry-making cooperative at Peoria Friendship House, where poor Latino women earn a little money by making "Matthew 25" charm bracelets ("You fed me when I was hungry," etc.). The Peoria Journal Star profiled the coop in yesterday's paper. To read the article, visit HERE.

PEOPLE. Former Jo-Ann CEO Alan Rosskamm was hired to head Breakthrough Charter Schools, a new nonprofit management company being formed by three Cleveland charter schools, the Cleveland Plain Dealer reported. The publicly funded, privately managed charters receive state aid, but no local taxes, forcing them to rely heavily on benefactors. Rosskamm will concentrate on the schools' business side, finding ways for them to collaborate and save money.

"We're doing a great job for kids," Rosskamm told the Plain Dealer. "But we're struggling. We're struggling to pay our teachers, we're struggling to make ends meet." To read more, click HERE 

KIDS. A.C. Moore is donating $60,000+ and art/craft supplies to the more than 100 Boys & Girls Club chapters in the towns served by the company. It's part of the ACMR's Crafting a Better World™ program. As part of the program, stores have hosted 90+ crafting parties for local Clubs, collecting crafting supplies, and accepting $1 donations from customers at checkout. To see more, click HERE.

CRIME. Shoplifting losses rose $1 billion to $12.9 billion last year, according to National Retail Federation figures. According to the NRF, consumer theft accounts for about half the total, and employees the other half. ... Two Augusta, GA men were arrested and charged with a series of robberies, including the attempted robberies of Jo-Ann and Hancock stores, the Augusta Chronicle reported.

THE JOYS OF RETAILING. An electrical fire in a sign above the Jo-Ann store in Hagerstown, MD caused an evacuation of the shopping center and closed the store for the day. The store opened the next day, the Herald Mail reported.

GIFT CARDS. Retailers are putting gift cards on sale this season, either by cutting the price or offering credit on future purchases. "It's a direct result of [retailers] listening to their customers who say, 'Hey, I really can't afford to give $50 out of my pocket this year,' " National Retail Federation spokeswoman Kathy Grannis told the Raleigh, NC News & Observer.

THE MODERN WORLD. A woman eating lunch in her car outside a Hobby Lobby in Alexandria, VA was accosted by a potential robber with a gun. She escaped and the culprit was later arrested after two other attempted robberies. The culprit was 14 years old.

BEADS. The Cleveland Plain Dealer interviewed independent bead retailer Kieu Pham Gray, owner of two Bead Q retail stores and TheUrbanBeader.com. Gray offers sound advice on being the boss and entrepreneurship. To read the interview, click HERE. ... Interesting article on the history of beading and a profile of The Bead Box, a retail shop in Tecumseh, MI. To read the article, click HERE.

STOCKS. A.C. Moore: $2.83, down $0.10 ... Hancock: $3.27, up $1.54 ... Jo-Ann: $33.35, up $0.86 ... Wal-Mart: $52.85, down $1.39 ... Dow Jones: 10,328.89, down 0.6%. (Note: All changes in price are since 12/18 and are exclusive of dividends.)

DEADLINE. Tomorrow is the deadline for the On Site Floor Plan for the CHA winter show. Any confirmed exhibitor interested in having the company name, logo, and booth number name highlighted with a huge call out should call Anthony Licata at 800.822.0494 or email alicata@craftandhobby.org; 7,000+ floor plans will be distributed.

HEALTH. A new survey released today from Misericordia University and Braun Research finds that two in five Americans plan to spend less this holiday season as a result of rising health care costs.

PEOPLE. Sandylion named Bruce MacDougall President/CEO. Most recently he had been President/CEO of Elmer's Products. He'd also held positions with Coleman Outdoor. ... Mrs. Grossman's named Scott Leoncini as VP of Sales and Marketing. He is the former VP of Sales & Marketing for Calvin Klein Home, Elsa L., and Starlight/Illume. ... Stampendous named Ilene Albert-Nelson, formerly of Ultra-PRO (7 Gypsies and Chatterbox) as Global Sales and Marketing Manager, and Pegi Smith, formerly of Delta, as National Sales Manager.

TNNA SHOW. Organizers of the fashion show need volunteers for an hour or more to help receive and tag/document garments, on Friday, 10:00 am–4:00 pm, and volunteers to assist with the pick up of garments on Saturday, 9:00–9:30 am. To volunteer, email JoAnne Turcotte at design@plymouthyarn.com.

ACQUISITIONS. Noritsu America completed the acquisition of Lucidiom.

DESIGNERS. Heidi Swapp is working with Tattered Angels (the manufacturer of the Glimmer Mist) to introduce new products, Scrapbook Update reported. Her first products for Tattered Angels are four colors of Glimmer Mist to be introduced at the CHA winter show.

QUILTING. Joe Truskot is President/CEO of the Monterey, CA Symphony and is also an avid, accomplished quilter, reports the Monterey Herald. To read the article, click HERE.

YARN. Lion Brand Yarn was the subject of a six-page article in the Jan. issue of Martha Stewart Living. In addition to photos and projects, the article highlights Lion's Studio, a retail store in Manhattan, describing it as a "global destination for yarn crafters."

SPELLBINDERS. Filed a lawsuit in US District Court for Arizona alleging patent violations by several Quickutz products, Scrapbook Update reported. The suit alleges that Quickutz’s cookie-cutter dies, nesting-shapes dies, and the circle-cutting dies sold with the Letter Press Combo Kit are in violation of the patent which is owned by Caron, and Spellbinders has the exclusive license to manufacture products covered by it. ... Launched its "National Design Team Search." The deadline to apply is Jan. 15. For info, check the blog at www.spellbinderspaperarts.com.

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.

1. Why is the third hand on the watch called the second hand?
2. If a word is misspelled in the dictionary, how would we ever know?
3. Why do we sing "Take me out to the ball game" when we are already there?
4. Why is it called "after dark" when it really is "after light"?
5. Why is "phonics" not spelled the way it sounds?
6. If work is so terrific, why do they have to pay you to do it?
7. How come abbreviated is such a long word?
8. Why do we wash bath towels? Aren't we clean when we use them?
9. Why doesn't glue stick to the inside of the bottle?
10. Christmas: When else do you sit in front of a dead tree and eat candy out of your socks? 

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