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Challenges, problems, and triumphs -- from a manufacturer's perspective.

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Advice on Exporting to the U.K and Europe

An interview with the former CEO of HobbyCraft.

Staff Report (February 20, 2012)

(Note: For two-plus decades, Chris Crombie has been on the receiving end of U.S. vendors' efforts to sell their products in the U.K. and Europe. He knows from practical experience what works and what doesn't.)

CLN: What is your background in the craft industry?

CROMBIE: I have been working in the UK craft industry for over 20 years. In 1995 I was part of the management team that created the retail chain, HobbyCraft. Today it is still the only dedicated art and craft superstore group in Britain. Prior to becoming CEO of that business, I spent eight years as Buying Director, so product and sourcing are my key specialties. I left HobbyCraft last year and I'm now consulting with a variety of businesses looking to expand in the craft market.

CLN: What is the state of the euro and the pound? Are exports from the U.S. to Great Britain and Europe more or less expensive?

CROMBIE: Like the dollar, the pound is a safe haven currency. Since the financial turmoil began in 2008, the exchange rate has been stable and trading in a relatively narrow range of between £1=$1.50 to $1.60. This makes trading in the UK predictable and from a UK wholesaler or retailer perspective, I'd say that U.S. products are competitively priced at this exchange rate level. The euro is, of course, less predictable Ė since 2008 the currency range has been anything from 1euro=$1.25 to $1.50. Currently trading at around $1.30, it makes buying from the U.S. an attractive option at the moment.

CLN: What is the state of the economy in Great Britain and also in Europe? If Greece defaults on its debt, will that drag Europe into a recession?

CROMBIE: Stagnant is probably the best description here. The U.K. saw weak retail sales in the all-important fourth quarter last year, and despite a small boost from post-Christmas customer traffic, retail sales remain flat. Economic sentiment in the U.K. is that 2012 will be a challenging year with minimal growth, but should the euro fail, this growth may become negative. The general view on Greece is that the financial markets have already priced in the scenario of them leaving, defaulting or leaving the euro, so I believe you'd have to see a total failing of the euro to really upset the economies of the euro zone.

CLN: Are you seeing interest in crafts from retailers who aren't traditionally "craft" retailers?

CROMBIE: The unfettered growth of e-commerce has affected all retail markets. Gross sales of  brick-and-mortar stores continue to decline as more sales go online. So all retailers looking at adjacent product categories to add to their assortments in order to bolster same-store sales. In the craft sector in the U.K., we have recently seen grocery, stationery, toy, gift, and variety retailers all adding crafts to their stores. As our industry is still growing, I expect this trend to continue. It's not easy to downsize a store portfolio in the U.K. because property leases typically last for 15-20 years and very few retailers want more space.

CLN: What do you see as the biggest roadblocks stopping vendors from more actively pursuing the international market?

CROMBIE: Lack of knowledge about the target market is definitely the main roadblock. All too often the question of "where do we start?" is answered by simply appointing an exclusive distributor and leaving them to it. This rarely translates into a successful outcome for either party. Dealing with Europe directly needn't be difficult, but it does require engaging with experienced locals on the ground in the target country, locals who know the market.

CLN: What considerations should a U.S. vendor make when dealing in an export market?

CROMBIE: Product design has to be the most critical factor. Consumer tastes are very different in Europe, and so it's vital, especially with fashion-led product, to understand what will appeal to the end-user. Remember, too, that the U.S. consumer is more "craft literate" than their European counterpart, so making sure that packaging explains the product and what to do with it is important. Think too about how the retailer will merchandise the item and what point of sale aids that will boost sales. Law is another key area to consider, especially in the area of product packaging and safety. The "CE mark" is the European safety standard for toy and electric items and, like in the US, the law is becoming more stringent at the moment.

CLN: What's the biggest mistake vendors make when they try to sell to the U.K.?

CROMBIE: Over the years I've seen so many U.S. vendors assume that just because their brand is well known in the U.S. that their product will automatically sell in Europe. You can't just "ship and forget"; you need to work closely with your customers to establish your brand and demand for you products. I would recommend investing in P.R. and trade and consumer advertising to create demand. It's also vital to exhibit at key trade shows, too. Another assumption to avoid is that a single European sales operation can successfully sell to the whole of Europe. I've seen at least two major U.S. vendors fail by making this error; treat each country as its own export market.

CLN: What craft categories are hot in the U.K?.

CROMBIE: Paper crafting continues to be the engine-room of the industry. The key activity, however, is making greeting cards. Scrapbooking is only a minor category in our market, although of course memory book components are used widely for card making. Fine art and needle craft are good, stable categories in the U.K., with needlecraft in particular being a resilient category, more so than in the U.S.. Knitting and jewelry have both seen good growth trajectories in the last few years, although they are relatively modest in gross turnover terms. Finally, in the last eighteen months we've also seen home baking really taking off, lead by the popularity of cup cakes.

CLN: What outlook do you see for the UK craft market?

CROMBIE: The UK craft industry has grown enormously over the past decade and continues to do so. Research has estimated the market to be worth about $3bn, so itís definitely a market worth targeting. However, in relative terms the market is still in its infancy. The majority of UK consumers still donít have access to a craft superstore, so customers are still discovering crafts for the very first time. This is great news for the industry which has much growth ahead of it.

(Note: Chris is also advising the sponsors of Autumn Fair International, a huge U.K. trade show Sept. 2-5 in Birmingham that is expanding its craft area. Chris can be contacted at chris@crombie.com and his cell phone is +44-7502-300-300.)

xxx

 

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