Creative Leisure News - Business-Wise

Mike's often irreverent, thought-provoking analysis of the industry.

The Big News Stories of 2004

Some good, some bad, all of them interesting.

by Mike Hartnett (December 20, 2004)

1. Scrapbooking. It dominated the news once again this year (see below).

2. Associations. The industry's trade groups worked together as they never have before. After more than a year of meetings and lawyer wrangling, the Hobby Industry Assn. and the Assn. of Crafts & Creative Industries merged into the Craft & Hobby Assn. The two shows now are the CHA Summer and Winter shows.

The National NeedleArts Association and the International Needlework Retailers Guild co-sponsored a joint show in Columbus in June and will again next June. Meanwhile, the Int. Model Hobby Manufacturers Assn., the Model Railroad Industry Assn., and the Radio Control Hobby Trade Assn., formed when the hobby companies left HIA, are talking merger.

The exception is the sewing industry, which has increased its shows (and therefore vendor and buyer confusion) to four for 2005.

3. Yarn. It continues to be the hottest category in the industry, thanks to a) an incredible media blitz; a movie star telling a national magazine that she (or even he) loves to knit has become so commonplace it's barely "news" anymore; b) attractive new yarns; and c) more fashionable, youthful projects. The result: a new, younger generation has discovered knitting which has created the best kind of problem to have: keeping up with demand.

4. Home party plans. While the new plans have not yet affected the industry the way Creative Memories has influenced scrapbooking, there is hope that they will attract a new wave of consumers to crafting and painting. A. The Creative Living Network (www.mycln.com), supported by Duncan. B. In Home Art supported by Dewberry Designs and Plaid.(www.in-homeart.com). C. The Purple Tree (www.purpletree.com) � see report in the 12/20 issue. D. Others include The Longaberger Co. (www.longaberger.com) and Big Yellow Box (www.bigyellowbox.com).

5. Friends Lost. Once again we've lost too many fine people. Kurt Adler, Pat Catan, Edna Clapper, Ron Gelb, Bob Herman, Catherine Kay, Michelle Kershaw, Marvin Kulkin, Oscar Kummerlowe, Bob Misterka, Robbie Rapoport, Gerry Rogers, Thelma Sbar, Edie Shugarts, Nancy Valliere, Bob Watkins, Thea Workman, and the wonderful Katherine Yoss,

6. Industry Stocks. A.C. Moore, Jo-Ann's, and Michaels (whose stock split) are showing nice increases in their stock prices for the year. Hancock's stock has fallen, Wal-Mart is basically flat, and Rag Shops' stock is no longer traded since the company was sold. There will be a complete report in the next issue of CLN, when the year is completed.

7. Mergers & Acquisitions. Chartpak acquired Frances Meyer ... Dimensions bought Inkadinkado ... Interweave Press acquired Fiberarts from Sterling Press ... Janlynn bought Sanook Paper and Stamps Happen ... Loew-Cornell was acquired by Jarden Corp. ... AccuCut purchased DayCo ... Peterson Partners acquired the last 20% of the shares of Making Memories. It had acquired the first 80% in 2003 ... Art Store was sold to Dick Blick ... Magic Scraps joined Advantus' Craft and Hobby Division ... Wichelt Imports acquired Gay Bowles Sales ... Autumn Leaves bought Foofala ... Pumpkin Masters became a division of Rauch Industries ... Party America bought Party Concepts ... Paper Adventures was sold to ANW/Crestwood Inc., owner of The Paper Company.

8. Economy. Oil prices rose about 40% this year, cutting into consumers disposable income. Import prices and interest rates are edging up, and the weak dollar, which has lost a third of its value vs. the Euro this year, has helped U.S. exports and drastically hurt imports from Europe.

9. Imports. As is true in most every industry, we're seeing more and more of our products being produced in the Orient, particularly China. The only things that may slow this trend is the overloaded infrastructure at U.S. ports and rail lines, and if China allows its currency to float.

9. The decline of "crafts" and other categories. While yarn, beads, and memory remain big sellers, a number categories that helped define a "craft" store have had less than stellar years: basics, needlework, decorative painting, florals, etc. The bright spot has been Plaid's Donna Dewberry's One-Stroke. One industry observer thought the loss of tv shows such as Aleene's Creative Living and Martha Stewart and Crafts magazine changing to Paper Crafts has hurt a number of categories. Another factor may be companies in these traditional categories devoting at least some of their creative energies to scrapbooking rather than concentrating on their core products.

10. Wal-Mart. The juggernaut continues to grow, but 2004 has not been easy: a multitude of lawsuits, including the largest sex discrimination case in history; a disappointing Christmas thus far; numerous communities fighting against opening new Wal-Marts, particularly supercenters; being blamed for so much out-sourcing to the Orient. Although the business media once again named Wal-Mart the most admired company in the U.S., the result of all of the publicity has been a relatively flat stock price.

11. Miscellaneous. Martha went to jail, and made millions when Sears and Kmart announced their merger ... Frank's Nursery, once the Michaels of the industry, declared bankruptcy again and died ... Rag Shops was sold to an investment company ... Garden Ridge and KB Toys filed for bankruptcy ... Toys R Us is considering selling its toy stores.

PT II: SCRAPBOOKING

1. The year saw an explosion of retailers selling scrapbook supplies, from drug stores to Linens N Things, Toys R Us, Best Buy, Marshall Field's, Bed Bath and Beyond, Kohl's, Sears, PetSmart, Costco, dollar and close-out chains, and other non-industry stores � and of course additional independent scrapbook stores.

2. A growing number of independents are encountering cash flow problems.

3. The evolution toward cardmaking � a very positive sign to keep scrappers returning to our stores, whether or not they have any photos to scrap.

4. There has been a virtual explosion of vendors, products, trade shows, retailer groups, web sites, and consumer shows. The danger, of course, is that all of the scrapbook pies will be divided into pieces too small for companies of all types to make a profit.

5. The digital camera explosion is the great unknown. Will enough consumers continue to print their photos for scrapbooks? Will the new photo kiosks and online photo services lure customers to the stores that offer them? Or will digital cameras make photography so easy that more consumers will take more photos � and thus need to scrap them.

6. Reacting to complaints from independent retailers, some vendors are selling their products, particularly paper, in smaller amounts � a healthy sign for storeowners.

(Note: To read previous Business-Wise columns, click on the titles in the right-hand column. To comment (on or off the record) on any of the issues mentioned above, email Mike Hartnett at mike@clnonline.com.)

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