Date: June 20, 2005
Vol. IX, No. 12

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TABLE OF CONTENTS

COMMENTARY: A DISCUSSION ON HOT TRENDS 

Most of this issue is devoted to hot trends – key elements they have in common, why they fade, and how (and how not) to evaluate their current status. Scrapbooking and yarn are just the latest trends, and they won't be the last. Your ability to judge the current and future potential of a trend is probably the most essential characteristic for your success.

Have I got it right? What am I missing? Let me know. Call 309-925-5593 or email mike@clnonline.com.

Category Reports. The Wal-Mart news (positive and negative) never stops.

Tech Topics. Simple, sage advice on building your business with an email newsletter, by the industry's savviest web marketing pro, Lynn Carlisle of Carlisle Communications.

"Vinny Da Vendor". Simple, sound advice on how to generate the most publicity from your trade show experience. Kindra Foster shows you how.

Kate's Collage. How to write a press release with an model to use as an example.

Scene & Heard. Highlights from the TNNA/INRG Columbus show and a final wrap-up of the Society of Decorative Painters convention in Tampa.

Note. If you surf to a column and it's an "old" column, click the "Refresh" or "Reload" button of your browser.

So how is the year thus far? A pleasant surprise? Disappointing? Vendors and retailers alike – cast your anonymous vote by clicking on Industry Polls in the right-hand column or click HERE.

The industry is worried about health insurance. A whopping 80% think the United States is in a genuine health care crisis, and 20% think the problem is approaching the crisis level. No one voted that health care was not a crisis.

As a result, 82% support the bill in Congress that would allow members of trade associations to purchase health insurance for themselves and their employees – through trade groups such as CHA, TNNA, and HSA. No one voted against the bill and the rest were unsure.

The one surprising result: 71% of respondents do offer some form of health insurance to employees. almost a fourth, 24%, do not offer insurance, and 5% have stopped offering insurance as an employee benefit. It's a different story for part-time employees. Only 5% offer insurance; 90% do not, and 5% had to stop offering it because of cost.

Meanwhile, as General Motors announced it was cutting its workforce by 25,000 in the next few years, GM execs said employee health insurance added $1,500 to the price of each car. And a recent report on National Public Radio said a family who buys health insurance pays an additional $1,500 to pay for pass-along costs of the uninsured. So if a family buys its own insurance and buys a GM car, that's $3,000 less to spend on leisure time activities such as crafts.

Rose Art Industries was sold to Mega Bloks for $315 million in cash and stock, including approximately $35 million in debt, Playthings reported. Mega Bloks is the second largest toy block company in the world; it has 1,000+ employees and sells in 100+ countries. Its stock, which has fallen 16% in the past year through June 14, according to Bloomberg News, is traded over the counter under the symbol MBLKF.

Rose Art has long been #2 to Binney & Smith in crayon sales and produces a variety of kids' craft products. In recent years it developed an extensive scrapbook line under the Kodak label and a paint-by-numbers line of Thomas Kinkade paintings. The Kodak line is in Toys R Us and other chains not normally considered "craft" stores.

Rose Art was founded in 1923 and owned by Lawrence and Jeffrey Rosen it had sales of $285 million US in the year ended March 31 and recorded an operating profit of $43 million. In addition to becoming major shareholders, Lawrence Rosen, Rose Art’s President/CEO, will be Sr. VP/Chief Marketing Officer and be nominated to Mega Bloks board. Jeffrey Rosen will have the same title, Exec. VP, at Mega Bloks.

One of the keys to long-term success in this industry is the ability to spot emerging trends and product categories, capitalize on them, and then adjust as they level off or decline. What follows is a list of qualities to consider when evaluating a trend, and how to judge the state of a trend.

The industry has seen numerous trends – decoupage, macrame, dollmaking, cross-stitch, plastic canvas, decorative painting, wearable art, scrapbooking, beads (4-5 times), and yarn. They don't all have the same characteristics listed below, but any potential trend needs many of them to be successful.

The lists below are not definitive, but rather are to stimulate thought and discussion. If you agree or disagree with any of the above, or think CLN omitted an important quality, email CLN at mike@clnonline.com. We'll print your comments in our next issue. (Note: these qualities are not listed in order of importance.)

1. A social outlet. Knitting circles, quilting bees, and scrap parties – even jewelry and painting classes – provide a sense of community in this increasingly isolated world. A social component inspires consumers to continue their craft.

2. Heirlooms. A consumer will spend far more time/money on an heirloom such as a quilt or an acid-free scrapbook than she would on a cute knick-knack.

3. $$$. Making something rather than buying a readymade should save money. HGTV is filled with programs showing viewers how to recreate expensive decor by doing "crafty" things themselves. For example, the flood of inexpensive imported clothes and painted items have hurt apparel sewing and decorative painting.

4. Room for improvement. Painters keep painting because they think their next painting will be better. If a crafter completely masters a craft, much of the challenge is gone – often fads do not evolve into trends because of this.

5. It "looks" easy. Consumers know they can glue a photo in a scrapbook, but they may be intimidated when they see complicated album pages, or a highly detailed cross-stitch or painting project. Many people learned as early as grade school that they can't paint, so they never try again, despite the fact that decorative painting techniques allow anyone to paint successfully.

6. It attracts consumers who normally do not craft, paint, knit, etc. An industry sales chart over the past three decades would show a series of sharp increases alternating with a plateau or small decline. The increases are the trends attracting newcomers into our stores.

7. It fits the fashion trends. Bead sales always rise when embellishment is in fashion. Fabric painting began to wane when a plain, spare look became popular.

8. One-of-a-kind vs. a copy. Decorative painters and cross stitchers often pride themselves on how well they copied the original, whereas jewelry-makers and altered-book crafters like it in part because they can create one-of-a-kind items.

9. Stars. Decorative painting and cross stitch are filled with "star" designers whose followers buy everything the stars publish. Because of "stars," some consumers become collectors. Numerous consumers collected all of the Precious Moments charts without necessarily making all of the projects.

10. Health. The repetition involved in knitting and cross stitch provide a zen-like relaxation. A study sponsored by the Home Sewing Assn. indicated sewing could reduce blood pressure. One well known painter told CLN when she started painting she stopped eating so much and lost 100 pounds.

11. It's portable. Knitters can take their projects anywhere.

12. Quick & Easy. Ironing a transfer onto a sweatshirt, for example. If it's not quick and easy, then the result probably better be an heirloom.

13. Margins. There is enough profit to motivate retailers and vendors to continue pushing a category via displays, classes, new product development, teaching programs, and advertising. Plastic canvas declined when price wars cut the margins so drastically that vendors and retailers couldn't make any money – therefore they concentrated on other categories.

14. Satisfaction. What Howard Hoffman said is still true: "The crafter does 10% of the work but gets 100% of the credit." There is no substitute for the I-did-it-myself feeling.

15. Evolution. Cardmaking is an outgrowth of scrapbooking. Other forms of needlework may benefit from the knit/crochet trend. Stencil sales will rise with the home dec trend.

16. Function. Does the completed project serve a helpful purpose? Soap- and candle-making do that, for example. So does sewing curtains and pillows.

17. Ease of entry. If it is relatively inexpensive to bring a product to market (e.g., a line of scrapbook paper) or open a store, consumers see a wider array of projects/designs, thus increasing the chances they will discover something they want to make. More stores means more visibility for the category, too. And more independent stores means more teaching.

18. Appealing designs. Consumers buy our products for what they can create with them. "I do not sell shoes," the Italian manufacturer said. "I sell beautiful feet."

19. Create beauty. Years ago an old pioneer woman was interviewed about her quilts. She described an incredibly harsh life, including the terrible isolation of farming on the desolate U.S. plains. About her quilts, she said, "I quilted as fast as I could to keep my family warm, and as beautiful as I could to keep my heart from breaking."

1. Trends fade. No matter how intense and extensive they may be at the time, they eventually decline. Fashion-oriented categories such as wearable art and jewelrymaking are particularly susceptible.

2. Society changes. Consumers, usually younger ones, go through periods where they want to make unique, one-of-a-kind projects rather than a copy of a chart or a pattern. That affects duplicating categories such as cross stitch and decorative painting and more individualistic categories such as jewelrymaking and scrapbooking.

3. Challenge is gone. Are you as good at a category as you're ever going to be? Then you may feel motivated to move on to something more challenging.

4. The function is gone. How many macrame plant hangers does one house need? When the enthusiast has filled every inch of her home and those of her friends and relatives, what does she do next? Scrapbooking should never decline the way macrame did as long as consumers continue to take billions of photos every year; they have to do something with them.

5. Forget the beginner. To keep the enthusiasts involved, the industry provides more involved, complicated, and challenging projects. But enthusiasts eventually move away, die, or get bored. Meanwhile the image of the category for potential novices appears to be too involved, time-consuming, and challenging.

6. The retail market is diluted. Everyone starts selling the category until the pie is divided into so many pieces that many retailers and vendors no longer find it profitable.

7. Word of mouth. Because the pie isn't large enough for all of the vendors and retailers, some go out of business. Word of the closures spreads. People talk about the category slipping, declining. Vendors and publishers begin hedging their bets, devoting some of their product-development and publishing energies to other categories. The result is fewer new ideas to entice the customer.

8. The missionaries drop away. Every hot trend inspires some enthusiasts to open stores. They are great teachers and give incredible customer service, but because they're more interested in sharing their love of the category with the world, and less interested in markup, margin, and the business elements that make a true merchant successful, most of their stores eventually fail. They take some smaller vendors with them. The result? The consumers see and hear less about the category.

9. Technology. The copier machine drastically hurt sales of cross-stitch charts. The Internet allows for massive copyright violations, which hurt sales of vendors and storeowners alike. E-commerce allows consumers to bypass brick-and-mortar stores. Digital scrapbooking allows consumers to create scrapbooks and share them with friends and relatives around the world – without spending a dime on traditional scrapbook supplies.

10. The demand for new. When it's too strong, the industry is flooded with too many products for the retailers and consumers to absorb. A publisher makes much more profit reprinting a book (or a scrapbook paper) but now the consumer wants a first edition of something new. Meanwhile, the retailer orders a new line, sells half of it, then is pressured to buy another new line.

1. Are new magazines springing up? Or is the amount of advertising in the current magazines declining?

2. Is the trade show space devoted to the category growing or shrinking?

3. Is there an increase in complaining/finger-pointing by the category's retailers and vendors? That's a sign the pie isn't big enough.

4. What is the state of the consumer shows?

5. Are fashion/society trends changing or still supporting the category?

6. Are publishers such as Design Originals and Hot Off the Press publishing books in the category? Their track records indicate DO's Suzanne McNeil and HOTP's Paulette Jarvey are excellent early trend spotters.

7. Are key vendors getting involved? A few small companies can't push the category into the consciousness of the consumer.

1. Word of mouth can be misleading. Companies or stores might brag about increased sales, but that could simply mean they're getting a larger piece of a contracting pie. Vendor or retailer complaints of lost sales could be due to mismanagement, not declining consumer interest.

2. Size of industry studies can be misleading for retailers. Overall growth does not necessarily mean growth in a particular region.

3. When non-industry stores sell the category, like they are today with scrapbooking, it becomes more difficult to determine the overall interest of consumers. Some industry stores may suffer, but that might only indicate that Target, Big Lots, Costco, etc., are siphoning off sales.

Aleene Jackson is one of the true pioneers of the industry, and while she has retired from the industry, her influence continues with her children. Aleene now owns/operates La Toscana Resort, a resort/spa in Desert Hot Springs, CA (www.latoscanaresorts.com). 

Her daughter, Heidi Borchers, will guest regularly on WBOB Radio Talk Show as a craft expert. The show is being readied for syndication and can be heard on the Internet at www.wbob.com. Heidi and her daughter, Starr Hall, have operated A Creative Spark, a brick-and mortar and e-commerce store (www.acreativespark.com) and are working on a tv series, a new adhesive line, a book series, and other products under the A Creative Spark label.

Another daughter, Tiffany Windsor, was the host of the Aleene's Creative Living series on TNN and has launched Creative Mavens – creativity retreats that will be held at Aleene's resort. The site, www.creativemavens.com, will be activated soon. Another daughter, Candace Liccione, is sponsoring women's wellness retreats at the resort.

Aleene's contributions to the industry are far too numerous to be included here. Aleene's Tacky Glue, now produced by Duncan, has been one of the industry's strongest brands for decades. She was demonstrating craft projects to Art Linkletter on his tv series in Los Angeles when L.A. had only a hundred tv sets in the city. Her Aleene's Creative Living was the first wildly successful television series on a cable network and her Craft Caravan (traveling consumer shows), which she organized with another industry pioneer, Hazel Pearson, helped put the industry on the map 40-some years ago.

I am a small scrapbook manufacturer who started my company at my dining room table. I grew and grew, but now I am being squeezed out due to several factors. You are so right on in your observations about the scrapbook industry!

I did very well for several years, but I held onto my niche too long, and by the time I realized it, there was just so much product out there and the local stores were just jumping on to all the new items – you know the song and dance. Since my revenues decreased, it was hard for me to develop the product lines that were necessary to compete.

When I started I was VERY receptive to the advice given to me by the independents. Everyone knew each other back then. Many stores asked me not to sell to chains, at consumer shows, or from my website, and not to sell out/join with larger companies. I even had one store owner tell me that if the chains carried my product then she would not.

When I started losing support/sales from the stores, I started selling to consumers from my site, since the consumer could choose from the entire product line; when I started checking into consumer shows, I noticed it was mostly manufacturers who were selling, and I've noticed many local stores carrying the same products as the chains do!

I have let independents know that I don't sell to chains and I have even created a special program for stores to help educate the consumer and get her to try the product. Nothing.

It's taken me awhile, but I have come to the realization that I can no longer remain profitable and will have to close my business. – Name Withheld

The note above raises all sorts of questions about loyalty and business management. What are the lessons here:

1. Should the vendor have not been so loyal to independents?

2. Should retailers pay less attention to customers – who are always pushing the stores to add the newest/latest – so they can continue to order from their loyal vendors?

3. Should the vendor have poured more profits into new products?

4. What should the vendor do now?

Email your answers – on or off the record – to CLN at mike@clnonline.com.

1. I just returned from Milwaukee where I attended the Bead & Button consumer show. Fifteen thousand avid consumers, 350+ classes, and thousands (millions?) of dollars changing hands. Much more on all this in the next issue of CLN.

2. According to a regulatory filing, Toys R Us Chair/CEO John Eyler will receive $65 million when the sale to Kohlberg Kravis Roberts, Bain Capital Partners, and Vornado Realty Trust goes through, Playthings reported. Since Eyler took over, TRU's stock barely budged and the company continued to lose ground to Wal-Mart to the point where the company had to be sold. Yes, that's $65 million for his efforts. TRU stockholders will vote on the company's acquisition this Thursday, just days after TRU reported it lost $41 million this past quarter.

3. TNNA's campaign, Stitch to WIN Against Breast Cancer, has garnered enormous publicity, including being highlighted on NBC's Starting Over, supported publicly by the office of governor of Nevada, and featured in fund-raising events in Los Angeles and Las Vegas. It's a great cause and is creating an impact similar to the early Knit-Out events in New York sponsored by the Craft Yarn Council of America.

It's also a classic example of why retailers, if they have to choose, should attend trade association events rather than "cash-and-carry" hotel shows – because the profits benefit the industry through programs like this, rather than in the sponsor's pocket.

SHOWS. Pre-registration for the CHA Summer Show July 15-17 is up a whopping 20%, 30 education classes are sold out and most of the 10 show hotels are sold out. Pre-registration continues through this Wednesday and discounts on hotel rooms are in effect through July 1. Visit www.chasummershow.com, call 740-452-4541, or email chasummershow@offinger.com. (Note: To see the exhibitor list, which includes links to the exhibitors' websites, visit www.e-offinger.net/cha/exhlist2005.cfm.)

PAINTING. Holly Winter, 14, won the 2005 16th Congressional District Art Competition with her oil painting, reported the Lancaster (PA) Intelligencer Journal. What makes the story unique is a) Holly started painting when she took an oil painting class at A.C. Moore; b) Holly is home schooled; c) Holly is dyslexic and paints upside down. "(Dyslexia) can affect all things," Holly told the Journal. "It’s easier for me to paint when it’s upside-down."

ACQUISITION, I. Xyron acquired Granite Peak Inc., specifically the Wishblade Personal Media Cutter and all elements of the Wishblade design library. The Wishblade Personal Media Cutter is a cutting tool that, when connected to a computer, allows consumers to type in what they want to cut and, with the click of a mouse, does the cutting work for them. Xyron President Chuck Ensign said, "Going forward, with [Wishblade founders Jen Aamodt and Jane Kober] in key roles, we intend to expand this product platform into an exciting range of digital cutting tools that solve problems and overcome challenges faced by the creative professional as well." To learn more about Wishblade products, visit www.wishblade.com.

ACQUISITION, II. Interweave Press was sold to Aspire Media. Interweave offices remain in Loveland, CO, and founder Ligon stays as Creative Director and Marilyn Murphy as President. Aspire is a new company, led by CEO Clay Hall, designed to acquire consumer enthusiast media businesses with the backing of private investment firms Frontenac Co. and Catalyst Investors. "Our first priority will be to invest in and build on the success of Interweave Press by continuing to grow and expand the business organically, as well as through the acquisition and development of additional media properties," Hall said.

INTERNET. Hancock, Michaels, Jo-Ann's, and Wal-Mart made Internet Retailer's annual Top 400 Retail Web Sites list. Visit www.internetretailer.com/top400/top400list.htm.

CONDOLENCES. Our very best wishes to the family of Betsy Friendmann, a Product Manager for Prym Dritz, who died of cancer recently. Betsy had worked in the industry for more than 30 years. Memorials may be made to the American Cancer Society, 154 Milestone Way, Greenville, SC 29415.

BANKRUPTCY. Frank's Nursery & Crafts won court approval of its plan to emerge as a real estate development company. The company will launch the business with 42 parcels of land that are former Frank's stores, the Detroit News reported. Unsecured creditors will be paid in full, with interest. The 70-year-old company started as a 24-hour fruit stand and grew to become the largest craft chain – and the largest garden chain – in the U.S. with approximately 300 stores.

RECALL. Michaels is voluntarily recalling children's metal folding chairs distributed by Summit Marketing. There may be a failure of the safety lock on the folding chair, allowing it to collapse or fold unexpectedly. Michaels has not received reports of injuries, but Summit Marketing has received seven reports of the chairs collapsing. Customers should call Summit Marketing at 866-270-6275 or visit www.summitproductsaol.com to receive a repair kit.

PEOPLE. Big Lots named Steven Fishman as Chair/CEO/President. Retail Merchandiser said Fishman was "responsible for the strategic repositioning of Frank's Nursery & Crafts...." ... Sandylion hired Steven Schiff as sales manager for its home dec division. Sandylion plans to launch a collection of peel-and-stick wall decorations featuring some of the company's most popular licenses.

LICENSING Reminders of Faith signed a licensing agreement with The Time Factory: The Calendar Company for a 2007 calendar using ROF products. The calendar will feature pages with scripture verses and ROF designs and space to insert photos. The calendar will be 12 x 12 and will be produced on acid free paper. Once used, the calendar pages can then be placed in an existing scrapbook. ROF was highlighted in the May/June issue of Outreach magazine.

TV. Craft TV Studios, Series 100, debuts July 9 on PBS station KRSC. It's a 30-minute show hosted by Pattie Donham who demonstrates new products and techniques in crafts; painting, paper crafts, stamping, sewing, beads, etc. ... Decorative painting icon Priscilla Hauser, founder of the Society of Decorative Painters, has a new PBS series, In The Studio With Priscilla Hauser, which will be available to PBS stations beginning in September. Cutters Productions and UNC-TV are the producers. For info visit www.unctv.org and www.cuttersproductions.com.

SEEKING EMPLOYMENT. Craft industry exec looking for employment in the Southern California area. Able to travel. Eight years experience designing and marketing products for a scrapbook company ... Also, a true industry pro in marketing, product development, PR and on-camera work is looking for clients – vendors, publishers, and retailers. For more, in confidence, email mike@clnonline.com.

STOCK. CLN reported in our last issue about A.C. Moore execs selling company stock. They're not the only ones. According to Vickers Stock Research, Michaels CEO Michael Rouleau has sold 250,000 shares of Michaels stock from Jan. 3 - Mar. 29 and Jeffrey Boyer has sold 50,000. Jo-Ann's Chair/CEO Alan Rosskamm has sold 102,000 shares from Jan. 3 - Apr. 25 and Rosalind Thompson has sold 19.950 shares. They're not bailing out though; Rouleau still owns 125,662 shares and Rosskamm owns about 1.1 million shares.

ROLODEX. Clover Needlecraft, 13438 Alondra Blvd., Cerritos, CA 90703. Call 562-282-0200 or 800-233-1703; fax: 562-282-0220; email: cni@clover-usa.com; visit www.clover-usa.com.

DIVIDENDS. The Hancock board declared a cash dividend of $0.06/share on outstanding common shares, payable July 15, to shareholders of record July 1 ... Michaels board declared a quarterly cash dividend of $0.10/share to be payable July 29 to shareholders of record at the close of business on July 15.

QUILTS. This month some PBS stations will use World's Fair of Quilts: For the Love of Fabric, an hour-long feature on the Int. Quilt Festival, as an hour-long fundraising special. Karey Bresenhan and Nancy O'Bryant Puentes give a guided tour of their collection of quilts, also featured in their C&T Publishing title, Celebrate Great Quilts!, the June 2005 pledge gift in connection with the program. The program includes footage of the antique and contemporary quilts and winning quilts from the Int. Quilt Assn. contest, and interviews with C&T authors such as Laura Wasilowski, Becky Goldsmith & Linda Jenkins, and Patty Albin.

GARDEN RIDGE. May same-store sales rose only 1%, but gross margin dollars were up 6.6%. For the fiscal year to date, same-store sales are up 5.2%.

The Creative Network is the only personnel recruitment firm specializing in our industry. To see a partial listing of the jobs currently available, click on Jobs in the left-hand column or click HERE.

A. C. Moore (ACMR). Last*: 30.03 ... Change**: +0.72
Hancock Fabrics (HKF). Last*: 6.03 ... Change**: +0.67
Jo-Ann Stores (JAS). Last*: 27.80 ... Change**: +2.05
Michaels (MIK). Last*: 41.73 ... Change**: -0.93
Wal-Mart (WMT). Last*: 48.93 ... Change**: +1.58
CLN Retail Index. Last*: 154.52 ... Change**: +.2.7%
Dow Jones Index. Last*: 10,623.07 ... Change**: +1.5%

Industry pioneer Bob Valliere is highlighted in a new book, The Bomber Boys, to be published in July. Bob was a navigator in the 385th Bomber Group that flew thousands of B-17 missions over Europe in World War II. In the book Bob recounts his first combat mission. From the website: "This 'milk run' to drop food and supplies to the starving people of the Netherlands (during a shaky truce with the Germans there) would put at risk the lives of every man on board Lieutenant Michael Swana's B-17...and earn them all a special place in World War Two history."

Bob returned home and founded Signaigo & Rossi, whose Pretty Petals line of silk flower parts touched off one of the industry's earliest hot trends, flowermaking, and became one of the most successful product lines in industry history.

To learn more, visit www.thebomberboys.com/page5.htm. What Bob did for the industry was invaluable. What he did for this country was far more important. So as we approach the 4th of July ... thank you, Bob.

REMINDERS

1. For more information on how your business can be the subject of a "Business Profile" call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

2. If you want a hard-copy of this issue, click on "Printer Friendly version".

3. If your company is a paid subscriber, everyone in the main office is welcome to register, free. Just click on "Work for a paid subscriber? Click here to register."

4. If you want to recommend CLN to a friend, use the "Tell Your Friends" box on the home page.

5. Creative Leisure News is published the first and third Mondays of each month. Your next issue will be Monday, July 4. Happy 4th of July!

xxx

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