Date: June 19, 2006
Vol. X, No. 12

Printer Version

TABLE OF CONTENTS

COMMENTARY: Digital or Hard-Copy Scrapbooks? 

The New York Times article described below presents an ominous, depressing view of the future of scrapbook retailing: consumers will buy printers and software rather than paper and stickers. Scrapping on a computer takes less time and requires less space, and makes it easy to copy albums for relatives or share online – it's the perfect solution, right? It better not be.

What about the inks and papers used in printers; are they acid/lignin free? Saving an album on a CD – how long will the CD last? Will the future generations' computers be able to read today's digital scrapbook?

Rather than bury our heads in the sand, we need to deal with digital scrapbooking and know how to talk to our consumers.

So here's the plan: I'm asking all of you involved in scrapbooking to give me reasons why "hard copy" scrapbooks are better than the computer versions. Email me your thoughts; I'll compile them and publish them so retailers will have "talking points" for consumers who ask, "Why don't I just make a scrapbook online?" Email your thoughts to mike@clnonline.com.

Scene & Heard. A report on the recent Society of Decorative Painters convention/show in Nashville.

Tech Topics. How women – scrappers and crafters both – have changed technology and how it's marketed to consumers.

Can the year be half over already? Yes, for better or worse. How is your business compared to the first half of 2005 and what do you expect for the second half? To vote, click on Industry Polls in the right-hand column or click HERE.

More than half the respondents in CLN's unscientific poll, 53.9%, said health insurance was a "very serious" issue for their business. Another 34.6% said the issue was "serious." Only 3.9% thought it was "not very serious" while 7.7% didn't know.

Less than half the respondents, 44.4%, provide some or all employees with insurance, but 57.1% of those have had to reduce their insurance plans or require employees to pay more.

PAINTING. The 34^th convention/show sponsored by the Society of Decorative Painters in Nashville showed a significant increase in attendance, although no final figures were available. For more, visit www.clnonline.com and click on Scene & Heard in the left-hand column.

TNNA. Given the number of recent complaints about yarn sales, the show in Indianapolis was a pleasant surprise – much more positive than expected. Publishers, especially those who staged author book signings such as Interweave, did very well. Needlepoint seems to be holding its own.

The most important long-term news is the Int. Needlework Retailers Guild voted to dissolve at the end of INRG's fiscal year and TNNA approved bylaws changes to create a Retail Section, whose chair will be a voting member on the TNNA board. The current INRG Retail Board Members will be part of the transition team (along with current TNNA Regional Directors) for the first year. They will help define focus areas and responsibilities and recommend committee structure within the Retail Section.

BEADS. Although no final numbers were available for the Bead & Button show in Milwaukee that ended yesterday, the size of the sold-out show and the attendance appeared about the same as last year – 16,000 jewelry-makers, retailers, and consumers. Trends: large beads, the vintage and ethnic/natural looks, lamp work, Swarovski crystals, bead making, and using leather, fibers, and ribbon.

SCRAPBOOKS. The consensus on the TwoPeas message board was that the Great American Scrapbook Convention in Arlington, TX was an excellent show, but smaller and the attendance was down. One theory: the number of scrapbook shows in Texas may have diluted the crowd. One vendor was selling everything in his booth for $1. (Note: That may get rid of excess inventory, but it surely doesn't help the sales of area independent stores.)

More than 1,800 class tickets were sold online and 24 classes sold out before the Memories Expo in Somerset, NJ opened. A.C. Moore sponsored Tim Holtz to demo Ranger Industries inks in its booth and hosted the Friday and Saturday pajama-themed Creative Bash Crop Parties. Bash make-it/take-it projects were provided by EK Success, Epson, Me & My Big Ideas, Provo Craft, Ranger Industries and Xyron.

(Note: Consumers hunting for bargains were apparent at both shows. If the shows inspire consumers to increase their scrapping, then the shows will ultimately help area retailers. If they are used by exhibitors simply to unload overstocks, then ultimately area independent stores will be hurt.)

Primedia has agreed to sell substantially all of the assets of its Crafts Group to Enthusiast Media, an entity controlled by affiliates of Sandler Capital Management, for $132 million, subject to audit adjustments. The deal is expected to close in the third quarter.

The sale includes 10 magazines and their affiliated events, including the MemoryTrends and Creating Keepsakes Universities and Conventions. The magazines are Craftrends, Creating Keepsakes, Simple Scrapbooks, Paper Crafts, McCall's Quilting, McCall's Quick Quilts, Quilter's Newsletter Magazine, Quiltmaker, Sew News, and Creative Machine Embroidery. Step by Step Beads is not included.

The company will operate as a stand-alone LLC under the temporary name of Enthusiast Media. Look for a new name/logo after the sale is completed. The Crafts Group employs 137 people in offices in Golden, CO and Bluffdale, UT.

Sandler is a New York investment company which owns a number of media properties, including cable television companies, movie theaters, and Discover magazine. Visit http://www.sandlercap.comwww.sandlercap.com.

Michaels announced on Friday that it received a grand jury subpoena from a U.S. District Court in New York requesting documents relating to stock-option grants from 1996 to the present. On Thursday the company said it had received a letter from the Securities and Exchange Commission asking it to preserve documents regarding stock-option grants from 1990 to the present. No details were provided regarding the options or the execs who received them.

Michaels had already launched an internal review of its options policy and had announced it had understated approximately $60 million in compensation during a period between 1990 and 2001. The difference stems from stock option awards that came with effective dates that preceded the approved dates.

The company said in an SEC filing that it did not believe it would need to restate any financial results, "but additional information may become available which could cause the current estimate of potential unrecorded compensation to change materially."

The internal review was undertaken when the Wall Street Journal recently published a study of various public companies such as Monster.com, the Internet job-search company, that appeared to have awarded stock options just before the stock price rose.

Stock options give execs the opportunity to earn more money – if the company's share price rises. They are usually awarded at the stock's value on the date the company board approves it. For example, a company board might grant an exec options for 10,000 shares at $10 each on July 1. If the stock later rises to $20/share, the exec can buy the 10,000 shares at $10 and immediately sell them for $20. The exec's profit: $100,000. If the options were backdated to a time when the stock was $5/share, the exec makes even more.

Backdating options is not illegal, per se, the Securities and Exchange Commission ruled, but it could be if there wasn't proper disclosure to investors or if the options weren't accounted for properly, the Associated Press reported.

However, Dow Jones News reported Michaels also announced it was facing two "shareholder derivative" lawsuits regarding the option-granting program, charging that Michaels board "is guilty of breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment because of its authorization of the options grants."

The June 7 edition of the New York Times included an extensive report on scrapbookers switching to computer scrapbooking. "... the main action is on the digital side ..., which is the fastest-growing segment of scrapbooking, attracting novices as well as the most experienced compilers." Among the highlights of the article:

1. A key motivation for the change is time. Jeffrey Housenbold, CEO of the online photo service Shutterfly, said 83% of scrapbookers said they had not finished a scrapbook in the past year. "It takes too much time." (Shutterfly also offers a variety of scrapbook products and services. Visit www.shutterfly.com.) A consumer who switched to digital, Claudine Jackson, an optometrist and mother of two in Carlisle, PA, told the Times, "When I get a half-hour, I have to move quickly. It would take that long just to get my materials out."

2. Some paper companies have created CDs with digital versions of their paper designs, and sites such as www.shabbyprincess.com and www.twopeasinabucket.com offer downloads of fonts and digital versions of embellishments.

3. April Anderton, founding editor of Digital Scrapbooking magazine, said computer scrapbooking is enticing women to buy serious computers and software. As a result, companies such as HP and Epson (wide-format printers), Adobe (Photoshop), and Wacom (digital writing tablets – www.wacom.com) are creating specific products and marketing them directly to scrapbookers. Lucidiom (www.lucidiom.com) has created a photo kiosk for scrapbook retailers and HP even offers software – Creative Scrapbook Assistant – for under $30. Visit http://h71036.www7.hp.com/hho/cache/119531-0-0-225-121.html.

Reminders of Faith is sponsoring a unique scrapbook event, A Journey of Faith: A Weekend to Inspire, Sept. 21-23 in Nashville. Attendees will spend a weekend "learning various new ways to remember and document God's faithfulness in your life. You will enjoy a time of fellowship and be inspired through seminars, worship, classes, and speakers."

"Our goal continues to be to educate and inspire our consumers to leave behind the stories of how God has been working in their lives and we do this through inspiration writing, speaking and communications," says President Sandra Joseph.

Sponsoring companies include Accucut, me & my BIG ideas, Colorbok, Memories in Uniform, Forever Yours, and Scrapmates. For more information, visit www.remindersoffaith.com/web/pageid/34550/pages.asp.

(Comment: church groups could be an excellent venue to promote your store and introduce it to new consumers.)

Parents by the millions have called on their children to help them use computers, DVD players, VCRs, iPods and other marvels of the digital age. But what do kids want when they want to create – high tech or low tech?

On June 8 the New York Times published a report on the growing trend of technology and crafts for kids. It highlighted the PicoCricket Kit.

"At first blush, the PicoCricket Kit resembles a plastic box of arts and crafts supplies, crammed with colored felt, pipe cleaners, cotton, and Styrofoam balls. But this is a craft kit for the digital age. It includes electronic sensors, motors, sound boxes, connecting cables, and a palm-size, battery-powered, programmable computer. By combining the traditional materials with high-tech ones, children as young as 9 can invent interactive jewelry, fanciful creatures that dance, musical sculptures, and more."

The Times said a kid could make a cat and program it to purr when someone pets it or create a birthday cake that is programmed to play a song when someone blows out the candles.

On the other hand, a recent report in TD Monthly interviewed craft and toy manufacturers who disagreed with the Times. Moshe Neurath, President of Hygloss, said the ideal product is "something which the end user, the teacher or consumer will use, enjoy and end up with a nice project without too much work."

The article also quoted Leslie Selig, Marketing Director at Darice, who explained, "... our most popular products are no-tech, hands-on things that use kids’ imaginations and creativity. Things that involve the kids with the parents, which let kids be kids. It’s a total return to basics, combining household items with our products, merging art and science. Kids getting their hands gooey and creating their own toys, using their own imaginations."

(Comment: What do you think will appeal to kids – high tech, low tech, or a combination of both? Email your thoughts to CLN at mike@clnonline.com.)

VENDORS COME, GO, AND CHANGE

1. Advantus and Ashley Smith will discontinue the Magic Scraps line beginning Jan. 1 – a mutual decision by Ashley, Magic Scraps' founder, and Advantus President Kevin Carpenter. Advantus will continue to sell Magic Scraps Scrappy Glue and Scrappy Tape; the remaining Magic Scraps inventory will be available for sale while supplies last.

"Advantus is committed to our craft and hobby division," Carpenter said. "At this time we find it necessary to focus our resources on the Cropper Hopper and Heidi Swapp brands. With the pending addition of two new major brands to be revealed at CHA Winter 2007, we made the difficult decision to discontinue Magic Scraps."

Smith added, "I'm thankful for the experience that Advantus has given me, but I'm an entrepreneur at heart and happiest when I'm running my own business." She will be launching a new digital scrapbook venture, Polka Dot Potato (www.polkadotpotato.com.)

2. Kim Luty has decided to shut down her wonderful Same Differences scrapbook company. There's an inventory reduction sale; visit http://samediff.typepad.com/samediff_shopping and Kim's blog at http://samediff.typepad.com.

3. Testor is now part of the Rust-Oleum companies. It will remain an independent division and will keep its manufacturing facility and sales office in Rockford, IL. The craft and home dec lines include Testors, Aztek, Floquil, Polly S, Pactra, and others.

4. Forster, the well known wood product company, is now part of Loew-Cornell. Both companies are owned by Jarden Corp., a public company traded on the NY stock exchange under the symbol, JAH. Forster produces craft sticks, dowels, Woodsie shapes, and other wood products.

Ever worry that you're the only business with a particular problem? Ever wanted to compare notes with others about serious issues facing your business – and therefore the entire industry? Attendees at the CHA Summer Show July 21-23 will get that chance – and a free breakfast, too.

Sunday morning, July 21, attendees with free tickets will eat a buffet breakfast, and while they're eating, they will hear six speakers, each explaining briefly a particular issue facing many businesses. After eating, attendees will break into discussion groups devoted to each issue. Each table will have a discussion leader to get the conversation going. There will be no attempt to provide 100%-accurate, all-encompassing solutions. Rather, the goal is to provide an atmosphere conducive to help everyone in the industry compare notes, learn from each other, and realize they are not alone.

The topics: "How to finance the growth of your business" ... "How to recognize and capitalize on trends as they relate to your business" ... "How to develop strategies to differentiate and grow your business" ... "How to understand and inspire your customers" ... "How to best manage the ups and downs of the market cycle" ... "How the industry can help independents survive and prosper."

The Forum is free but tickets are required (so the staff knows how much food to order). Visit www.chashow.org.

CLN is asked periodically where vendors can find a list of industry retailers. There is no master list, and if one existed, it would be out of date as soon as it was published, given the number of stores opening and closing. However, here are some suggestions:

1. Trade show exhibitors often have the opportunity to purchase a show's attendee list after the show closes. Contact the show sponsors.

2. Many vendors include on their websites the names and addresses of stores that sell their products. It could be very time consuming to find and collate the names from various sites, but if you want a list badly enough....

3. Consider exchanging customer lists with other vendors.

4. Trade magazines do not rent their circulation lists, but may on occasion do a mailing for an advertiser. And, of course, there's always advertising and creating a list from the reader response cards.

5. Some trade associations offer its members a membership directory, often divided by category, such as "retailers."

Whatever the size/extent of your customer list, a good way to keep it "clean" is to do an annual, simple, first-class mailing. That way you can cull the names of stores whose letters were returned by the Post Office. 

1. Retailers, it's toward the end of the day and there are no customers in your store. Vendors, the trade show's almost over and there are no buyers in sight. Been tempted to close your doors or start tearing down your booth? I learned that lesson last week.

My wife Barbara, the new jewelry-making maven, and I were selling her creations at a farmer's market in Peoria, IL last Saturday. We had had a good morning, the market was closing in five minutes, and so I started putting away the unsold jewelry. "Wait! Don't put that away; I want my girlfriend to see it," came a voice from behind me.

I turned and sure enough, a woman was bringing her friend over to our display. The friend bought Barbara's most expensive necklace – $350.

2. Retailers thinking of attending the Memory Trends show in Las Vegas in October may want to check the site, www.memorytrends.com, and check out the prices.

A.C. MOORE. A.C. Moore also announced that Michael Joyce has been appointed non-executive Chair of the board of directors. He succeeds William Kaplan, who is retiring as Chair but will remain on the board. Joyce has served on the board since June 2004 after retiring as a partner in the public accounting firm Deloitte ... The company also announced that Joseph Coradino joined the board. Coradino is a member of the board of trustees and Chair of Pennsylvania Real Estate Investment Trust. He's currently serving as President of PREIT Services and PREIT-Rubin, management affiliates of PREIT that manage retail real estate.

HANCOCK. Named Gail Moore as Sr. VP/Chief Merchandising Officer, in charge of strategy, assortment planning, sourcing, and private label product development. She reports to CEO Jane Aggers. Moore had been Sr. VP, Divisional Merchandise Manager, for Fred's. She had also worked at Dollar General and Belk department stores. According to a filing with the Securities and Exchange Commission, Moore receives a base salary of $190,000/year, is eligible to participate in the Hancock's bonus, long term restricted stock, and 401(k) plans. She also received 25,000 shares of restricted common stock which will vest in five equal annual installments, and received stock options to purchase 50,000 shares of common stock which will vest in four equal annual installments.

C&T. C&T Publishing named Mary Wruck as Product Development Manager. She had worked for MacPherson’s and Savoir-Faire.

ACQUISITIONS. Reuters reported two more investment companies, Leonard Green and Hellman & Friedman, have joined together to consider an offer for Michaels.

NUMBERS. Hancock reported that corrections for an accounting error related to pension expense and benefit obligations will result in non-cash charges over prior years, estimating the cumulative after-tax impact from 1988 through 2004 is about $1.2 million, or 6 cents/share. The company said recent quarterly and fiscal year reports will need to be restated.

SHOWS. Exhibit square footage for the CHA Summer Show has already surpassed the last several summer shows and hotel bookings are up 16% over last year’s total. The CHA show is July 21-23 in Rosemont, IL. Visit www.chashow.org.

JOBS. The Society of Decorative Painters board of directors is accepting resumes for an Executive Director. Send inquiries/resumes to Darla Foreman, President, SDP, 373 N. McLean Blvd., Wichita, KS 67203-5968.

MAGAZINE. SoHo Publishing has launched Adorn, a quarterly "geared toward the growing numbers of hip, young crafters determined to give their clothing, furnishings, and accessories a creative, one-of-a-kind spin." For editorial, call Christina Batch at 212-937-2589 or email christina@sohopublishing.com; for advertising, call Dorreen Connors at 212-937-2554.

TV. Duncan and the entire industry received a wonderful 3.5-minute plug recently on CNBC. Among other things, it plugged the embellished clothing worn by American Idol contestants. 

LAWSUIT. QVC and the Home Shopping Network are fighting in in a Philadelphia courtroom over the use of the phrase, "Christmas in July." (Comment: Some craft stores have been having "Christmas in July" events for decades.)

KNITTING. The Professional Knitwear Designers Guild has become the Assn. of Knitwear Designers (AKD) – dedicated to establishing and maintaining a standard of excellence for knitwear designers. To partner with a designer member or receive info about accreditation visit www.knitwear-designers.org or email President Diane Zangl at stitchwi@dotnet.com.

YARN. A recent issue of Family Circle highlighted Afghans for Afghans, a group that, like Warm Up America!, creates afghans from donated squares. Ann Shayne and Kay Gardiner proposed the idea for the program on their blog, www.masondixonknitting.com, and thus far have received 1,000+ squares and made 25+ blankets. Visit www.afghansforafghans.org.

IMPORTS. Although China has made some progress in its efforts to enforce intellectual property rights, the country still has "a long way to go," U.S. officials said at a June 7 hearing of the U.S.-China Economic and Security Review Commission, according to a U.S. State Department report ... The Times/Post News Service reported the shipping rates to some U.S. ports have fallen, due to a cooling-off of international trade and a slow-down in demand by countries beset by higher gas prices and inflation.

QUOTATION. "... the people now running some of the country's largest big-box specialty chains are not merchants who have worked their way up the ranks – they're bankers. And as such, they don't always place the same value on the fundamental building blocks of organic retailing, such as marketing, advertising, store growth, associate development, and community relations, to name just a few." – Tim Craig (DSN Retailing Today)

TOYS. Inspired by the recall of Rose Art's Magnetix line and the subsequent lawsuits claiming children were injured or killed when they swallowed magnets, the toy committee of the international standard-setting organization, ASTM Int., met to discuss new warning labels, a performance test, or limiting the strength of magnets, the Washington Post reported.

QUOTATION. "I'm part of the [Baby Boomer] generation that said it wanted to change the world, and it did. We let the 40-hour workweek morph into the 60-hour workweek and even the 80-hour workweek." – Anna Quindlen (Newsweek)

QUOTATION. "It is time to get creative. Let's start some new craft or vehicle dιcor projects. How about some designs for redecorating SUV's into spare rooms or mother-in-law quarters? Since gas is sucking up the discretionary $'s, our industry needs to offer some alternatives for these soon-to-be-disposable vehicles." – Industry Retailer

SIGN OF THE TIMES. Canon announced it will stop developing new single-lens reflex film cameras as more consumers switch to digital. Nikon already announced it would stop making seven of its nine film cameras.

TV. The 14th series of Needle Arts Studio with Shay Pendray produced by KS Inc. uplinks July 23. Visit www.shaypendray.com. It's sponsored in part by Coats & Clark, DMC, and The National Needlearts Assn ... Cutter Productions will premier new series of For Your Home and Glass with Vicki Payne in July.

CORRECTION. In our last issue we mentioned Reflections of Faith, a scrapbook vendor doing well in the Christian bookstore market. It should have been Reminders of Faith. Visit www.remindersoffaith.com.

CONDOLENCES. To the family of Machiko Ito of AITOH, who passed away after a four-year battle with ovarian cancer. I lieu of memories, send donations to the UCSF Foundation, Gynecology Oncology, UCSF, Box 0248, San Francisco, CA 94143-0248.

To read the current job listings by the only personnel recruitment firm specializing in our industry, click on Jobs in the left-hand column  or click HERE.

A. C. Moore (ACMR). Last*: 15.59 ... Change**: -2.48
Hancock Fabrics (HKF). Last*: 3.18 ... Change**: -0.29
Jo-Ann Stores (JAS). Last*: 14.72 ... Change**: -1.72
Michaels (MIK). Last*: 37.93 ... Change**: -1.02
Wal-Mart (WMT). Last*: 48.31 ... Change**: +0.48
CLN Retail Index. Last*: 119.73 ... Change**: -4.0%
Dow Jones Index. Last*: 11,014.56 ... Change**: -2.1%

As the world, including scrapbooking and even kids crafts, becomes more high tech, the last straw for columnist Ellen Goodman of the Boston Globe was when a friend bought a new toothbrush that came with an instructional DVD. Apparently it wasn't a mere toothbrush but an IntelliClean System – another example of modern conveniences offering far more features than we want, features that merely mystify, confound, and frustrate us.

"All of our daily lives have become more complicated. Americans moonlight in the self-service economy – pumping our own overpriced gas, checking out our own groceries, printing our own pictures. Not to mention picking our own Medicare prescription plans and 401(k)s.

"But faced with gadgets test-marketed on 14-year-olds," Goodman wrote, "we now blame ourselves for being tech-unsavvy rather than blaming tech for being user-unfriendly."

A case in point: a few years ago my watchband broke. My wife, Barbara, was going shopping and volunteered to buy a new one. She returned with not a watchband but a new watch that was cheaper than any watchband she could find.

The watch came with a 40-page instruction book. I struggled with the watch for an hour setting the correct time and date. Then I gave up, because that was all I wanted from a watch.

A few months later Barbara and I accompanied my sainted Aunt Virginia to Midnight Mass on Christmas Eve. At the Consecration, the most reverent moment in the Catholic Mass, my watch started playing "Jingle Bells," and I didn't know how to turn it off.

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xxx

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