Date: September 4, 2006
Vol. X, No. 17

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TABLE OF CONTENTS

COMMENTARY: Tough and Provocative 

Recently CLN asked readers what should retailers, vendors, designers, and trade associations do to attract more customers into our stores. One response was the longest email I've ever received to a question like that, so long it could fill this entire issue. So, three sections of the email – specific advice for retailers, vendors, and designers – are in the "Benny," "Vinny," and Designing Perspective columns respectively. Her general summary to the industry as a whole is below ("Business Basics 101").

The tone of her email reminds me of a mother yelling at unruly children. It's tough talk and some can be filed under "Easier said than done," but it's thought-provoking and well worth your time.

The author is a designer, a genuine scrapbook/paper craft enthusiast, and she has an MBA. She wrote, "I wrote this a couple of weeks ago when you asked the question – and then just 'sat' on it. But this week, I have traveled to more than 12 scrapbook and rubber stamp stores in my area, taking a day and a half out of my life. All I want is a jar of Ranger Ink Platinum UTEE. I did not find it. I will have to order it online. No wonder the stores are closing so fast."

"Benny Da Buyer". Advice to retailers who want to keep enthusiasts (their biggest-spending customers) happy.

"Vinny Da Vendor". Common sense advice for vendors for all-too-common problems.

Designing Perspectives. Scrapbook/paper craft designers should take off their blinders and tell real stories.

Kate's Collage. Miss the newsbrief report on August sales? Or the newsbrief with Michaels' quarterly report and the execs' conference call with analysts? They're right here.

(Note: If it appears to be an old column, click the "Refresh" or "Reload" button on your browser.)

Labor Day is the traditional kickoff of the mid-term Fall elections. Everyone will elect someone to the U.S. House of Representatives, and most will vote for governors and/or Senators. To see what effect the campaigns will have, CLN is asking you to vote now, then vote again just prior to the election. CLN will compare the results with the actual elections. To vote, click on Industry Polls in the right-hand column, or click HERE.

The industry appears to be entering the critical Fall/Christmas selling season with reduced expectations. While almost half the CLN voters in this unscientific poll, 48.2%, predicted a "good but not great" season, no one expects it to be a "very strong" season. Exactly one third believe it will be a "mediocre" season; 18.52% expect it will be a "tough" time for the industry.

Voters are somewhat more optimistic about their own businesses. Almost a third, 31.8%, believe their sales will increase 10% or more, while 27.3% predict their sales will increase 1%-9%. Almost a quarter, 22.7%, think their sales will be the same as last year, while 13.6% expect sales to decline 1%-9%. Only 4.6% believe their sales will drop more than 10%.

"The demands of the large customers have gotten to me. I have decided to concentrate on our gift line," a mid-sized manufacturer with almost 20 years invested in the industry told CLN. "These smaller gift stores expect a fair price and don't come back for a better one. The large chains are eating their young; pretty soon they'll run out of fresh ideas and eager vendors. The industry has certainly changed. Today's market just doesn't offer the opportunities that our company had when we started."

The next day CLN received a call from a vendor who told this story: This chain had a small but important department that was a mess – too many vendors and price points, inconsistent packaging, etc. The vendor presented a plan that took over the department. The buyer agreed and gave the company a few months to ramp up production and give the retailer time to close out the existing merchandise.

The vendor invested in expanded production. A couple of weeks later he received a call. The buyer was gone and the new buyer said the deal was off unless the vendor bought the existing merchandise – about $1.2 million worth.

The vendor said no and the deal was off. The chain's department remains the same.

In the previous issue, CLN asked readers to predict the state of scrapbooking in 2010. Some answers:

1. It will still be changing, because modern business always does. The year 2010 is just an arbitrary date. It will be much different than today, and much different than it will be in 2015.

2. There will be fewer independent stores, and fewer vendors because of it. Survivors will broaden their inventory and sell more than scrapbook supplies. Most of the "non-craft" chains will drop the category.

3. Technology, particularly digital photos, will play a greater role. Vendors and retailers who stick exclusively to hard-copy scrapbooking may be burying their heads in the sand.

4. The international market will continue to grow. Companies will succeed if they adapt their designs and packaging to fit the local cultures.

5. The current trend of investment companies buying companies will have faded.

Perhaps the most interesting prediction was a kiosk for paper. The consumer chooses a design and weight and size of paper and the clerk puts the appropriate paper in the machine, which prints the paper. If the kiosk is connected to the Internet, the manufacturer could change the designs overnight, and the store need not worry about unsold inventory.

Predictions about the future of scrapbooking usually included a decline in the number of specialty stores, so CLN asked Pam Riddell of The Riddell Group, a manufacturer's rep group in the Southeast, and the founder of Maps2Memories (www.maps2memories.com) what today's independents can do to have a thriving business four years from now. Her advice:

What will it take for today's independents to make it to 2010? They must love what they do, and run their business as a BUSINESS. While the following principles have been discussed in detail in CLN and other industry publications, they are paramount to success:

1. Exceptional Customer Service. Nothing less will insure survival.

2. Manage your inventory through a POS system or old-fashioned back tags. Know what's selling, and what isn't. If it's not selling, get rid of it. Your first loss is your best loss.

3. Set aside time to work ON your business every week, not just IN your business.

4. Understand that chains are not the enemy. If you can't get past this thinking, you will not make it.

5. Build relationships with your primary vendors. Buy from fewer vendors and be important to them.

6. Attend at least one trade show a year. The benefits are far greater than just placing orders.

7. Be flexibile in your buying, merchandising, promotions, and your thinking. This is a constantly-shifting industry – you must move with it. What you couldn't give away last year may be the "hot thing" tomorrow.

8. Beware the "fluff" – the hot, trendy items everyone's talking about today (for a limited time). Some is good, too much is fatal. Maintain a good balance of core inventory (appealing to all who walk through your door). Fluff comes and goes. And probably most important:

9. NETWORK with each other, sales reps, and manufacturers. The word "independent" is a misnomer in our business, because to survive and thrive independently, you must be anything but. You must constantly be seeking out new information, new resources, new contacts, and working them all.

Through my work with independents over the last 12 years, I have seen many stores come and go. Working in the gift industry was easier because more storeowners had a solid business/retail background. But working in the scrapbook/paper craft industry is so much more exciting and satisfying. I may not work with business experts, but my customers LOVE what they do and they pass that love on to their customers. If we can perpetuate that AND become better business people at the same time, our industry will thrive. I'm counting on it. – Pam Riddell

H.I.G. Capital, a Florida private equity firm, acquired a majority interest in Provo-based Die Cuts With a View and Richfield, UT-based Pressed Petals to form DCWV, Inc. Die Cuts provides foundational scrapbook products, including themed paper, stickers, quotes, and rub-ons. In 2005, Die Cuts was named by Inc. magazine as one of the fastest growing companies in the U.S. Pressed Petals produces embellishments utilizing real pressed flowers, chipboard, and metals.

Both deals were brokered by Chad Burnett at IndustryPro.

"We are extremely excited to partner with H.I.G. and Pressed Petals," said Die Cuts co-founder Nancy Hill. "This new relationship will enable us to accelerate our growth and bring a lot of fresh ideas to the marketplace."

"This transaction marks the beginning of a new era for all of us," said Mike Hill, also a co-founder of Die Cuts and the new CEO of DCWV, Inc. "We are looking forward to the combination of all of our talents in not only creating a unique market offering, but in developing a team of professionals that help us reach the next level of performance and satisfaction for both our customers and employees."

H.I.G. Managing Director Elliot Maluth said, "It will be a privilege to work with these outstanding management teams and we look forward to growing this business together. DCWV is extremely well positioned to capitalize on the expanding scrapbooking and craft industry due to its strong brand, great channels, and continuous innovation."

Cut It Out!!! Quit it! Stop it! In the last week alone, I have heard of a designer who didn’t get paid for working a booth at CHA. I’ve heard from another designer who was blackballed off her design team. I’ve heard from a vendor who is crying over the competition – it’s just too stiff.

I’ve heard from dozens of consumers that their LSS (local scrapbook store) just doesn’t carry what they need. I’ve read hundreds of posts from consumers wanting to know where are all the new products from the CHA show; why can’t they find it anywhere?

I attended the grand opening of a new LSS that was so bare people were walking away before they went inside. If only they had gone inside they would have seen there was some stuff for the taking. I’ve had two stores a thousand miles away ask me to come teach because they can’t find designers in their area willing to work with them.

I just don’t get all these problems.

1. Be fair. Be honest. Do not lie. Pay for what you get. Do not ask for discounts. Negotiate in fairness. Understand that verbal contracts are legal and binding.

2. Just be nice. If you can’t say something nice about another person, just shut up!

3. I’ve never seen the word "competition" defined as "easy." Grow up. You started a business so of course there’s going to be competition. If you are the best, if you have the best product, you WILL win. Yes, it IS a race. But only the best racer wins. It’s just life!

4. Plan. Organize. Control. Direct. They are the fundamentals of any successful business. If you don’t understand them, learn them!

5. If you open/own a store, make it worth consumers' time to come to you. Give them something they can’t get anywhere else. Be unique. Hire a competent staff that will work when you are not there. Unsupervised employees never produce.

6. Hire teachers and demonstrators who are fun, creative, and innovative. Go the extra mile. Become a teacher. Walk a mile in their shoes. Know the difference.

7. Treat it like a business. Whether you are a storeowner, a vendor, a designer, or a trade publication, this is YOUR business. If you do not know how to run a business, do not expect to succeed. Take a class. Read books. Buy videos. It’s all out there, but if you don’t seek out help, it’s most likely not going to come knocking on your door.

Here's a unique way to promote a new book – a "blog tour." To promote Lisa Kartus' new book, Knit Fix: Problem Solving for Knitters, Interweave Press is "sending" Lisa on a "Get Your Knit Fix Blog Tour." It starts today and Lisa will have a virtual visit with a different blogger each day leading up to her appearances in New York at Knitty City Sept. 16 and the New York Knit-Out and Crochet Sept. 17. To see a schedule of the "blog tour," visit www.interweave.com/knit/books/Knit_Fix/tour.asp.

Lisa also has a new website, www.knitmaven.com, for her weekly Knit Fix picked from consumers submissions. Each week she’ll select one knitting problem and a picture of the unhappy result, and post it with a solution on her web site. (Send submission to knitmaven@sbcglobal.net.) In October she’ll also broadcast and discuss this weekly knit fix on the popular podcast, Cast-On: A Podcast for Knitters, hosted by Brenda Dayne.

The Decorative Painting Advisory Council, formed in January by Sheila Rouse, a past president of the Society of Decorative Painters and Chair of the Council, is looking to "... bring together leaders in the decorative painting industry to revitalize decorative painting by establishing a growth plan that will be implemented by the Council with the board of directors, staff, and members of the Society ... acting as ambassadors."

The council: Rouse, Stan Clifford (DecoArt), Darren Cohen (All American Crafts), Gus Dovellos (Royal Brush), Bill George (Delta Creative), Ann Kingslan (Kingslan Publications), Mike McCooey (Plaid), Chris Thornton (Delta artist/author), Tim Mulvey (Houston Art), Priscilla Hauser (Priscilla's Little Red Tole House), and Teri Mott (SDP staff member).

The group is currently collecting information. At the meeting at CHA's Summer Show, the DPAC looked at popular trends that are making an impact on the industry, studied SDP's membership figures to determine what factors have influenced cycles in the organization in its 34-year history (as well as in the painting industry), and discussed what specific challenges the industry is now facing.

A grassroots initiative is in the works, the first stage of which involves two contests for SDP chapter members with incentives provided by All American Crafts and DecoArt. Details will be released in the upcoming weeks.

For more information, call Sheila Rouse at 717-329-7049 or email her at toleheart@pipeline.com. (Comment: Anyone with suggestions or comments for the Council should contact individual members or CLN – mike@clnonline.com.)

As I clipped another Jo-Ann’s coupon before trekking in this weekend, I wondered why none of my local craft stores have frequent shopper cards. Maybe it’s different outside Northeast Ohio, where I live, but if Michael’s, Pat Catan’s, Hobby Lobby or Jo-Ann’s would offer me a little card to put on my key chain a la the grocery store, the library, the Borders bookstore, I guarantee I’d go to their chain more frequently than the other two.

It’s a matter of convenience for me, as a member of their target audience (33 years old, married, two children, college-educated, some disposable income). I want to know that I’m saving as I hand over my frequent shopper card. I want to know that it’s OK that I left the sales flyer at home because they can see from my account that I qualify for a 10% discount on all non-sales items. I estimate I have left probably $200 of scrapbooking and other items on the shelf over the last year just because I happened to go to the store on a whim, but darn it, I left my coupon at home. So out their door I go, because I can’t bring myself to pay full price knowing I could have saved a couple bucks. It would have been an impulse buy, but instead I remain a browser. Paper coupons – how 20th century! – Heather Gooch, VP of Gooch & Gooch, Creators of Custom Media. Visit www.goochandgooch.com.

1. Have you ever stopped to consider this and its consequences: We remember our childhood based on physical evidence such as memorabilia/photos and also the recollections of those around us. As we grow, we are told stories about our youth by our parents, grandparents, and others who are older and can vividly remember the things we were too young to process. Our memories are based on their versions of the events.

So what is going to happen to the kids whose mothers have documented every sneeze, funny phrase, or soccer practice in their scrapbooks, blogs, and more? – Pamela Smart

2. I just finish reading Born To Rule about the five granddaughters of Queen Victoria who became queens of other European countries. Most of the author's research was based on letters and scrapbooks kept by these women. The amount of information that came from their personal files was fascinating.

And I just started to think about our times, with all the email, im, and digital pictures. What if, when the time comes to write the history of our time, the files are gone? I have lost emails when changing jobs or computers – or pictures when a computer crashes. I'm glad I have my own scrapbooks to give a glimpse of what my life was like (not that I expect to make the history books), but how will history be pieced together in the future? – Edited from a TwoPeas message board

RANDOM NOTES, RANDOM THOUGHTS

The Dallas Morning News recently published an extensive profile of Charles and Sam Wyly, the Chair and Vice Chair of the Michaels board of directors. It detailed the ongoing conflict of the brothers with a Senate investigating committee and the Securities and Exchange Commission over their alleged manipulation of their off-shore family trusts – all of which has been reported in previous issues of CLN.

The billionaire brothers claim they acted on the advice of their army of lawyers, accountants, and tax specialists and have done nothing illegal. The government isn't so sure.

How can there be a disagreement like this? I asked a friend of mine who has a doctorate in accounting what on earth there was to study at the doctoral level of what appears to be a very cut-and-dried discipline. "It gets very esoteric," he said. "It's almost like philosophy."

I think what the Wylys have here is a difference in philosophy with the government. Still, I wonder how much money they've spent to avoid taxes.

1. According to the 2005 National Retail Security Survey, craft stores have a worse problem with shoplifting than most other types of stores; 2.6% of sales are lost to shoplifters, according to the study sponsored by the National Retail Federation and reported in Business Week. Only home centers, which lost 3.2% of sales, are hurt worse than craft stores. "Hot" items include "scrapbook accessories, particularly Sizzix," Business Week reported.

2. Retailers and vendors who are benefitting from the increase in beading/jewelrymaking should thank ... sewing, crochet, and knitting. According to an online survey of 1,200+ readers of Bead&Button magazine, those were the respondents' first categories. More than 84% were 13 or younger and two-thirds were taught by a parent or grandparent. The percentage of respondents who started in a particular category: sewing, 22% ... crochet, 19% ... knitting, 18% ... other, 12% ... cross stitch, 11% ... beading, 9% ... needlepoint, 6% ... macrame, 3%.

3. A survey of 575 stores by in-store marketing agency, Bezier, has found lack of space in the retail environment to be the number one reason that point-of-purchase displays are not put out in stores, Retail Bulletin reported.

MISCELLANEOUS NEWS

NEEDLEWORK. Sunrise Craft and Hobby is now distributing an extensive range of 600+ cross-stitch and needlework kits, plus accessories and books, from its distribution centers in Wisconsin and and Ontario, Canada. Free price lists, catalogs, and/or brochures on Vervaco, Lanarte, Craftways, Bayview, and Cross-Stitch and Needlework magazine are available via mail or on CD ROM. Call 866-737-7764; fax 519-578-1523; email orders@sunrisecraftandhobby.com; or visit www.sunrisecraftandhobby.com. The addresses: P.O. Box 336, Plover, WI 64467; 41 River Rd. E. Unit 8, Kitchener, ON N2B 2G3.

SHOWS, I. The National Sewing Show in Las Vegas is Sept. 19-21. Highlights include a three-day VISIONS Style Exhibit by trend guru Joel Karpoff ... Rita Farro's keynote address, "36 Ideas in 36 Minutes" ... "Merchandising for Today’s Retail Environment" by Sharon Stoffel, VP/General Manager of Pacific Fabric and Crafts ... "Sourcing Solutions for Small Businesses"  presented by Susan Power, publisher of sourcing resources, and Sheryl Sapriel, President of the Fabric Sourcing Exchange. There's still time to pre-register at www.sewing.org. 

SHOWS, II. The Int. Quilt Market is Oct. 28-30 in Houston. Visit www.quilts.com ... The School, Home, & Office Products Assn. show, Paper World USA, is Nov. 8-10 in Miami Beach. Visit www.shopa.org ... Registration info for The National NeedleArts Assn. show Jan. 13-15 in San Diego will be mailed next month. Hotel info is available at www.tnna.org/winter_show.php. Three hotels are already sold out.

DESIGNERS. There's a new blog for designers: Play. Create. Encourage. Founder Pamela Smart said, "The blog was started because, like so many designers/artists, we forgot how to play. We got so busy with creating for work assignments that we lost the joy of creating for ourselves. The encouragement part is a backlash from the specific, step-by-step how to’s that have become so popular. We don’t want to inspire (that sounds too snooty), we want to encourage others to have fun and make something without any pressure, deadlines, or concerns. Anyone is welcome to join in through the comments section and from time to time we will include photos of their work with their blurbs. This is one place where it isn’t all about the money. Going back to the reason we all wound up in the industry in the first place: the love of creativity." Visit http://pcsmart.typepad.com/playcreateencourage/

NEEDLEWORK. The 15th series of Needle Arts Studio with Shay Pendray uplinks with PBS stations Oct. 22. The series is produced by KS Inc. and is sponsored in part by Coats and Clark, DMC, and The National NeedleArts Assn.

WAL-MART. Was named as one of the "50 Best Companies for Latinas to Work for in the United States" by LATINA Style Magazine ... Entered into a partnership with the National Gay and Lesbian Chamber of Commerce. The company "is making a very sincere effort to reach out to people who are a significant part of our customer base," Wal-Mart spokesman Bob McAdam told Cox News Service. "I don't think this is something that will sell on Main Street America, where most Wal-Mart stores are located," Tony Perkins, President of the conservative Family Research Council, told Cox. "I don't think cheap prices on goods from China will be enough to stop a rollback in their customer base if they choose to go down this aisle."

HOME DEC. Jennifer Apfel used acrylic paint to transform an old chair. At the urging of a friend, she sent photos to HGTV's That's Clever series. Within days a film crew was at Jennifer's house in Milwaukee. To read how it happened, visit www.jsonline.com/story/index.aspx?id=486383.

XYRON. Is receiving lots of magazine coverage. The 510 Creative Station was featured in the Aug. 1 issue of All You, and the Design Runner is a featured product in the Aug. 29th issue of Quick & Simple. The Design Runner and a variety of Xyron machines and adhesives, as well as papers, stickers, and other embellishments from Karen Foster Design, will be featured in Woman's Day's Halloween Celebrations (on sale Wednesday) and in Woman's Day's Best Ideas for Christmas (on sale Sept. 26).

PEOPLE. Tiffany Windsor is the COO of 2 Point Media.

QUOTATION. "I’d say, judging on the comments I hear, that our customers are about 9-to-1 in favor of the [closed on Sunday] policy. Every once in a while, someone will say to me, ‘gee, I wish you were open on Sunday,’ but the big majority favors what we’re doing. The employees, including me, like it." – Lance Noth, manager of the Hobby Lobby in Mason City, IA (Globe Gazette)

QUOTATION. "People like Art and Angela Williams, Drs. Tim and Beverly LaHaye, Hobby Lobby CEO David Green, and others have played significant roles in helping to build [Liberty] university and secure its future." – Rev. Jerry Falwell, Founder of Liberty University (WorldNet Daily)

A little known area of the industry is the custom book producer, exemplified by Banar Designs. If publishers want a book in a specific category but don't have the time, personnel, or expertise to produce it themselves, they call on a custom book producer. Manufacturers who want a book to complement a new product line do the same thing.

Banar will design the projects, photograph them, write the instructions, and complete all of the graphic design, then put everything on a disk and send it to the client. Banar is paid an advance and a production fee, then royalties against the advance. If a publisher has the projects and written instructions, Banar will do the photography, editing, and the graphic design of the book. Banar can complete a 64-page book in as little as two months, even faster if necessary.

Banar has produced books for clients on paper crafting (wedding invitations, artist trading cards, beginner's guide to altered art, etc.) ... Quilt/fabric books (fleece, art quilts, etc. ) ... Jewelry (beading, polymer clay) ... Embroidery ... Home Dec (curtains, designing for small spaces, quick decorating) ... Baby Gifts ... General crafts (including Great Gifts in Under 30 Minutes for Int. Masters Publishing that included more than 4,000 craft projects).

For more information, contact Nancy Javier at Banar Designs, banar@adelphia.net or call 760-728-0344. Another company which offers similar services is Kooler Design Studio.

Note: CLN will periodically profile companies, then after the issue place the profile in Business Profile Archives. For more information on how your company can be profiled, call Mike Hartnett at 309-925-5593 or email mike@clnonline.com.

To see the latest listing of available positions 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*: 17.65 ... Change**: -0.58
Hancock Fabrics (HKF). Last*: 3.04 ... Change**: -0.39
Jo-Ann Stores (JAS). Last*: 15.43 ... Change**: -0.53
Michaels (MIK). Last*: 43.14 ... Change**: +3.83
Wal-Mart (WMT). Last*: 45.45 ... Change**: -1.53
CLN Retail Index. Last*: 124.71 ... Change**: +2.0%
Dow Jones Index. Last*: 11,464.15 ... Change**: +0.7%

Next Monday will be the fifth anniversary of 9/11. To see a remarkable reminder of that day, visit http://camazotz.com/wtc/large/index.html.

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xxx

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