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A view of the industry through the eyes of a chain buyer.

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Independents Respond to Provo

To say they're not happy is an understatement.

Compiled by Mike Hartnett (December 18, 2006)

Note: The following are responses by independents who were given an advance reading of Provo's defense of the way it handled the sales and marketing of the Cricut. To read Provo's comments to which the following are responses, read click on "Vinny Da Vendor" in the left-hand column or click HERE.)

Bob Ferguson, Ferguson Merchandising (Ben Franklin), Redmond, WA

Huh, what she say?

I would only tell you that perception is reality and the perception in the market is Provo does not take care to value their independent customers. All the fancy words of a "Communications Director" do not change that perception. They completely bungled this program as far as the independent retail world is concerned and to use another old concept, memories last a long time.

Gobbledeglotz is gobbledeglotz not matter how it is spun into a position. The answer regarding the MAP initiative is technically correct, but the fact is they sold the program to many independents that purchased based on the explanation that the item would not be discounted by anyone, or the items would not be sold to those people who did discount. Them's the facts!

Of course they will not stand behind some salesman's word to a customer that the item will not be in the big discounters or be discounted if it is. The cop out is, "We can't be held accountable for anything that our sales people tell our customers 1 1/2 years ago." Again, people have long memories.

The sad thing is this is not like selling used cars. Business relationships are built on mutual trust. I can only say to Provo, good luck on reconnecting with those that have been made to understand otherwise.

Karen Bremer, The Red Bee, Tustin, CA

I totally agree with Bob's response. That interview with the "communications guru" made me laugh out loud. I just attended the EKstravaganza event put on exclusively for independents by EK Success and was blown away by the effort they make to educate and encourage their Elite independent accounts (the pending Martha roll out excluded, of course). The buzz among retailers there was that no one was ever going to buy from Provo again.

I personally called Provo yesterday to find out what would happen to me (a fine? jail? firing squad?) if I advertised my remaining Cricut stock below the price I signed my life away to protect, and after being transferred, called back, and admonished like a small schoolgirl, was basically told that I would lose my account. Nary a tear came to my eye. My reps were in yesterday too, without an appointment, to try and salvage anything left from their livelihood. They were screwed and they are mad at Provo.

May this be a lesson to all manufacturers short sighted enough to fish for the big fish at any cost. Cuz when Wal-Mart is done, so is Provo.

Lisa Kanak, The Cropper's Corner, Frederickburg, VA

Whether or not the piece of paper retailers signed is a contract is a matter of semantics. The understanding of those reading the paper is that we would agree to abide by the MAP in relation to Cricut products, or face the consequences. We could not be a retailer of the product without signing the paper.

The advertising restrictions are put in place to protect the value of the machine and thus create a fairly even playing field for everyone selling it. Michael's, AC Moore, and I all had the same restrictions. Also, we are also all craft stores with a similar customer base. Wal Mart is well outside the craft store mold, in that it is a store our customers go to shop anyway. They are known for carrying cheap products or products at cheap prices.

The fact that the larger stores violated the MAP on more than one occasion without repercussions was a major ding to the independent's faith in Provo Craft. However, the straw that broke the camel's back was placing the Cricut in Wal Mart. By placing the Cricut in that marketplace, Provo devalued the item and rendered the MAP completely worthless.

It is downright laughable that Provo is now attempting to pawn the Wal Mart debacle off as some sort of planned marketing strategy. While the general principle of appealing to "the curious" is valid and very important to the long-term health of the industry, that is NOT who will buy the Cricut.

Your curious crafters enter with staples stickers, paper, albums, basic tools, and maybe a starter set. The initial outlay for supplies is probably around $150-$200 in total. They will "see how it goes" and then start purchasing more.

It is the rare "curious" customer indeed who will walk in and spend $179-199 for one machine for a craft in which she may or may not be interested. They might justify that for a basic sewing machine but for a tool that cuts paper into fancy shapes and alphabets? I'd like to see the focus group, or market research on that but I'm betting it doesn't exist.

So, the question is, "Who is buying the Cricut at Wal Mart?" They are the already-crafting-but-on-the- fence-for-buying Cricut consumer. They are people who already shop at A.C. Moore, Michael's, etc., and are looking for the best price. They are the ones who were interested in the machine but were waiting for Christmas (or the price to come down) to make the leap. These were the same people that walked into my store on Black Friday for demos, and then drove across the street to Wal-Mart to purchase it. Instead of making $70 on the machine, I put on my best smile, made someone happy, and sold some paper.

Regardless of how quickly the Wal Mart decision was made, Provo Craft did not act as any type of "partner." They sent everyone a letter reiterating the MAP policy, and told everyone they needed to make sure they had enough product for Christmas; that was it. There was plenty of time to notify stores. Wal-Mart does not operate on a Fed Ex timetable when it comes to buying.

With respect to the mentioned "LSM" program, it sounds like too little, too late for the stores that are now faced with the prospect of having to sell the machines at a loss just to get them off of the floor. And, unfortunately, Provo has lost the trust of hundreds of independent stores through this process. Any "LSM" program relies on trust in order to be effective. That trust has been shattered through Provo's inaction with the enforcement of the MAP, and the undercutting of the perceived and real value of the Cricut machine by placing it in Wal Mart.

Provo acted irresponsibly and is now trying to repair the damage to their reputation and their company. The LSM program is a band-aid that probably is being developed on the fly, without much thought or consideration. There are too few people in this industry who truly understand grassroots marketing, and how to go about it. And from what I've seen, they aren't at Provo Craft.

Mike Dolan, Scrapbook 911, San Antonio, TX

First, I do not think that "unexpected demand" is the appropriate title, but unexpected quality is a better explanation. As you may know, at the Summer 2005 CHA show, delivery was scheduled for the first quarter of 2006, but because of technical glitches, this did not occur. In fact, it wasn't until October 2006 that we received the final Cricut that had been ordered in the summer of 2005.  

Since Thanksgiving, I have contacted over 50 authorized Cricut dealers to see if their opinions about this issue are similar to Scrapbook 911's. I have tried to incorporate the comments I have received into this note. 

It really does not matter if the Minimum Advertised Price policy, or MAP, is called a contract or an acknowledgment. We, along with many stores, placed orders for a high-priced item solely because of the assurances made by Provo Craft that the Cricut would not be sold at national retailers for a discount price. Had we known that consumers could easily buy this machine at a chain for less than $200, we would not have placed an order.

This is echoed by the majority of stores that I have contacted. I am disappointed that Ms. Davis did not answer your question "Have you stopped selling to any retailers who violated the MAP?" I am not aware of any retailer who was discontinued as a dealer, and we do not believe that the policy is enforced.

To give you an example, I reported a violation about a website that was selling the Cricut for $239.99. I even walked the customer service rep through the steps to add one to her online basket. The Provo Craft rep said that issue would be forwarded. The bad news is that the website was cricut.com, or Provo Craft. As of today, you can still buy one for less than the $249.99 MAP price directly from Provo Craft. I know that a small retailer in Louisiana called Provo Craft the week after Thanksgiving and told them she was going to sell all her Cricut items on Ebay (which she did). Even after reporting herself, her store is still listed as an authorized dealer. So much for enforcement.

As to shipping, we along with many small stores were told shipping was based on when the order was placed. The response by Provo Craft that weighing all the considerations of business needs during a time of high demand can be better said as Provo can get a check for a large number of machines from Michaels, who is their largest customer, and QVC, before going through the hassle of sending units to the 100 authorized small stores.

I think Provo Craft had a very good idea of how many units had been ordered at the summer CHA show, so where is this unexpected demand?

As a side note, when the Cricut was being sold on QVC, I called and complained that Provo Craft stated that you must be a brick-and-mortar store in order to sell the Cricut. A few days later, Provo Craft told me that QVC has a storefront in the Mall of America, which I called. They did not know what a Cricut was, but suggested that I go online to find it.

Pricing: I can understand why Provo Craft will not discuss pricing in the article. I think that the discussion about pricing may be heard in a court room, and the legal staff does not want to provide any details to potential plaintiffs.

Wal-Mart: The decision to sell to Wal-Mart is Provo's choice. They have the choice to sell to their established retail network, or to Wal-Mart. Unfortunately, it can't be both. We learned of this decision from a customer in late November. Provo Craft had ample time to send a letter to its dealers. In fact, we received a letter from Provo Craft dated October 26, 2006 which started with the phrase, "Due to recent events...." I can't imagine that Provo Craft didn't know about selling to Wal-Mart on October 26th, 2006.

Appointments at the Summer CHA: Again, the lawyer-speak of what may or may not have happened is best left to the court room.

Competing with chains and new product lines and the upcoming CHA show: I have no issue with competing with a chain store on an item that retails for less than $9.99. I think 98% of what I stock falls into this bucket. In fact, Michaels says it best in their Securities and Exchange Commission filings:

"We believe customers tend to choose where to shop based upon store location, breadth of selection, price, quality of merchandise, availability of product, and customer service. We compete with many different types of retailers and classify our competition within the following categories. Small, local specialty retailers. This category includes local "Mom & Pop" arts and crafts retailers. Typically, these are single store operations managed by the owner. These stores generally have limited resources for advertising, purchasing, and distribution. Many of these stores have established a loyal customer base within a given community and compete with us based on relationships and customer service."

We do have many customers who could save a few pennies or a dollar or two on a Provo Craft trimmer by purchasing it at a chain store, but come to our store because it is more convenient, and we have built customer loyalty. However; they have and will continue to go to Michaels in order to save $50 or $100.

As to the new product, based on the comments I have received from other stores, the sentiment is, "Fool me once shame on me; fool me twice, shame on you." In other words, Provo Craft has lost its credibility with its small customer base, and these stores do not plan on visiting the Provo Craft booth as there is a lack of trust.

Education: Our store offers a class for $2 that is titled "Make Your Cricut Sing." This 90-minute class instructs customers on how to use all of the features of the machine. Yes, it is our hope that customers will buy other Cricut cartridges and such, but at the last class, 60% had bought their machine for less than $200 at a chain, and had purchased additional cartridges from a chain as well. We think Local Store Marketing is a great idea, but we have yet to receive any in-store marketing materials from Provo Craft, like the window sticker, the display stand, etc., that we see at Michaels, Hobby Lobby, etc.

New customers: The comment by Provo Craft is right on the mark; however; the only way to increase the customer base is to advertise in non-traditional craft publications. How about People magazine? An ad that says here are our great products, and see a local store near you, or look it up on our website would be fantastic. Will it happen?

At the end of the day, we have decided to no longer be a Cricut dealer. This sentiment is shared by a large number of small stores who like us, who called Provo craft and cancelled all future orders. I was lucky enough to sell one of my 10 unsold machines to a foreign national who thought is was a bargain at $249.99 because they are over $500 in Mexico City, but I still have over $8,000 invested in unsold Cricut products.

Distributor (Name Withheld)

Provo Craft is doing nothing more than angering their best customers. Wal-Mart may have bought the Cricuts, but who buys things day in and day out? Now we face our customers who think we've increased prices and are completely bewildered that we are offering the Cricut at $249.99.

(Note: Care to join the debate? Email CLN at mike@clnonline.com. To read the Provo's original comments, click on "Vinny Da Vendor." To read previous "Benny" articles, click on the titles in the right-hand column.) 

xxx  

 

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