irreverent, thought-provoking analysis of the industry.
The Changing (Disappearing?) Core of the
Bob Ferguson and Mike Hartnett discuss the
year's major issue.
Note: In our last Business-Wise column, we published a letter
from Fred Zerull, a 71-year-old industry veteran who began his
retail life with a fabric store. He has changed many times since
then, and recently liquidated his Ben Franklin Crafts store into a
collection of specialty stores under one roof – framing, art,
quilting, yarn, and upholstery. You can read Fred's letter by
clicking on "Leaving 'Crafts' For Specialty Stores" in the
Some of the responses are included in the 12/1/03 issue. But
Fred's letter also generated a lengthy discussion between Bob
Ferguson and CLN's Mike Hartnett.
Bob Ferguson of Redmond, WA is widely considered the most
successful independent retailer in our industry. He is also a member
of the board of directors of the Hobby Industry Association and a
leader in the Sierra Pacific Crafts group. Bob responded to Fred's
letter, which elicited a response from CLN, which Bob, in
The Discussion, Pt. I: Bob Ferguson.
I have read, with great interest, the letter written by Fred
Zerull. I have known Fred for more than 40 years because my mother,
father, brother, and sister worked for Fred at one time or another
in the 60's and 70's. I have always known him to be a fine retailer
and a very astute study of the industry trends. I was sorry to see
Fred drop his membership in Sierra Pacific Crafts, but apparently
SPC could not provide "value" to his membership within the
framework of changes he needed to make to continue to be a viable
business in the Redding market. Conversely, Fred always added value
to the organization with his forward, if sometimes strident,
I have not seen his new store changes, but would guess that, like
his letter said, he made changes as a result of his perception of
how he can continue to be a merchant working within the real world
trends of Redding, California. That is a smart retailer.
I would take exception to some of the ideas he has put forth in
his letter, while at the same time saying that he is closer to right
than many craft retailers might imagine today.
His suggestion that crafts as we knew it in the '90's is dead is,
of course, correct. Like any other business, if you are doing it the
same way you did it in the '90's, you are driving on a rugged road.
That said, crafts is not dead. Crafts as we know it in 2003 is
vastly different than it was in the 90's, and different even than it
was in 2002, but it is far from dead. Scrapbooking is hotter than
hot and yes, even with two Michaels, two JoAnn's, and 10 small
independents selling scrapbook products and all within five miles of
us, it is still the hottest concept in the crafts business today, at
least in our area..
Beading and jewelrymaking is a huge category. With 70%+ margins
and a following of customers from many miles around, even with the
above-named competitors and a half dozen independent bead shops in
the area, I would hardly call that craft category dead. As the
country song says, "I like it, I love it, I want some more of
Yarn is bigger than it has been in all the 40+ years I have been
involved with that end of the business. New goods arrive almost
daily and new consumers (read: young) are drawn to the category by
many factors that have resurrected this formerly "dead"
Knitting and crochet are so hot that manufacturers of the various
needles involved are having a hard time keeping the pipelines filled
with product. We have knitting needles that sell for more than $20 a
pair that the manufacturer cannot bring in fast enough. (Yes, they
are made in China or they would never be manufactured.) Meanwhile,
our customers put their names on a waiting list to purchase them as
soon as they become available.
These categories are not dead by any means, but they have changed
and thank you craft designers and consumers for your change in
interests. Yes, the run-and-gun days of the 90's are gone and from
this independent retailer, I say, "Hoorah!"
Since I don't operate in California, I cannot take exception to
Fred's concept of dropping employee benefits, but in my market I
cannot believe that no benefits equals attracting quality staff
members. Our business success is absolutely dependent on the
commitment and creativity of our staff, and paying them either with
hard dollars or a combination of that and strong
benefits, as well as providing them with a sense of ownership of
their responsibilities, has been a winning formula for us.
The bottom line: I believe Fred has done what is right for him in
his market. Every independent should be thinking along similar
lines: A) Dominate the category or get out of it. B) Upgrade
and offer knowledgeable, professional customer service. C) Find
niches that chains cannot merchandise well. D) Change,
Thanks, Fred, for always leading the way. I have learned a lot
from you over the years and even while you sit in that beach chair
in Maui, you continue to inspire and motivate a lot of us to keep
the faith – and change. – Bob Ferguson
The Discussion, Pt. II: Mike Hartnett Responds.
Bob: I don't disagree with Fred turning to specialty stores, just
as I don't disagree with Crafts magazine changing to Paper
Crafts. What concerns me is this: if everyone turns to
specialties (heck, I thought crafts WAS a specialty) and abandons
the "core," what happens to the industry when those
specialties eventually decline?
When hot trends – the scrapbooking of their eras – declined,
there was always a "core" from which grew the next hot
trend. If we lose the core (and I'm not sure I can even define the
core).... – Mike Hartnett, CLN
The Discussion, Pt. III: Bob's Answer.
Well, for all of our sakes, Mike, I hope you are worrying
needlessly. Unfortunately, I think you make some very strong
arguments in the direction of how we are losing the core of what we
are, or at least what we have been.
I should only try and tell you the other side of the story: I do
go back a few years in this and other retail endeavors, and the
essence of what a retail business is has always had to shift with
the consumers' interests.
As you might remember, many of the old geezers like me, Fred, and
so many others came out of the variety- or department-store world.
We saw so many of those companies fail to address or embrace the
world of change in their industries. We ultimately saw failure
across the landscape because the "core" of the business
changed and the businesses did not. Look at W.T. Grant, Woolworth,
Newberry, TG&Y, and department stores like Frederick and Nelson,
Rhodes, Liberty House, and so many others. If you look carefully,
you will find that the "core" of their businesses changed
and they did not even know it until it was too late.
Woolworth was a classic. I started with that company in 1959 and
in the mid 90's, when they closed it down, they were still
merchandising the same goods to the same customers they embraced in
the 50's. That meant that their customer just got older and poorer
as time went on, and the young and more affluent went elsewhere to
buy their needs and desires. Isn't that where Kmart is today?
These retailers did not die or get where they are today because
they did not have customers who wanted to buy. They simply failed to
change their core merchandise philosophies and kept addressing the
needs of a shrinking number of consumers.
In stepped the Targets and Wal-Marts of the world who offered a
different slant on the products that Kmart tried to merchandise, in
locations that were of far more interest to the average consumer
than the locations that Kmart stayed with over the years.
Right here in relatively affluent King County WA, Kmart had one
store which they opened in about 1972. Their mistake? Simple – and
anyone with a year's worth of retail experience could see it –
they tried to entice that affluent consumer with the same core
products that worked in Bakersfield or in the old Kresge or
Woolworth stores around the country.
Our core in the craft industry has changed. When we started into
the craft business in 1979 after a mildly successful run as an
independent variety store, we opened up with the four lines that
were core products at that time: yarn, fabrics, macrame, and plastic
flowers. We also had a fine
selection of beads, but the beads of that time were plastic or
wood; there were few choices as to color or shape. That was our core
and the customers loved it.
When plastic canvas and macrame began to falter, we tore our
insides out trying to determine what would be the next basic product
in our industry. In the case of flowers, along came silks and we
were off and running at even higher levels of interest than
previously thought possible.
We went outside to other industries and found tole painting, at
that time a strictly boutique line that interested only the
hard-core and talented painters. We worked it and taught it and
showed it and modeled it and saw it morph from painting on wood to
painting on every kind of surface imaginable, including apparel and
even warm bodies in the form of tattoos. While some
called it "apparel painting," we saw younger consumers
getting interested, so simply gave it a new name, "wearable
We went to the framing industry and saw opportunity there and
added both custom and artists frames to an already existing tabletop
photo frame line.
Those lines became our new core. Along the way we saw opportunity
in many more lines like cross stitch that was also considered a
boutique or specialty line. Over and over and over we saw our core
merchandise lines change as the consumer changed. We had some years
when the basics were things like dollmaking and simple products like
felt squares. Sometimes our other heart-and-soul products were so
hot we could not keep them in stock, and then the next year we could
not give them away. Same thing today.
Some stick and some do not. The last big boom/bust in
jewelrymaking saw us go from $15K a month from January to August one
year to $2K a month from September to November of that same year.
Did we eat some inventory? Hell, yes, and then came up with Beady
Babies the following year that created $250K in sales for us in 15
months until all the big boxes and wannabes of the crafts world
jumped on the bandwagon and we moved on.
Framing is bigger and better than ever even despite the fact that
every Joe Dokes and corner retailer, along with every big box in the
world, has gotten into some form of framing.
So what can the independent do? Move on or set the bar higher.
Fortunately there is a huge quality issue revolving around framing
and we take advantage of it. We cannot begin to compete with the
Michaels and Targets of the world on their same ground, but we can
do better than they can when it comes to quality, and we do.
Our core product have changed, and even some of the core
principals surrounding custom framing have changed, but WE, not
they, set the bar and make them chase us. I took in 415 custom
framing jobs last week and any Michaels store would die to have that
many customers in their custom departments in a month, even with
their 40%-off coupons (which we do not ever run or accept).
Look at yarn. Three years ago we had cut back yarn to a few
basics and about 20' of space with a $50,000 inventory and less than
two turns a year. Our knitting classes attracted a few of us of the
geezer age, but then some brilliant wag in one of our other classes
said, "Why don't you call it something besides knitting
classes? That's what my grandmother and mother did."
"Yarn Yoga" was born and we have had a full house every
Friday night for two years. Now that inventory is four times that
$50K, the turns are 8 times, and we only have one item from our
inventory of just three years ago that we still merchandise in our
The core of the business has shifted and we are delighted with
the results. What was the core of the business three years ago is
now sold in every Michaels, Fred Meyer, Wal-Mart, and corner gas
station in the world, while we have happy customers lining up to buy
the new "core" products.
Of course we cannot sell it to our customers without some high
level form of expertise to help
customers make choices, but with a gross margin 20 points higher
than what we had with the old "core" products, we can
afford such expertise on the sales floor.
I can only see from the perspective of an independent retailer.
Chains have their niche and we have ours. I would worry more about
the manufacturing side of the business and what they are doing to
themselves when they bet the farm on the Michaels and Wal-Marts in
The new core: paper arts – and it's a huge draw; beading with
its glitz and excitement; and specialty yarn and the myriad of
things to do with it besides making afghans; and then there are all
the other new things.
The real trick is not to worry about what the "core"
merchandise is in the business, but worry and help to identify what
crafting is to the consumer at the moment. Crafting is a components
business. It always has been and will continue to be so forever.
We have taken departures like home dec that have been immensely
rewarding and still continues to be so in many ways, but the real
customers in our business want to "do it themselves," and
as long as we constantly try to identify and then react to what the
consumer wants to turn into core products, we will be successful.
In 2002 we sold about 40 units total of a particular product.
Last week we sold over 100 units. Why? We have a new
"secret" core idea and merchandise program surrounding
this product. It will be a hot line producing fantastic results
until the pipeline is full. The manufacturer will eventually figure
out what we are doing with it and sell it to Michaels and Wal-Mart
and it will get a big ride for a short time and we will move on to a
new core product.
What is core? It is what the consumer says it is, and smart
retailers respond in whatever manner is appropriate for their
market(s). If Crafts magazine turns into paper crafts and
paper eventually finds its role in the sunset, they will morph again
into whatever is "core" at the moment.
My three granddaughters will be doing great "crafts" in
their own way long after you and I are pushing up daisies. Now go
worry about something important, like where to find a decent quality
bottle of Cabernet. – Bob Ferguson
(Note: Want to join in the discussion? Email your thoughts