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Your Business Commentary

Mike's often irreverent, thought-provoking analysis of the industry.

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What Hasn't Changed in 25 Years

Plus some random thoughts on this wonderful business..

by Mike Hartnett (January, 2004)

The only constant in the last quarter century has been change, but I've seen enough to think there are some valid generalizations.

1.
Technological marvels are often ahead of their time. The first craft videos, tv shows, e-commerce sites, infomercials, etc., were not successful when they were introduced.

2. Companies that make a big entry splash usually fade away like a shooting star. You can't spend your way to success (e.g. Creativity, Idea Forest).

3. Companies who try to enter our market without hiring someone with industry experience usually fail (e.g. Montgomery Ward, Kmart). And a number of successful craft companies were ruined by well-known, hotshot companies (e.g., General Mills, Borden, Bain Capital).

4. Making all the right moves for years doesn’t guarantee you’ll keep making them (e.g. Wang’s, MJ Designs).

5. Too much success, too fast, can kill a company as quickly as too little.

6. Retailing is VERY hard. Just ask MJ Designs, Craft Mart, Craft Showcase, Crafts & More, Cloth World, Piece Goods, Frank’s, Leewards, Fabricland, Old America, Ames, Ambers, Zaks, Silk Greenhouse, Moses, Creativity, Peoples, and Crafts Etc. (the Texas retail chain) – and thousands of independents. It's ironic that many independents look at chains as invincible; I bet as high a percentage of chains have gone bankrupt as have independents.

7. As Wanda Burnett said years ago in Craftrends, there are two types of independent retailers: missionaries and merchants. Missionaries want to share their love of scrapbooking, cross stitch, etc., with the world, and they are great teachers. Merchants are more concerned with things like turnover, rent, and margins. Ultimately, the missionaries convert hundreds or thousands to love painting, stamping, etc., but they don’t last. In a perfect world, retailers would have the business-savvy of the merchant and the love and enthusiasm of the missionary.

8. It is infinitely more difficult now to get a new product line into general retail distribution than it was then. For example: Plaid would come out with a new line, such as its Shoe Paint. (Yes, readers, paint for shoes.) Then Dave Cunningham would call up Bud Rothschild, the head of the most influential distributor, Craft World, and say, "Come on, Bud, try it!" And Bud would place an initial order, which would inspire others to try it. If it didn't sell, Bud wouldn't re-order, but at least Dave would re-coup his product development costs, and start working on yet another new line. Today, if Michaels and Wal-Mart don't like the prototype, the product never sees the light of day.

9. The quality of design has improved a hundred fold. Maybe a thousand.

10. Good manufacturers’ reps have been as instrumental to the industry’s growth as any group. Many a company has succeeded by following the wise advice of smart reps.

11. The single event that spurred so much outside investment in our industry was HIA’s first Size of Industry Study. Regardless of how accurate the Studies have been, finally investors had some concrete data upon which to make decisions.

12. Consumers continue to want projects that are faster and easier. Examples: A) First consumers made flowers with "silk" flower parts. Then consumers skipped making flowers by buying readymade silk flowers and arranging them. Now some consumers are skipping even the arranging by purchasing readymade arrangements. B) For years Wilton has made a gingerbread house kit. As the years went by, Wilton does more and more of the assembly so the consumer has to do less and finishes the project more quickly.

13. I’ve never seen a market study that wasn’t rife with inherent procedural problems. It isn’t the fault of the sponsors; it’s the nature of the beast. Consequently, I pay little attention to the actual numbers but, if the study was conducted exactly the same way from year to year, then I think the trend information is probably accurate.

14. Technological advances. The invention of acrylic cord was such an improvement over jute that it turned macrame into a blockbuster. Sewing machines, paints, and other improvements have made "crafting" easier, quicker, more beautiful. UPC codes and blister packing made life easier for retailers.

But with every improvement comes new problems. Thanks to technology, retailers now know exactly how well a new product line is doing, and they often pull the plug before the new line has a chance to find its audience.

15. The pace of change in the industry is increasing. We're not just juggling the same number of balls as before; now we're running faster while we do it.

Predictions that came true, sort of.

I predicted the industry evolving into two industries, large vendors selling to chains and small vendors selling to independents. That seems to be happening in scrapbooking.

I once wrote that the industry was like a teenager, trying out/testing various forms of behavior. At the time, the vendors were trying selling direct, to distributors, via home parties, mail order, etc. Eventually the industry would figure out the best way to move products from the vendor's factory to the consumer's living room.

We have. I'm not sure we've figured out the best way, but it's much more consistent now.

Predictions that didn't.

Blackwork. I was so convinced this form of needlework would be the next cross stitch that I put it on the cover of PCM magazine. The fact that you may never have heard of it is a sign of how wrong I was. That experience taught me never to assume something would be a hit because I personally liked it.

MJ Designs. Mike Dupey was the best retailer in our industry, and I once said, "If Mike Dupey ever goes bankrupt, we should all give up." Mike did, but the industry continued to grow.

E-commerce. I thought it would do better than it has thus far.

I knew they were doomed ...

When the Montgomery Ward "craft" buyer said to a vendor, "Oh, you sell paint? We’re not going to have paint in our craft department. We were going to, but then our hardware buyer heard about it and had a fit. He says paint is his department."

When the head of the decoupage society said to a magazine editor, "Oh, you want a how-to project for a beginner? Gee, I don’t know anyone interested in doing that sort of article."

When, at the height of the e-commerce interest, the VP of one of the biggest money-spending e-commerce sites blew off her first meeting with a trade magazine editor. When they bumped into each other later at the show, she said, "Oh, we just couldn’t make it," and laughed, but didn’t apologize.

Most important day in industry history.

About 10 years ago when the industry was still dominated by craft and needlework independents, the most powerful, influential company in the industry was a distributor called Craft World, and the leading chain was Leewards. In one 24-hour period, Craft World went bankrupt and Leewards was sold to Michaels. It was the beginning of the modern craft industry.

Other important events.

1. The great snowstorm in Chicago that devastated the HIA show and convinced the board to move the show around to Sun Belt cities.

2. The birth of ACCI, caused by the HIA board's complete inattention to the needs of its growing craft segment.

3. When Michaels went public. Now money was available for expansion. And later, when Michaels hired Michael Rouleau. I think the company was near bankruptcy at the time and Michael turned the company around.

4. When Ben Franklin scoffed at an Arkansas BF dealer's idea to open a discount store. The retailer, Sam Walton, said, "Ok, I'll open it on my own and call it Wal-Mart."

5. When Michaels first used Delta paint as a loss leader and sold it for less than independents paid to distributors. It created a firestorm of protest by angry retailers and distributors, and it was a graphic example of things to come. In macrame's heyday in the mid-70's, American Handicrafts had used a similar strategy with jute – $9.95/roll compared to $19.95 and $24.95.

6. In the 1960's, when Aleene and a handful of other vendors started the Craft Caravan, which was a traveling consumer craft show and helped put crafts on the map.

7. When Northwest Fabrics changed to Northwest Fabric & Crafts. It was the first major effort by a fabric chain to sell crafts.

Most hypocritical ad promotion.

Wal-Mart's "Made in America" ad campaign.

What I love about the industry.

The people. So many were so kind and patient with me when I first started. And for a writer, entrepreneurs are a gold mine of fascinating personalities.

What I hate.

When talented, hard-working people lose their jobs through no fault of their own.

Condescending attitudes. People who look down their noses at various categories or designs, vendors who are rude to independents, and outsiders who look down on our industry.

Companies and people who survive and prosper because of this industry, but don't give anything back. They never volunteer for trade association committees or boards and don't support industry charities.

What I've learned to appreciate.

Simple Survival. Soooo many vendors and retailers are gone, usually because they didn't adapt to change fast enough in this trendy marketplace. To still be here after all these years is an accomplishment in itself.

(Note: To read previous Business-Wise columns, click on the titles in the right-hand column. To read more about the industry 25 years ago, read the 1/19/04 issue of CLN.)

xxx

 

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