Creative Leisure News - Business-Wise

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

What's Happening Out There?

Some grim answers, and gas prices is only one of the culprits.

Compiled by Mike Hartnett (September 5, 2005)

(Note: Last month in an email newsbrief, CLN noted the mostly bad news I had heard lately and asked, "What's going on out there?" Here are some of the responses. Comments relating specifically to scrapbooking can be found by clicking on Memory, Paper & Stamps in the left-hand column or by clicking HERE.)

A Well Established Independent.

To put it simply, things are not good out here in retail craft land. Not many people will share actual numbers, but the information from those who will is pretty consistent � sales are flat at best. Even with good sales in yarn, beading, scrapbooking, and a few other small areas, it is not enough to make up for the significant drops in the big picture. I know that in our primarily "blue collar" community the cost of gas is having a major impact � especially when coupled with large families, big distances, and virtually no public transportation!

(Mike's comment: When I visit the Peoria-area stores, I see customers in the paper-craft, stamp, yarn, and bead aisles, but not many customers anywhere else.)

An Industry Consultant.

A war I don't want � and am suspicious of � makes me anxious subliminally. I don't trust big business; they cheat and lie and the officers live big off the money I either invest in them or support with my business. Auto business is way up; that money comes from somewhere in the budget that is already down because of gas prices. Housing prices are off the charts and people are investing in expensive housing. That money comes from somewhere in the budget, too.

(Mike comments: To illustrate that point, is a new study by the Public Policy Institute of California and reported in the San Diego Union-Tribune which indicates that 20% of people who have bought homes in the past three years are spending more than half � half! � their monthly income on mortgages. And almost a third of those earning $30,000-$60,000 are spending more than half their income on housing. The situation is worse in California than in most places, but still....)

What suffers? Leisure and incidentals. What gains: I spend it on what is of value, what I absolutely need, and what makes me feel better.

Most retailers today do SO much by the numbers that they lose track of who there customer really is. They are afraid to trust their gut along with the numbers to make decisions.

Target is the exception. It gives me value, fun, quality, and a new look almost every week somewhere in the store.

A Needlework Designer/Distributor.

It is not just the price of gas keeping consumers home, it is what fuel costs are doing to the price of necessities. Even Wal-Mart is starting to feel it.

Also, costs are increasing to their suppliers. The rock and the hard place are on a collision course to the point where publishers and manufacturers will no longer be able to tolerate "expense leveraging" and the retailers will have to find something besides price to compete on; most have long since given up on quality and customer service should be more than just a person at the door saying hello.

As a family with ingrained habits, our household shopping list has not changed substantially in many years. Each year the cost climbed a bit, something close to the CPI. But in the past 16 months our household expenses are up more than 35%; trust me, our income has not.

Our industry sells niceties, not necessities, purchased from disposable income. Working families have fewer extra dollars, and those who thought they had good incomes from dividends and other parts of their retirement portfolio have less income and higher expenses. All this means less disposable income.

A year ago I thought nothing of jumping in the car every afternoon and heading out to the farmstand for "just picked" vegetables for dinner, and stopping by my local supermarket for the entree. Now I consolidate those four to six trips a week into maybe two. That means at least two times I do not impulse buy. And even with that cut out of the budget, our expenses are still up 35%, not counting the gas to get there.

(Mike's comment: Interesting thought! How often is the difference between a store's profit and loss the impulse purchase? Fewer store visits means fewer chances to get that impulse buy.)

All of the chains have been making their stores progressively less pleasant places to shop. As a consumer. I find it increasingly unpleasant to navigate the aisles.

More and more resets seem to include moving the aisles a few inches closer, thinking no one will notice. Or increasing the height at which merchandise is placed. My mother, who relies on a electric cart, is so frustrated she prefers to do without rather than under go the unpleasant experience. Either she spends half her time trying to back out of an aisle because two push carts � much less two electric carts � cannot pass in the aisles. Or, she cannot reach the items she wants because she cannot reach over about 6 ft. and things are now often as high as 8 ft. with no sales help around to assist her.

(Mike's comment: Federal law requires stores be accessible to the handicapped, but says nothing about products being accessible.)

As recently as a year ago, it was not uncommon for me to take a day each week to visit the chains just to see what was happening. Often this meant spending $$$. Now I visit more like once a month or six weeks.

Now we cram all necessity errands into fewer (some weeks even one) trip; there is no time to side trip to my local shops to see what's new and impulsively buy. In fact, I don't usually even get to the "craft aisles" strategically placed as far from the entrance as possible because I have neither the time nor the spare cash to fight my way back there.

This change in shopping means spending about the same amount per visit, but it is one trip, not six; that means at least 80% fewer dollars spent. And if my neighbors are any indicator, this is more common than we retailers really want to think.

Crafters now are talking more about using their stash instead of building it. If they aren't in the stores, they aren't buying.

Consumers are not in stores for more reasons than the cost of getting there. High gas costs are certainly an issue, but so are the prices of necessities. Traditionally, during bad times consumers visited and spent money in craft stores because they needed an escape, not a claustrophobic experience in a poorly maintained store where you trip over trash in the aisles.

E-commerce and Store Owner.

What is going on? I'm in two businesses: crafts and teen apparel (don't ask me why). My online craft business is down a smidge (maybe 5%) after five years of growth. I thought it was because I took too long to implement a website redesign and my customers were tired of technical problems. But maybe not.

I've been able to hold the line on outbound shipping costs. (My prices are up somewhat because my suppliers have higher expenses, but that usually raises sales rather than decreasing them unless a $1 increase in a kit affects a purchase decision.) Overall I don't think gas price is a large part of my particular issues.

Seems that Michael's is still doing well, but perhaps they're just getting a bigger piece of a shrinking pie.

On the other hand, the teen apparel business is going gangbusters. Up 30% from prior year, and that's in my store that's been open five years. The local newspapers were commenting that teen oriented businesses were doing very well for back to school, partly because there were no more "must have" electronics purchases soaking up available spending money. Kids were buying clothes instead of desktop computers, cell phones, or MP3 players. Clearly the increased gas prices have not stopped spending on teen apparel.

I don't know how many of the target customers for crafts have teen-aged kids. Maybe they're spending it all on the kids (the baby boom "echo"). We certainly can't blame it on the electronics business, or my teen apparel would be suffering also. Or maybe crafts are pretty low on the household-expense totem pole, and the craft fund is going to gas money and there's no connection between what's happening in my two businesses.

I guess I'm glad I'm not alone in my craft woes, but it's not too good for the industry as a whole. I don't really want to assume that the whole idea of making it yourself is drifting out of fashion, but it's possible. My 96-year-old grandmother can't get a grip on a needle any more. (I'm thinking about introducing her to punch needle for something to do.) But as we all get older and more infirm, large numbers of crafters just fall away, like my grandmother. Sobering thought.

Major Manufacturer.

I did hear on the CBS news last night about this trend towards soft sales. It is not only the craft industry. Wal-Mart and Target even reported low sales, low traffic. They were interviewing people coming out of Wal-Mart.

Yes, Higher gas prices does mean people do not have the extra money to spend on hobby or home related items. They are too busy trying to keep their car going, buying food for their family, and paying higher utility bills of the Summer.

If gas prices remain high, then this will continue to keep all extra money to a minimum. Putting children back in school during the third quarter could also translate into softer sales for the craft industry, but will help Wal-Mart and Target.

Manufacturer.

I just returned home from a week's vacation with my family and thought I'd share the observation my husband and I made. So far, gas prices haven't seemed to inhibit the number of people traveling. We left our home in Iowa to travel to a resort near Chicago, then made a circuit through Illinois, St. Louis, Lake of the Ozarks, and home. At every gas station along I-80 and I-70 (and we have little kids so we stopped at more of them than we actually filled up at!), there were cars waiting in line to even pull up to the pumps. Traffic on the interstates was always busy all the times of the day and night.

My husband drives all over the Midwest regularly for his business and he feels the number of people on the road is higher than any summer in the past 5 years.

Maybe people are simply putting their gas purchases on credit and it will affect behavior later when they have to pay the bills.

(Mike's comment: Ok, we've read lots of reasons why sales are flat or down. Now then, what should we DO to improve business? Email your thoughts to CLN at mike@clnonline.com. To read previous Business-Wise columns, click on the titles in the right-hand column.)

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