Date: August 4, 2008
Vol. XII, No. 15

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TABLE OF CONTENTS

COMMENTARY: FINDING A WAY 

A little historical perspective on the industry's and the country's economic woes: In the 1970s oil prices went through the roof. There were miles-long lines at gas stations and President Nixon lowered the speed limit on Interstate highways to 55 mph. The inflation was particularly bad in our industry because oil was necessary to make polypropylene, or macrame cord. (Macrame was THE category at the time. Imagine if the cost of scrapbook paper tripled.)

The early 1980s brought a recession and inflation that was far worse than it is now. Back then the size of the industry was estimated at $3 billion. Today it's $30+ billion.

Somehow we found a way to survive and prosper, and we will again.

"Benny Da Buyer". How scrapbook retailers can benefit by offering a slide-scanning service to customers.

Designing Perspectives. Janet Perry gives practical advice to designers and publishers to improve communication between the two groups.

"Vinny Da Vendor". A small manufacturer reports how she almost was scammed by a man seeming to represent a store in Australia.

Kate's Collage. Businesses are "going green"? That's been Walnut Hollow's philosophy since the wood products company was founded in 1972.

Note: If a column seems "old," click the Reload or Refresh button on your browser.

TAKE THE CLN POLL: GRADE THE SUMMER SHOW

Now that the dust has settled from the CHA Summer Show, exhibitors and attendees can pretend to be teachers and give the show a grade. Were you pleased with the show? Disappointed? Neutral? To vote, click on Industry Polls in the right-hand column or click HERE.

The industry appears very unsure about CHA moving the Summer Show to Orlando and adding a consumer show. Almost half of the potential exhibitors who participated in this unscientific survey, 47.1%, said they were not sure if they would exhibit; 29.4 said they exhibited in '08 and will again in '09. Almost a quarter, 23.5%, said they did not exhibit in '08 and will not exhibit in '09.

One third of the attendee voters said they attended in '08 and will again in '09, but 39.4% said they were not sure. There was a good number, 12.1%, who did not attend the Chicago show but would attend in Orlando, while another 15.2% said they did not, and would not, attend either.

For the vendors who are planning to exhibit at the trade show, 22.3% will not exhibit at the consumer show, 29% will exhibit, and 38.7% are not sure. For attendees who are considering attending the trade show in Orlando, 45.5% will stay for the consumer show, 36.7% will not, and 18.2% are not certain.

(Note: Voters were asked to read the interview with CHA CEO Steve Berger regarding the '09 trade – and consumer – shows in '09 in Business-Wise before voting. If you have not yet read it, please do so.)

A worrisome time. The triple whammy of inflation, recession, and a credit crunch has vendors and retailers alike wondering about the future.

Chain Vendors. Are worried about Michaels' ability to service $4 billion in debt, that beancounters are making short-term decisions that may hurt in the long run – and feel betrayed that Michaels will now do more direct importing. ... Are concerned about A.C. Moore closing stores and its decline in same-store sales. ... Pleased with Jo-Ann's turnaround, but wondering if it's only due to Wal-Mart moving out of fabric and Hancock having closed so many stores. ... And what is Wal-Mart planning? Will they phase out more of our industry's products, like they're doing with fabric and needlework? ... Some vendors, believing the grass is greener elsewhere, are branching out into other industries.

Independent Vendors. Concerned about the decline in the number of independent retailers. Is this a sign scrapbooking is slipping or simply a temporary lull while cash-strapped consumers fill their gas tanks?

Others. The entire industry, particularly designers, worry about passage of the Orphan Works legislation in its current form. ... Magazine publishers are fighting against declining ad pages as advertisers, squeezed by higher costs and lower margins, cut back. The demise of hard-copy trade magazines, Craftrends and CNA, are examples.

Categories. The "next big thing" hasn't happened yet. The industry appears to be in one of its periodic fallow periods between the hot trends that inspire consumers to rush into our stores like a tidal wave, regardless of the national economy. ... Quilting, kids crafts, and jewelry-making continue to be strong. ... Art materials are getting a boost, possibly from retiring Baby Boomers.

Bright spots. Finally, chains are realizing their "We won't accept price increases" attitude is unrealistic, if they want to have any vendors left. Besides, the price of their imports is rising anyway. ... Hancock coming out of bankruptcy and paying off its old debts – the first retailer to survive bankruptcy after the recent change in bankruptcy laws. ... Yarn should get yet another boost when the Julia Roberts movie is finally filmed and released. ... Consumers staying home more often should help most categories, especially kids crafts. .... The weak dollar makes U.S. exports very price competitive.

The ultimate question: Yes, the industry traditionally does well during recessions, but has the industry had to deal with a fallow period and a recession and inflation at the same time?

Congress passed and sent to the White House a compromise bill revamping the U.S. Consumer Product Safety Commission and partially banning plastic-softening chemicals called phthalates. President Bush had expressed concern over the original Senate version and is reviewing the compromise version. The bill passed in both houses of Congress with veto-proof marjorities.

The bill would sharply cut the amount of lead allowed in toys and other products and increase funding for the CPS Commission. Three types of phthalates would be banned in children's toys and child-care items, except for minute amounts, while three others would be temporarily banned pending further study, Reuters reported.

It is not known if the ban, if put into law, would seriously affect kids' crafts and other industry products.

"It's a perfect storm," a veteran industry manufacturer told CLN at the CHA Summer Show, referring to inflation in the U.S. and China, a slowing economy, tighter credit, concern over the chains' increased interest in direct importing, and a decline in the number of independent scrapbook stores. Some examples:

1. Newell Rubbermaid is walking away from $500,000,000 in sales. The company probably has a product in every kitchen in the U.S., but President/CEO Mark Ketchum said it would give up a half billion dollars in sales because if it passed along all of its price increases, particularly for resin, the products would be so expensive they wouldn't sell.

2. The U.S. consumer price index surged 1.1% in June, the largest monthly rise since June 1982, and the federal minimum wage rose last month from $5.85 to $6.55. A year from now it will increase again to $7.25.

3. Steiff, a Germany manufacturer who has been a leader in the production of "plush" animals for decades, moved some of its production to China four years ago to cut costs. Now the company is moving production back to Germany. Higher transportation costs were one reason, but a major problem was quality control. "If you don't have people from your own head office in China, then it is very difficult to manage the process," Harald Kayser, head of the China Business Group division of PricewaterhouseCoopers, told Reuters. "Smaller companies have more problems in this area."

4. Gift & Decorative Accessories cited a survey, Global Sources' China Sourcing Report, stating that 92% of China's craft gift suppliers plan to raise prices in the coming months, most by less than 10%, in part because China recently raised its domestic gas and diesel prices by 17%-18%, the Wall Street Journal reported.

5. Last month Costco, long considered relatively immune to recessions because of its low-price strategy, warned that its fourth-quarter results will be "well below" Wall Street's projection, the Wall Street Journal reported. "It's a new ball game," said Costco CFO Richard Galanti in a conference call. "The consumer is just starting to see – not only with us – rising general merchandise costs in a much bigger way than they have seen other than with gas." Galanti said Costco's vendors are raising prices 5-10%, double the increases the company had seen earlier in the year.

6. A new survey released by the market research firm Nielsen Co. revealed that 63% of the 50,000 consumers surveyed are cutting spending due to rising gas prices, up 18 percentage points from a year ago, the Associated Press reported, and 78% are combining shopping trips.

7. In a front-page article on 7/28, the New York Times reported, "Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring."

The Press Enterprise, which covers the Inland Empire area of Southern California (San Bernardino and Riverside Counties, Ontario, and east of L.A.), detailed how the economy is hurting scrapbook retailers. Stores in Hemet, Corona, and Temecula have closed recently, as have Scrapbooks and More and The Loft Scrapbooks in Canyon Lake.

The recent Rubber Stamp and Scrapbook Expo in Riverside had such a low attendance that it won't return next year. Expo President Scott Kramer, who organizes 20 shows a year across the U.S., told the newspaper, "The economy has impacted the shows, especially in the Inland Empire where the amount of disposable income is less than other areas." The area's unemployment rate is 8%.

The article cited Tami Premo, owner of A Page in Time in Murrieta, who believes the situation will get worse before it improves, and Shelly Maloney, supervisor of Collective Journey in Redlands said the store's customer count is the same, but sales are lower. "... but people still want to do paper crafting," Maloney said. "We are seeing a huge increase in wedding invitations and cards."

To read the article, visit www.pe.com and type Scrapbooking in the search engine.

1. Americans drove four billion miles fewer in the last year, according to media reports. Although the price of gas dropped lately, it's still substantially higher than the seemingly high prices a year ago. The more people stay home, the more things they need to do.

2. When consumers are pinching pennies, making gifts and Christmas cards that cost less than readymades is more appealing.

3. Location: Hardware cooperative True Value continues on its schedule to add 1.5 million sq. ft. of space between 2006-2009, while larger competitors Home Depot and Lowe's are reducing expansion plans. True Value's CEO told the Wall Street Journal higher gas prices and more convenient locations help True Value compete.

4. E-commerce: Amazon's second-quarter profits doubled, thanks to a 41% increase in revenue. Now parents are even buying school supplies online. Visit www.schoolsuppliesnetwork.com/default.aspx. Retailers, especially in tourist areas, might discover e-commerce isn't just for huge, national companies.

5. The weak dollar makes U.S. products particularly attractive overseas. One vendor told CLN, "If CHA wants to expand the market they should do a show in Paris, or Sydney."

Scrapbooking may be suffering from consumers using various online photo storage services or simply burning a CD, rather than printing photos. Here are three reasons retailers can use for such consumers:

1. AOL announced it was closing three data-picture storage services, AOL Pictures, the year-old media-sharing site BlueString, and the online backup service Xdrive. This is not the first online photo storage site to close. Consumers must retrieve their photos soon, or they will be lost forever. Can anyone trust that any company will be in business for generations, so a consumer's descendants can access the photos?

2. As fast as technology changes, who knows if a scrapbooker's grandchildren will be able to read a CD? Remember the betamax videotape machines? The floppy disks?

3. Because CD's deteriorate over time, they should be copied every year. Will children and grandchildren remember to do that to preserve today's CD's?

(Note: Mike Dolan is a retired banker who owns Scrapbook 911, an independent retail store in San Antonio. He is referring to Kathy Lamancusa's article "Email: A Banker Talks About Credit" in the 7/28 issue. To read Kathy's article, click on CLN Archives in the right-hand column.)

Kathy Lamancusa is right on the money when it comes to underwriting loans. Having 30 years of banking experience, I know first hand how credit cycles go. While hard to do in the current environment, the smart borrowers are the ones who obtain lines when times are good so that they have a source of emergency funding when times are not so good.

In our store we avoid bank loans and focus on credit cards that offer rewards. We use only one credit card to buy everything, and pay the card off every month. We earn reward points on it, and as you can imagine, the points add up quickly. We then use the points to save on travel or buy something nice that we can either use in the store or at home. – Mike Dolan

(Note: The following is from a manufacturer's sales rep.)

I get so much feedback from consumers and retailers about the dreaded "40-50% off" coupons circulated by the chains. You and I know they have to make their money somewhere, and I've personally found instances of product I sell that are listed at a substantially higher than the MSRP price in chain stores.

But they are perceived as a sound value by the consumer, and as an albatross by the independent retailer. I know of some retailers who are honoring these coupons on a limited basis (certain day of the week or month, etc.), and I would recommend that. But what's really killing these little stores is consumers who purportedly "love" their independent store, but are first in line at the chain store with coupons. I liken this consumer to one who would patronize a tire store by buying all of their oil there, but buying tires elsewhere. In other words, local scrapbook stores can't make a living selling just paper & stickers, period. They have to also offer and sell larger ticket scrapbook/craft items and/or other categories. Or they're not going to make it. – Name Withheld

(Note: What should independent stores do about chain store coupons? Honor them? Ignore them? Issue similar coupons of their own? Email your thoughts to CLN at mike@clnonline.com.)

1. "I think as with most changes, there will be positives and negatives, so the key will be for everyone to make the most out of the situation. Most likely we will lose some vendors and some buyers, but gain a few as well. Florida in the summer months is not one of my best places to go, but Disney is always good for the creative juices, so I am looking forward to it.

"The clients I work with are generally very pro business and look at most things from a positive-move-forward view, so I think they will make it a positive move.

"When I reflect back over the 20+ years attending trade shows in many different locations, the constant seems to be, those who look at change as an 'opportunity' for improvement, will come out of the show building their business. Change is good, but you must be prepared to accept the challenges that it brings." – Mark Lee, DreamSolutions Marketing Corp.

2. "This will be the death of the Summer Show." – Name Withheld.

3. "The show draws from a 400-mile radius? So what's that for Orlando, Cuba?" – Name Withheld

4. "After talking with Steve [Berger] and Larry [Olliges, owner of Dee's Crafts in Louisville and a member of the CHA board] this morning, I am excited about the new opportunities, and feel like we all have an active voice in what's going to be presented next year. I invite you to get excited as well, and think about the positive effect this could have on our industry and our businesses." – Pam Riddell, Maps2Memories and The Riddell Group

(Note: After reporting on the new '09 consumer show to be sponsored by CHA, CLN received the following email from a subscriber.)

A few weeks ago I attended the Learning & Product Art Expo in Illinois to take some art classes. The event had 200+ consumer art classes and had a product expo where attendees could buy product. On the way back to the airport, I shared a cab with a few vendors who told me the way everyone worked their sales:

All sales funneled through one retailer, Blick Art, who was the major sponsor of the event. Exhibitors brought the products they wanted to sell and set the prices they wanted to sell at. They were to have products there that were used in the classes, as well as whatever else they wanted to sell. Consumers would stop by their booth and tell them what they wanted to buy. A rep from that company would write up the order on a sales slip that had three (or four) parts and bag the customer's order. They'd give two (or three) parts of the sales slip to the consumer and hold the package until they received proof of payment from the consumer.

The consumer would walk around shopping as much as they wanted, and then go to the Blick Art booth to pay for all of their purchases. They could pay with cash or credit and were given back all their sales slips marked paid and a receipt. They took the sales slips marked paid back to each of the booths they purchased from to pick up their purchases.

Blick received a certain percentage on all Expo sales from the vendors for providing this service, and Blick didn't have to bring the product there or deal with any of that sort of thing. It also got the consumer in the booth a second time, which may have resulted in them seeing something they missed the first time that they might like to buy. I didn't hear any consumers griping about the way the sales worked, and most seemed to like being able to shop without carrying all their bags around.

Of course, depending on the size of the CHA Summer Consumer event, it would likely be challenging or considered unfair to run sales through one vendor, and still leaves the impression that manufacturers are competing with retailers. However, perhaps manufacturers who wanted to sell product at the show could strike their own deals with retailers who will be at the show to provide this sort of service, which would allow retailers to benefit.

If you reference this in a newsletter, please leave my name out as I know it's a sensitive topic in the industry. -- Name Withheld

1. "The dignity of the artist lies in his duty of keeping awake the sense of wonder in the world." -- G.K. Chesterton (1874-1936)

2. "The great artist is the simplifier" -- Henri Amiel (1821-1881)

3. "When I judge art, I take my painting and put it next to a God-made object like a tree or flower. If it clashes, it is not art." -- Marc Chagall (1887-1985)

4. "Abstract art: a product of the untalented sold by the unprincipled to the utterly bewildered." -- Al Capp

5. "Don't compromise yourself. You are all you've got." -- Janis Joplin

6. "There are some enterprises in which a careful disorderliness is the true method." -- Herman Melville

7. "I shut my eyes in order to see." -- Paul Gauguin

8. "As an artist, all I need is my paints and brushes – and someone to drag me away when the canvas is done." -- Pablo Picasso (1881-1973)

9. "Art does not reproduce what we see. It makes us see." -- Paul Klee (1879-1940)

10. "I don't know anything about music. In my line you don't have to." -- Elvis Presley

1. The 7/22 edition of the New York Times reported on companies switching to videoconferencing to save time and travel costs. "As travel costs rise and airlines cut service," the Times wrote, "companies large and small are rethinking the face-to-face meeting – and business travel as well. At the same time, the technology has matured to the point where it is often practical, affordable, and more productive to move digital bits instead of bodies."

I wonder how much money vendors could save – and pass along to their retail customers – if they didn't have to visit the customers' offices so often?

2. Scrapbook Retailer Editor Beth Mauro wrote an excellent entry, "Scrapbooking Going the Way of Macrame?" in her blog. Visit www.fwpublications.com/bline.

3. I recently received a new "book," Our Glass Jewels, published by HHH Ent. (www.hhhenterprises.com). It's 16 pages with projects calling for the company's products, particularly glass pendants. This type of publication once was de rigeur; every self-respecting retailer carried 10's if not 100's of such books – and manufacturers often teamed with publishers to produce books that supported their product lines.

What happened? Why has a book like Our Glass Jewels become a rarity? Help me out here. Email your thoughts to mike@clnonline.com.

4. The beading portion of our industry has no trade association or trade magazine. Consequently, almost no one at the recent Bead&Button show, other than CLN subscribers and/or members of CHA, knew anything about Orphan Works legislation. Many would have been happy to support the efforts to either fix or kill the bills, but there was no vehicle to inform them.

5. Recently Barbara and I bought a car. It wasn't a used car, it was "pre-owned." Now Gail Czech of The Creative Network reports that someone she's working with has decided she doesn't want to be called "unemployed." Instead, she calls herself "labor liberated."

6. In all the Industry Polls, I've never seen so many potential exhibitors and attendees vote "not sure" about next year's CHA Summer and Consumer shows in Orlando. Part of that, of course, is people have bigger, more immediate decisions to make, and are too  unsure about the rest of '08 to give much thought to '09. Still, CHA has a lot of promoting to do if these shows are going to be a big success.

QUOTATION. "We started receiving [Christmas] trees in April. By the middle of August, we will be 80% set. We get one truck a week and it's one-third full of Christmas." – Hobby Lobby Manager Jeff Walber (Aiken, SC Standard)

LAWSUITS. It seems some vendors are tired of their products being copied by retailers. Adidas filed a lawsuit in Oregon claiming Wal-Mart copied models of Adidas shoes.

PEOPLE. Former Jo-Ann Chair/CEO Alan Rosskamm is serving as interim CEO of Charming Shoppes since the resignation of Dorrit Bern as President/CEO. Alan is a 15-year veteran of the Charming board. Charming Shoppes operates 2,407 retail stores – Lane Bryant, Fashion Bug, Fashion Bug Plus, Catherines Plus Sizes, Lane Bryant Outlet, and Petite Sophisticate Outlet. ... Former Jo-Ann exec Michael Edwards was named Chair of the board of specialty retailer Muttropolis, a pet food/store chain.

PRIVATE EQUITY. The owners of Michaels, Bain Capital and the Blackstone Group, joined with NBC to buy the Weather Channel. To CLN's knowledge, it's the first major acquisition by private equity firms since the sub-prime mortgage crisis.

TECHNOLOGY. Sam's Club has sent letters to vendors telling them they will be fined if they ship pallets of products without the RFID (Radio Frequency ID) tags. Watch for Wal-Mart to follow that lead, and then eventually other chains will follow, just like UPC codes and Electronic Data Interface.

PAINTING. When you watch the Olympics, watch for a giant mural at the Beijing International Stadium, painted by Wyland, a Chine artist, and children. It will be a "Great Wall of China" spanning more than a mile with life-size canvas segments representing endangered or threatened marine wildlife from 191 nations. Wyland now has a PBS series, too.

IMPORTS. The Int. Longshore and Warehouse Union and the Pacific Maritime Association agreed on a new six-year contract covering 25,000+ dockworkers at 29 West Coast ports, thus averting a potential strike. Terms were not disclosed but one vendor told CLN, "Their insane wages and benefits are out of control and that is before the new increases are disclosed."

SEWING. Pati Palmer, President of Palmer/Pletsch, and her daughter, Melissa Watson, are the first mother/daughter team to be licensed by McCall Pattern. Melissa is one of two designers for McCall's DIY Style pattern line. They are the cover story in this month's SQE Professional, a trade magazine for the Sewing Dealers Trade Assn.

TV. The sixth Bake Decorate Celebrate! series uplinks to PBS stations Aug. 17, sponsored in part by KraftMaid and KitchenAid and produced by KS Inc. Productions and Wilton.

REPS NEEDED. A manufacturer of embellishments for paper crafting needs reps in Northern CA, UT, AZ, CO, WY, KS, Northeast U.S. Email mchiu@creativecharms.com.

DEADLINES. CHA's deadline for proposals for seminars at the Winter Show Jan. 25–28 in Anaheim is Aug. 15. For info, email Education Manager Amie Kolb at akolb@craftandhobby.org or call 201-835-1202.

CRIME. Two men stole $3,000 worth of sterling silver jewelry from a Hobby Lobby in Upper Cumberland TN. Police have a description of the thieves because the entire event was caught on videotape, the Upper Cumberland Daily News reported.

HOBBIES. The General Hobby Division of the Hobby Manufacturers Assn. elected Mike Lucero (Hornby America) and John Smith (Hobby Division of Iwata-Medea) to its governing council. Alan Iwig (Excel Hobby Blades) and Ed Rogala (Midwest Products) were elected President and VP respectively. HMA's Model Railroad division's Hall of Fame inducted Bud Reece and Dick Maddox, current and former execs of Bachmann Trains. Fred Hill and Fred Hamilton were recipients of the new Bobbye Hall Distinguished Service award. For info on the iHobby Expo™ Oct. 16-19 in Rosemont, IL, visit www.ihobbyexpo.com or call 1-800-TOHOBBY.

STOCKS. A.C. Moore: $8.07, up $0.84 ... Jo-Ann: $21.77, down $0.87 ... Wal-Mart: $57.75, up $0.92 ... Dow Jones: 11,326.32, down 0.4%. (Note: All changes in price are since 7/25 and are exclusive of dividends.)

To see the complete listings from the only personnel recruitment firm specializing in our industry, click on Jobs in the left-hand column or click HERE.

THE WISDOM OF LARRY THE CABLE GUY

1. A day without sunshine is like night.

2. On the other hand, you have different fingers.

3. Remember, half the people you know are below average.

4. He who laughs last, thinks slowest.

5. The early bird may get the worm, but the second mouse gets the cheese in the trap.

6. A clear conscience is usually the sign of a bad memory.

7. How many of you believe in psychokinesis? Raise my hand.

8. OK, so what's the speed of dark?

9. When everything is coming your way, you're in the wrong lane.

10. Hard work pays off in the future. Laziness pays off now.

11. Eagles may soar, but weasels don't get sucked into jet engines.

12. What happens if you get scared half to death, twice?

13. Why do psychics have to ask you your name?

14. Inside every older person is a younger person wondering, "What the heck happened?"

15. Light travels faster than sound. That's why some people appear bright until you hear them speak.

16. Life isn't like a box of chocolates . It's more like a jar of jalapenos. What you do today, might burn your butt tomorrow.

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