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Date: April 1, 2013
Vol. XVI, No. 7, #375

Printer Version

TABLE OF CONTENTS

bulletCommentary: Stay Strong?
bulletTake The CLN Poll: Taxing E-Commerce
bulletThe CLN Poll: Social Media
bulletUpdate: Hobby Lobby vs. Obamacare
bulletWal-Mart's Inventory Woes Continue
bulletCHA Adds New Feature To CNC Show
bulletHigher Wages, Higher Profits
bulletDoctors Argue Against Hobby Lobby
bulletBeware Of Lawyers And Legislators
bulletMore Things To Beware Of
bulletWill Cash Registers Become Extinct?
bulletRetailers Try New Delivery Methods
bulletRanking Product Categories, I: The Numbers
bulletRanking Product Categories, II: The Meaning
bulletRandom Notes, Random Thoughts
bulletMiscellaneous News: Retail
bulletMiscellaneous News
bulletThe Creative Network: Job Openings
bullet"Bart" Bartimo, 1919-2013
bulletReminders

COMMENTARY: STAY STRONG? 

There are issues of CLN that, by coincidence, have lengthy pieces about scrapbooking, or retailers, or whatever. The issues aren't premeditated; they just happen. If I had to label this issue, it would be this: what a pain in the butt it can be to be a business owner.

I sure didn't plan it, but this issue is filled with lawyers and legislators and changing, confusing technology.

I'm tempted to say, "Stay strong. This, too, shall pass." But I don't think it will.

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TAKE THE CLN POLL: TAXING E-COMMERCE

Last week the Senate passed the Marketplace Fairness Act; it was an amendment to the budget bill and it has not yet passed the House. But the vote was, by Washington's standards, remarkably bi-partisan: 75-24. The bill would enable states to require e-commerce sites with more than $1 million in sales to charge sales tax, and it may have a strong chance of becoming law.

So here are the questions: Are you in favor of the bill becoming law? Do you think it will become law? To vote, click on Industry Polls in the right-hand column or click HERE. To read Independent Retailer's report on the reaction to the Senate vote, click HERE.

In related news, the New York Times ran an editorial endorsing the legislation, and New York's highest court ruled the state can collect sales tax from out-of-state retailers, rejecting claims by Amazon.com and Overstock.com that the tax law violates the U.S. Constitution's commerce clause.

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THE CLN POLL: SOCIAL MEDIA

Considering many forms of social media didn't exist five years ago, it's certainly made an impact – and will become even more important in the near future. Almost half (48.8%) the voters in this unscientific poll said social media was now very important to their business, while another 43.9% said it was somewhat important. Only 7.3% say it's not very important.

More than two-thirds, 67.4%, believe social media is much more important than it was just two years ago, and 30.2% said it was somewhat more important than in 2011. The remaining 2.3% said it was not.

The influence is expected to grow; 81.4% believe social media will be even more important in 2015. The remaining 18.6% think social media has peaked.

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UPDATE: HOBBY LOBBY VS. OBAMACARE

On Friday, the 10th U.S. Circuit of Appeals granted Hobby Lobby's request for the entire, nine-member court to hear its challenge of a federal requirement that it provide insurance coverage for the morning-after pill and similar emergency contraceptives, the Associated Press reported. The court also ruled it would hear HL's appeal on an expedited basis. Usually appeals are decided by a three-judge panel.

Oral arguments are expected this spring. Hobby Lobby asked for the appeal to be expedited, because beginning July 1, the company would be fined $1.3 million per day if the case is not resolved in HL's favor.

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WAL-MART'S INVENTORY WOES CONTINUE

Bloomberg News profiled a retired accountant, Margaret Hancock, as an example of the decline of Wal-Mart's operation. During recent visits to her store in Newark, DE, she listed numerous items, including fabrics, she was unable to buy because of inventory problems.

Bloomberg reporter Renee Dudley wrote, "It's not as though the merchandise isn't there. It's piling up in aisles and in the back of stores because Wal-Mart doesn’t have enough bodies to restock the shelves, according to interviews with store workers."

As evidence, the article reported that in the past five years, the company increased the number of U.S. Wal-Mart stores by 13%, but its U.S. workforce, which includes Sam's Club employees, dropped by about 20,000, or 1.4%.

Wal-Mart denies there is an inventory problem. "Our in-stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country."

Nevertheless, in February Wal-Mart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company had either tied or taken the last spot.

(Comment: The Bloomberg article is a pretty devastating portrait of the state of the world's largest retailer. See for yourself HERE.)

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CHA ADDS NEW FEATURE TO CNC SHOW

CHA has announced a program for the Create-N-Connect Conference & Trade Show (CNC) that will shine a spotlight on new product releases. Manufacturers planning on participating in the program will receive: space for their product in the New Products Showcase on the show floor … Significant publicity and online/social media coverage … Inclusion in a social media news release … Invitation to showcase the product in a VIP Media and Buyer Event … Listing on 2013 New Products Webpage.

In addition, a satellite media tour will be added, featuring a select number of products from the New Products Showcase. Products represented in the satellite media tour will be chosen by a public relations firm based on their ability to generate national television and radio coverage.

Any manufacturer can enter newsworthy products in the New Products Showcase. Go to www.craftandhobby.org/newproducts for more info and to register a product.

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HIGHER WAGES, HIGHER PROFITS?

An interesting article in the National Journal profiles three retailers, QuikTrip (convenience stores), Trader Joe's, and Costco, who pay their employees much higher salaries than is typical in retail stores. For example, entry-level employees at QuikTrip earn about $40,000 a year, plus benefits. Yet all three chains are doing very well.

The article cites Zaynep Ton of MIT's School of Management: "[The three chains] start with the mentality of seeing employees as assets to be maximized," Ton told the Journal.  That results in better operational efficiency and customer service, and that results in better sales. QuikTrip sales per labor hour are two-thirds higher than the average convenience store chain, Ton told the Journal, and sales per square foot are 50+% higher.

The article could have included Hobby Lobby, whose annual raises the last few years increased the company's minimum wage to $13/hour, almost double the federal minimum wage. 

Read the article HERE. The article coincides with "Make Your Customer Number Two" in CLN's Business-Wise section. Forbes Wendy Liebman makes a similar point in her "Yes, Personal Service At Retail Is Worth It – Again." Read it HERE.

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DOCTORS ARGUE AGAINST HOBBY LOBBY

The American College of Obstetricians and Gynecologists and several other medical groups that support the use of the "morning after" and "week after" pills filed a brief with the 10th U.S. Circuit Court of Appeals in Denver challenging Hobby Lobby's claim that the drugs are a form of abortion, The Oklahoman reported. The Center for Reproductive Rights also filed a similar brief.

As CLN has reported, Hobby Lobby sued over the Affordable Care Act mandate requiring that the company cover the cost of these pills in its employee health plan. HL contends the pills cause abortions, which violates the religious beliefs of the Green family, which owns Hobby Lobby.

"This court has already been provided with considerable misinformation concerning the supposed 'life-ending' effects of emergency contraception," the brief said, claiming research shows the emergency contraceptives work by preventing ovulation and the public discourse "is infused with misleading rhetoric stemming from political or religious views."

Kyle Duncan, general counsel for the Becket Fund for Religious Liberty, which is representing Hobby Lobby, said these contraceptives can also prevent a fertilized egg from implanting into the womb.

Other groups that joined the brief include The Assn. of Reproductive Health Professionals, Physicians for Reproductive Health, the American Society of Reproductive Medicine, the Society of Adolescent Health and Medicine, American Medical Women’s Assn., and the National Assn. of Nurse Practitioners in Women’s Health.

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BEWARE OF LAWYERS AND LEGISLATORS

Here are two instances in which lawyers are using quirks in legislation to sue unsuspecting retailers and vendors, who usually settle out of court to avoid costly legal fees. Settlements may be less expensive, but are expensive in their own right.

1. The National Retail Federation's blog describes "patent trolls," which work like this:

A company buys an obscure patent, then threatens to sue companies who use technology with even vague ties to the patent.

For example, 40+ online retailers who include a website link to their privacy policies on smartphone apps have been targeted by a California company claiming to hold a patent on the practice.

The NRF wrote: "Past claims include activities as mundane as adding an item to an online shopping cart and checking out, a retailer's mobile app linking to their website, and scanning a document to PDF and then emailing the file."  

Fighting a patent troll is expensive and time consuming; the average case costs $2 million and lasts about 18 months. Most retailers settle, instead, which is what the patent owner wanted in the first place.

To learn more and what's being done about it in Congress click HERE.

2. Adopted by California voters in 1986, Proposition 65, "Safe Drinking Water and Toxic Enforcement Act," was much broader than guarding against water pollution. In addition to prohibiting certain chemicals into the water, the law also required warnings for almost 900 substances. Also, instead of leaving enforcement to public officials such as the District Attorney and Attorney General, it allowed enforcement by "bounty hunters."

These people, often hired by lawyers, visit retail stores, discover products that inadvertently do not have an appropriate warning, and threaten the retailer and manufacturer with a lawsuit.

As is the case with "patent trolls," it is cheaper and less time consuming to settle out of court. This has cost numerous companies, including some in our industry, tens of thousands of dollars.

To read more on the subject, click HERE, HERE, HERE, and HERE.

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MORE THINGS TO BEWARE OF

1. As if retailers didn't have enough to worry about already, now they can fret about a potential shortage of the specialty paper used for cash register receipts. Read it HERE.

2. The Toy Industry Assn. reports the U.S. Customs and Border Protection will have to reduce import/cargo operations for the remainder of the year, due to the sequestration-budget cuts. TIA warns, "Cargo operations will have decreased levels of service, increasing delays for container examinations up to five days at major seaports." Read the full report HERE.

3. Because of the Americans With Disabilities Act (ADA), brick-and-mortar stores, for example, are required to be wheelchair accessible. What about e-commerce sites that make no provision for people who are partially blind or deaf? The National Assn. of the Blind and the National Assn. of the Deaf have already won lawsuits against Netflix and Target, the Wall Street Journal reports.

The Justice Department is expected to issue guidelines later this year. If there is a strict interpretation of ADA in relation to e-commerce, the Journal says that could mean websites will be required to include spoken descriptions of photos for the blind and transcriptions of multimedia features for the deaf.

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WILL CASH REGISTERS BECOME EXTINCT?

Maybe a shortage of cash register paper won't be a problem soon, because there won't be any cash registers. Associated Press business writer Anne D'Innocenzio reported, "Stores across the country are ditching the old-fashioned, clunky machines and having salespeople – even shoppers – ring up sales on smartphones and tablet computers." She cites Barneys and Urban Outfitters as chains planning to use iPads or iPod Touch devices for credit and debit card purchases, while Wal-Mart is testing a "Scan & Go" app that allows customers to scan their items as they shop.

The issue caused Michael Hiatt, President of Dynamic Retailing, to ask in Walmart Supplier News, "Once 90% of shoppers own and use a smartphone, will retailers continue to spend significant capital to build 20-plus cash registers at a venue to expedite shopper purchases? What if the remaining 10% of shoppers want to check out the old-fashioned way? How will retailers accommodate them? At what point will this accommodation no longer be supported? Will shoppers need to download a retailer's specific smartphone application in order to transact purchase? What if they [have] no desire to do this? Will retailers basically force all of their shoppers to become 'members' to buy their goods?"

To read the full report, click HERE.

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RETAILERS TRY NEW DELIVERY METHODS

1. Target, Walgreens, Toys R Us and several other major national retailers have teamed with Google on a test of same-day delivery for online orders in the San Francisco area. Google Service Express launched Thursday, offering six months of free same-day delivery services to shoppers who sign up, Bloomberg reported.

2. Wal-Mart is considering a plan to have store customers deliver packages to online buyers, a new twist on speedier delivery services that the company hopes will enable it to better compete with Amazon. It's the latest version of a new phenomenon called "crowd-sourcing," or the "sharing economy." Numerous start-ups now help people make money by renting out a spare room or a car, and Wal-Mart would, in effect, be inviting people to rent out space in their vehicle and their willingness to deliver packages to others.

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RANKING PRODUCT CATEGORIES, I: THE NUMBERS

In the two previous issues, CLN readers were asked to predict 2013 sales in 10 product categories. The point spread is the difference between the percentage of voters who think sales will increase and the percentage of those who believe sales will drop:

General Crafts, +69.5 … Kids Crafts, +56.3 … Sewing, +53.3 … Knit/Crochet, +52.2 … Art Materials, +35.5 … Needlework, +23.8 … Seasonal, +22.7 … Jewelry, +21.9 … Florals, -25.0 … Paper Crafts, -45.2.

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RANKING PRODUCT CATEGORIES, II: THE MEANING

Does the category ranking above mean General Crafts vastly outsells – or will outsell – Paper Crafting? No. Here's why:

1. Readers were not asked to predict the volume of a category's sales, simply whether 2013 sales will be better or worse than 2012.

2. For example, Category A could have sales of $100. Category B's sales are $50. If more voters thought B's sales would increase rather than decrease, the point spread would be positive – but perhaps the sales will increase only to $55. Meanwhile Category A had a negative point spread – more expect sales to decline than increase – but those sales might drop to $95. 

3. Who says CLN readers can accurately predict the future? (CLN itself certainly has a spotty record, at best, at predictions like these.)

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RANDOM NOTES, RANDOM THOUGHTS

1. In the last issue, I suggested that, in order to avoid charges of sexism or racism, athletic teams should be named after kitchen appliances, such as the Notre Dame Fighting Toasters. But David Rhymes of Hobby Lobby has an even better idea: "As a former Mississippi boy, I am proud of my 'Fighting Okra' from Delta State University.  While they are officially the 'Statesmen,' their green uniforms inspired the okra name back in the eighties and it has stuck. Forget kitchen appliances – go with vegetables with an attitude!"

2. Wal-Mart is so pleased with the performance of its small-format stores (under 60,000 sq. ft.) that it plans to open another 115 this year, the Wall Street Journal reported. Readers, have you ever been in a small format store? Does it carry our industry's products?

3. I've been waiting to report on this, and now that the new issue of CHA's magazine, Craft Industry Today, is mailed, I can. Be sure to read about the Schlecht family, which operates their Crafts Direct store in St. Cloud, MN. They put a very creative twist on store coupons: customers can buy a 40%-off coupon for $1, and the money is donated to charity. Would you believe $150,000+ has gone to local charities? Read "Industry Retailers Give Back." This is a great idea that every retailer could emulate. You can read the digital issue of CIT HERE.

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MISCELLANEOUS NEWS: RETAIL

WAL-MART. Is suing the United Food and Commercial Workers Int. Union and others who have protested at its Florida stores, the latest effort in its legal fight to stop "disruptive" rallies in and around its stores by groups seeking better pay and working conditions, Reuters reported.

IPO. Toys"R"Us announced it was withdrawing its intention to sell $800 million worth of stock. The company is owned by Bain Capital, Kohlberg Kravis Roberts, and Vornado Realty Trust. Bain is also the half owner of Michaels, which had also filed its intention to sell stock. A Toys "R" Us press release gave the reason for the withdrawal as "market conditions." It had also reported its fourth-quarter report that showed net sales, operating earnings, and net earnings were down. The three private equity firms purchased Toys in 2005 for $6.6 billion, about $600 million more than Bain and The Blackstone Group paid for Michaels.

A.C. MOORE. Is conducting its fourth annual Act for Autism® campaign through Apr. 27. Customers can donate $1 to the campaign at checkout and there will be a free make-it/take-it for kids Apr. 20. The donations support Easter Seals' Make the First Five Count® initiative – offering free online developmental screenings, early intervention, and autism services in the same communities as A.C. Moore stores. Since launching the campaign as part of its Crafting a Better World program in 2010, A.C. Moore customers and store team members have raised nearly $500,000 for Easter Seals.

RETURNS. Interesting analysis/comparison of the return policies of Michaels and Jo-Ann. Read it HERE.

NEW STORES. Hobby Lobby opened a store in Tucson, AZ and Federal Way, WA, and will open in Marlboro, its third store in New Jersey, and Bradenton, FL.

SOCIAL MEDIA. There is an interview with Kimberly Cornuelle, Jo-Ann's Social Media Specialis,t on the company's use of Pinterest. Read it HERE.

IMPORTS. Yahoo Finance cited Citi analyst Deborah Weinswig who met with Wal-Mart execs and quoted them as saying, "Proudly Made in the U.S.A. — While global sourcing remains a significant source of EDLC {Every Day Low Cost] opportunity, we believe that the $50B commitment to increase domestic sourcing over the next decade should benefit topline and profitability at WMT U.S. Domestic sourcing will help the company avoid wage inflation overseas and shipping costs, while increasing flexibility through shorter lead times and generating positive reputational buzz."

TECHNOLOGY. Jo-Ann chose Demandware's Commerce platform to support its digital commerce strategy. The press release said, "Demandware's cloud-based infrastructure will help Jo-Ann Stores to realize operational efficiencies and best-in-class performance." … This week marks the 40th anniversary of the first phone call made from a cell phone. The first cell phones weighed 2.5 pounds.

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MISCELLANEOUS NEWS

WEBINARS. CHA's April schedule: Apr. 3,  "The Inside Secrets of Charisma Retailers" with Rich Kizer and Georgeanne Bender ... Apr. 10, "QR Code Marketing: When, How, And Why To Use A New Technology" with Michael Newman ... Apr. 17, "Marketing With Focus" with Joe Rotella ... Apr. 24, "Make The Most Of Your CHA Membership" with Sue Turchick. Visit www.craftandhobby.org/webinars for details.

QUILTS. Judy Howard of Buckboard Quilts is sponsoring a "Food for the Soul" quilt contest/tour/sale with all proceeds going to feed hungry children. Watch a video of Sewing With Nancy's interview with Judy HERE and learn more HERE.

E-COMMERCE. eBay is trying to lure Amazon Marketplace sellers with fees lower than what Amazon charges, Yahoo Finance reported. Reuters reported a growing number of Amazon's online merchants are disenchanted because of the recent increase in fees and may think about switching to eBay and even Google and Wal-Mart, which are just getting to the same type of operation. Now Sears is launching a similar initiative

QUOTATION. "Success is a lousy teacher. It seduces smart people into thinking they can't lose." -- Bill Gates

3D PRINTERS. A company called Defense Distributed has obtained a federal license to manufacture and sell firearms – made at least in part with 3D printers.

PEOPLE. The online jewelry-supply retailer Artbeads named veteran designer/author Kristal Wick as VP.

DOLLS. Toy News reported sales of dolls are up a whopping 17%. Could that mean we'll see a resurgence of dollmaking, once an extremely hot industry trend? To read an explanation of why doll sales have spiked, click HERE.

AWARD. Spellbinders' Shapeabilities® 2012 Holiday Tree die template was selected as the 2013 British Craft Awards Best Craft Die of the Year, sponsored by Immediate Media, publisher of industry related publications.

MAIL. The Senate and the House approved legislation that blocks the U.S. Postal Service's plan to halt Saturday delivery of periodicals, first-class and standard mail, Folio reported. The continuing resolution still needs final approval from President Obama.

YARN. MapMuse has launched YarnPlaces.com, a map-based web portal to yarn shops, knitting events, knitting groups, and fiber farms. Knitters can now locate, learn about, and connect with places across America that cater to their hobby. "We built YarnPlaces to help knitters everywhere find great yarn shops, knitting events, and more – but also to give them a place to share their enthusiasm for knitting with like-minded people online," says MapMuse owner Mike Pilon.

YARN. Knitting icon Kaffe Fassett is the subject of an exhibition, Kaffe Fassett -- A Life in Color, at the Fashion and Textile Museum in London Mar. 22 - June 29. It celebrates Fassett's extraordinary life and career from his revolutionary knitwear for Bill Gibb in the 1960s, to his work with needlepoint, mosaics, rug making, tapestries, yarn and fabric design, costume and set design, and quilting. Now in his seventies, Fassett continues to produce new work which is also featured in the exhibition. See a BBC interview with Kaffe at https://vimeo.com/62698762.

PAINTING. To read an excellent review, with photos, of the National Museum of Decorative Painting, click HERE.

SEWING. The BBC Two network in Great Britain is broadcasting a new competition show, The Great British Sewing Bee. The series has eight contestants over a four-week period, with challenges along the way.

PEOPLE. CHA named former board member Kerri Wickersheim as VP of Marketing & Communications. Kerri recently held marketing positions at Scrapbook Adhesives by 3L and Bernina’s Sewing Supplies Division.

FASHION. Aleene's Tacky Glue and Tulip products, produced by iLoveToCreate, were used on a recent Project Runway episode. See a photo HERE.

THE CREATIVE NETWORK: JOB OPENINGS

To read the latest listings click on Jobs in the left-hand column or click HERE.

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"BART" BARTIMO, 1919-2013

Alex "Bart" Bartimo, 94, died the other day. He was the Editorial Director at PJS Publications, which published Crafts, Profitable Craft Merchandising (PCM), Sew News, and other industry-related magazines. He hired me as Assistant Editor of PCM in 1979, although I had no formal training in journalism or business, and promoted me to Editor about 15 months later. Much of what I know about those things today I learned from Bart.

But we all owe Bart a debt, because he was much more than a great boss/teacher/mentor. Ever see Saving Private Ryan, or the wonderful HBO series, Band of Brothers, about those troops who landed on Omaha Beach and fought their way to Germany? Bart was one of those troops.

One day when I was one of his editors, he was so upset, because some Democratic politician, who had fought in Viet Nam, was accused of some war crime or another. Now, Bart was a hard-core Republican, but he was furious at these Monday-morning quarterbacks passing judgment on this veteran, a soldier for us, doing the best he could at the time.

Bart told the story of how his regiment surrounded the Germans in a farmhouse in France. He and his brothers finally charged the house, and no one was on the main floor. But they heard noise in the cellar, so Bart opened a hand grenade, and threw it down the cellar. Apparently, the Germans had escaped, and Bart killed the elderly French couple who worked the farm.

Sleep well, sleep peaceful, Bart. You've earned it.

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REMINDERS

1. If you want a hard-copy of this issue, click on "Printer Friendly version."

2. If your company is a paid subscriber, everyone in the main office is welcome to register, free. Just click on "Work for a paid subscriber? Click Here to register" (center column, near the top).

3. If you ever have trouble with your password, click on "Trouble with your password?" in the right-hand column of the main page. The computer will then email the correct information to you.

4. CLN is published the first and third Mondays of each month. Your next issue will be Monday, April 15.

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