The trends, the issues, and productive business
SO, WHO'S AFRAID OF MICHAELS?
It's way, way too early to panic.
by Mike Hartnett (June, 2003)
News that Michaels will open two scrapbooking stores has many
independents nervous. After all, the regular Michaels stores have
wiped out hundreds, or even thousands, of independent craft stores.
Will history repeat itself?
Not so fast. Let's look at history and Michaels' operation.
First, why is Michaels trying scrapbook stores? Because it's a
public company. Officials have said they think the country can hold
about another 300 regular Michaels stores. At the rate the company
is opening stores, that market will be saturated in five or six
Then what? Michaels can't go to stockholders and say, "Well,
that's it. No more growth." So the company is looking at four
1. Aaron Brothers is a chain of framing stores in
the west with lots of expansion possibilities.
2. Village Crafts is a group of smaller craft
stores for population centers too small to support a traditional
Michaels store. The handful currently in operation do not seem to be
a serious threat to competing independents, but that may change. (To
read more about how independents are competing against the Village
Crafts stores, read the May 5th edition of CLN. Just
click on the CLN Archives button.)
3. A wholesale floral outlet is operating in Dallas. A
similar operation is expected to open in another yet-unannounced
4. Two scrapbook stores, Recollections, are
scheduled to open soon in the Dallas area. The first, in Frisco,
will open probably within the month, and the second, in Dallas, this
So Michaels has numerous options. Which ones the company chooses
to expand will depend on which options seem to offer the best
return. If it's not the Recollections stores ....
A little history here: In the 1980's many independents were
terrified when Wal-Mart opened three all-craft stores, Helen's
Creative Crafts. The stores did just fine by craft industry
standards, but were not as profitable as regular Wal-Marts (which
had not yet saturated the country) or Sam's Clubs, or the company's
new idea, mega-stores with groceries.
So the company asked, "Why open more craft stores and
receive xxx profit when we can open these other types of stores and
earn XXX profit?" Wal-Mart sold the craft stores to Michaels.
Michaels execs might be asking the same thing about scrapbook stores
in a year or two.
What If? Suppose the Recollections stores do
spread? Should the local independent close up shop?
Perhaps some of them should. Independents who opened a store
simply for the fun of it, because they love scrapbooking, should
close or sell their stores. But they won't stand the test of time
whether a Recollections opens nearby or not.
However, savvy retailers who are as much interested in making a
living as they are in scrapbooking should study the Michaels
operation. They may see flaws that can make Recollections
vulnerable to savvy independents.
1. Plans for the Recollections stores call for a
substantial amount of space where scrappers can gather and work
together on their albums. But for consumers to feel comfortable
doing that, the store manager must have a special personality that
is warm, comfortable, and inviting.
It's a good plan, but without the right kind of manager, it won't
work. Will Michaels be able to find such managers? If not, company
beancounters will soon pressure the company to put the work space to
more productive uses.
2. CLN has learned Michaels plans to staff the Recollections
stores with scrapbookers and teach them about retailing, rather than
teach retail pros about scrapbooking. A very smart move, but
hopefully independents have already hired the cream of the consumer
crop in their areas.
3. There are countless scrapbook products Michaels does
not carry because the vendors are too small to deal with a retailer
that size, and Michaels needs room for florals, paints, needlework,
Granted, Recollections stores will carry additional
products not found in a Michaels store, some from smaller vendors.
Still, Michaels can be very demanding in many ways. Many vendors
will not be able to work with them. Carrying products not carried by
the chains is a classic strategy carried out by independent crafter
4. Michaels is also notoriously slow to add new products
and re-set departments. Much of that is due to the company's size.
The Recollections operation should be better, but as it
grows, some bureaucracy is necessary to avoid chaos, and bureaucracy
slows things down immediately.
And as every storeowner knows, the first thing the best customers
ask is, "What's new?" If the independent has the new
goodies and the local Recollections store doesn't, where will
those customers shop?
A word of warning. Make no mistake, if a Recollections
store opens nearby, it will probably sell basic supplies for less.
(Michaels can sell for less because it buys for less, thanks to
volume buying.) History says many consumers will shop the chain for
basics, if the prices are substantially lower, and visit independent
stores only for new items, items the chain doesn't carry, and
advice. (Nothing is more irritating than the consumer who prances
into an independent's store and says, "I bought this at
Michaels. Could you help me with it?")
Furthermore, it isn't just Michaels getting into the act. As CLN
reported recently, discounters (Wal-Mart, Target, even Kmart) and
office supply stores (Office Max, etc.) are expanding or testing
Independents need to keep their prices on basics as competitive
as possible. Be THE store in town for new products (which means dump
slow-sellers to create more shelf space for the new items). Be THE
place where scrappers feel comfortable to congregate. Buy smart.
Most of all, don't forget to continue to attract newcomers. Recollections
may not come to town. If it does, it will take a slice of the pie.
That's ok, as long as pie continues to grow. We'll talk about how to
keep attracting newcomers in a future installment.
(Note: Any thoughts on this subject, on or off the record?
Any topics you'd like to see in this space? Call Mike Hartnett at
309-925-5593 or email email@example.com.)
COMMENTS FROM SUBSCRIBERS
(Note: The following is a response to the Michaels'
I have one idea to add to the article for the independent scrapbook
retailer worried about big box competition: POS computer software.
My local scrapbook store (A Page in Time, Lincoln, NE) offers
the customer the option to have the store keep a record of
everything she buys. A customer can't remember what she bought
previously -- but needs -- No problem; they have it all in the
computer. Customers don't even need a receipt to return items -- the
info is there. And at a certain amount, say $150, you get a freebie
or discount of some type.
What a gold mine of information for the savvy retailer. If they have
a special sale or event, they can e-mail or snail mail their
customers. And they know what merchandise is moving and what's not.
Small retailers may not think they can afford it, but can they
afford not to have it?-- Sharon Dugas, Papier Dreams