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The trends, the issues, and productive business strategies.

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Do What You've Always Done 

The scrapbook industry is in trouble! Some possible solutions. 

by Lisa Kanak (November 15, 2004)

(Note: Lisa Kanak of The Cropper's Corner in Fredericksburg, VA wrote and distributed the following article to various groups and CLN. We are re-printing it here, interspersed with our own comments.)

There's this health nut on television my parents used to watch each week. For about an hour hed be talking about sugar and yeast and how it was the root of everything from obesity to cancer. Hed parade people through to promote Noni juice and expensive supplements and provide a series of "prescriptions" for callers' ills.

Inevitably, callers would comment about how they tried one thing or another or how they went to their doctor and they were told to "stick with the old program"; hed issue this proclamation: "Do what you've always done and youll get what youve always gotten."

Now, I have no idea if this man's prescriptions for curing various health problems really work (although, to be honest, I'd be willing to try some of them); but it was his weekly challenge that stuck with me, because its true.

And it's not just true for people looking for the fountain of youth or a cure for the tire around ones midsection; it's true for retailers and manufacturers alike.

The scrapbook industry is in trouble. Year after year the majority of retailers deal with debt that just wont go away. Product is released faster than they can get it on the shelves. Rabid customers who, like Pavlov's dogs, have been trained to pound on our doors for "the next hot thing" while their last requests gather dust on clearance racks.

Yet day in and day out retailers and manufacturers do the same things out of habit or simply because "that's the way it's always been done." And then we complain when we get the same results.

The answer seems obvious: something needs to change! Retailers are quick to point the fingers at manufacturers and manufacturers are quick to point the finger at independents. But the truth is, there is enough "blame" to go around. There isn't an overnight solution (although I wish there were), but there are a number of things we can and should try.

There have been countless articles on how retailers can succeed, but very little feedback given to manufacturers about what they might be able to do differently to increase their sales and encourage retailers to purchase.

First, let's set up the scenario we'll be dealing with.

In order for manufacturers to make items more cost effective, large orders must be placed. They have to get rid of the old product fast in order to release more new product in a few month's time hoping to keep a percentage of the scrapbook market. Consumer magazines are flooded with advertisements (sometimes months in advance of the products' ship dates), fanning the flames of desire. That drives retailers to their booths to make a one-time purchase of a large quantity of products that will hopefully, one day, be purchased by consumers.

So, whats the problem with this scenario? What is it about this cycle that is causing so many problems in the scrapbook industry? Ill give you a hint: it's only three little words.

Still cant guess? Okay, Ill tell you: "one-time buy."

Now, I know the manufacturers out there are violently nodding their heads up and down saying, "Youre right, thats the problem, and thats what we've been saying stores dont re-order!"

And I know what most retailers are saying: "What? Re-order? "You've got to be kidding! Do you know how long it took me to get that (fill in the blank here) out of my store?!?"

That's because for years no one has been looking at one little concept: sell through. Manufacturers blame retailers for not calculating sell through when they purchase. A valid complaint, one may be sure. They point retailers to distributors telling them that if they can't sell through the product when they are purchasing direct well, get it from a distributor!

But heres the rub: distributors sell by the package. So if the stickers only come on rolls, the distributors sell them only on rolls. If the paper is packaged in 50's or 100's, the distributor only sells it in 50's or 100's.

And so the cycle continues. Retailers buy the item once and move on while manufacturers feel "compelled" to produce more, while their warehouses remain full.

Prior to MemoryTrends, our store was already working on calculating our product turn rates (not an easy process, since our very expensive POS doesnt support this through any of its reporting functions). Let me also say that our store is considered a "large" store. We have 4,000+ sq. ft., are located in a high-traffic retail center, and have a population base of more than a million people in with a median income of $65,000 in a 20-mile radius.

Our sell-through statistics: Printed Paper (packaged in 50's) the average sell through is FIVE months ... Stickers (packaged in 12's) the average sell through is THREE months ... Embellishments (packaged in 6's) the average sell through is THREE months

The fundamental key to retail success is product turn how quickly product moves through our stores and warehouses. The faster we sell it (without running out), the more money we have in our pockets (profit).

For the sake of argument, lets just say my store has a turn rate of 3.5; this means retailers are purchasing enough product for three and a half months of sales at a time. (Comment: That's only one way to calculate turnover, but it's valid for the point being made.) Whether retailers choose to finance this on credit cards, with net 30, or pay cash in advance, the retailer is "out" of

the money well before the product sells. This prevents re-orders or runs up net-30 accounts; all of which cause problems for retailers and manufacturers.

(Comment: One reason why Wal-Mart is so successful is that the company systems allow 80% of their products to be before they are paid for.)

A simple solution manufacturers can employ to increase product turn rates, re-orders, and new orders would be to lower product package depth requirements.

Lowering product package depth requirements allows retailers the flexibility to purchase enough to test new products and to re-order those that that sells well. Weve found the following rates work well for most stores that are at least 2,000 sq. ft. with an average daily customer count of 30:

Embellishments: 3s ... Stickers: 6s ... Printed Flat Paper: 20s ... Specialty Paper (this includes specialty textures, embossed, mesh, vellum, etc.): 12s ... Cardstock: 25s.

(Comment: The more often a vendor has to package a product (e.g., papers in 25's instead of 50's), the higher the vendors' costs. To stay in business, those higher costs would have to be passed on to retailers.)

Most medium-sized stores can absorb these quantities and maintain healthy turn rates. Larger stores would probably follow initial buys of paper in the same quantities, but would probably increase stickers to 12s and many embellishments to 6s.

The product would turn more quickly, enabling retailers to re-stock shelves more quickly, and not "rob Peter to pay Paul."

There are also many other things manufacturers can do to increase re-orders and increase their product turn rates:

1. Mix and Match -- Papers that mix and match are a hit with consumers because they are so versatile. You can combine three-to-five papers a number of different ways to make each scrapbook page look "unique." Whatever you do, don't do too much. Manufacturers fall into the "more is better" trap as often as retailers do. Keeping product lines to three-to-seven coordinating patterned papers keeps the line easy for retailers to pick up and easy for customers to manage.

2. Instead of always looking for different papers, create different embellishments. Instead of a paper for every possible theme in the market, create embellishments and stickers for those themes that mix and match with current product lines. The product depths are lower for everyone and make it easier to turn the product and offer a variety.

For example, instead of releasing an entire line of "wedding" papers, create a lovely floral paper and wedding embellishments that can be used with the papers. This increases the versatility of the currently selling line and encourages retailers to keep the older paper in stock (as long as it's still selling) because you've added a "new" use for the paper.

3. Advertise your older product! Why is it that when new product is released, it becomes the only thing advertised? Customers quickly forget what was advertised until they see it used on page layouts in magazines. Unfortunately, the paper and embellishments being used on the layouts is often a product that was released 12-18 months earlier! Customers become frustrated because they can no longer find the products used in the "soft sell" of the page layouts and they cant find ideas to use the "hard sell" products that are being advertised. Advertising does push demand, so find out how you can re-market that "old" merchandise!

(Comment: Scrapbook novices don't know which products are new and which ones are old. If retailers concentrated more on attracting new customers, they wouldn't have such a problem selling the remains of the old inventory.)

4. Feature old product with new techniques! Remember, consumers are trained to like what they see in magazines. Magazines rely on manufacturer advertising to survive: you control their purse strings!

(Comment: After walking a trade show with, a very savvy independent told CLN, "You know, I don't really need new products. What I really need are new ways to sell the products I already stock.)

5. Target Market: Many magazines are getting large enough where advertising can be regionalized. Magazines have the ability (just like paper and sticker manufacturers), to make plate changes. If you demand regional advertising, they should provide it.

6. TEST it! Focus groups have long been used by manufacturers for everything from a product spokesman to the colors used on the packaging. Many manufacturers do limited regional testing to figure out where they will get the most bang-for-their buck. If a product is lackluster in the Southeast, then dont sell it in the Southeast! 

Scrapbook supplies are no different; some things simply sell better in certain parts of the country than in others. After some time, re-test it. You might be surprised to lean that while interest was low on the East Coast initially, after a little time, the interest picks up and you have a whole new lease on the product you released at the winter show the year before!

(Comment: In its early years, scrapbooking sales were much different from one part of the country to another. That's probably still true.)

7. Join forces. Printers also have a dirty little secret; they buy in larger quantities than you do. You can take advantage of this by joining forces with other manufacturers to print your orders during the same time-frame. If two manufacturers want to produce 5mm sheets of printed paper each, by doing a joint run you both get the 10mm sheet price with only a small plate change cost.

The same is true for stickers. This enables manufacturers to print smaller quantities (enabling you to turn product faster, becoming more profitable), and still remain cost competitive.

8. Project ideas no, you dont have to have a full-blown class program! You can provide retailers with the step-by-step instructions, and JPG images of the final product (s); perhaps they are ideas you've taught on the road at various conventions and trade shows, created by your design teams, or possibly even LSS that sell your product and are willing to share ideas. Put them on a "retailer-only" section of your website and they will be used!

(Comment: It's been true for decades in crafts: if you have slow-moving merchandise, create a made-up or distribute an instruction sheet of a project using that merchandise. Sales will inevitably increase.)

I'm sure there are many other things that manufacturers can do to assist retailers with product turns, re-orders, etc. These are just the ones our group of retailers came up with.

Remember, the industry HAS to change if we are all going to survive and profit. If we keep doing the same things weve been doing, we will get the same results!

Note: Have any comments on Lisa's suggestions? Email them to mike@clnonline.com or to Lisa directly at thecropperscorner@adelphia.net. To read previous Memory, Paper, and Stamp columns, click on the titles in the right-hand column.

xxx

 

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