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An Interview with The SMART Group's Dennis Conforto

by Mike Hartnett (May 21, 2007)

(Note: Because I am a member of the CHA board of directors, I emailed questions to Dennis and promised I would edit only for typos.

Dennis Conforto is Chair/CEO of A-Z Media Group and its associated companies (A-Z Media Buying, A-Z Productions, Scrapbooking.com magazine, and ShopA-Z.com) which were founded by Dennis in 1999. Prior to A-Z Media Group, Dennis was an owner and senior exec at GERS Retail Systems, a vendor of retail management information systems. Dennis also served as president of the Retail Consultants Center and was Exec VP at a Top 100 retail company. After GERS went public in 1983 and was sold to GE in 1986, Dennis served as a Senior VP for GE's retail group. He also founded the Retail Consultants Center in 1983 and has served with or on the boards of various trade associations. He has been a columnist for numerous retail industry publications and lectured extensively on various retail topics.

The SMART Group has approximately 160 retailers and 60 manufacturers as members.

CONFORTO: The transaction is complete and we are moving forward in our new relationship with PMA. We are very excited about what it means to our members and the scrapbooking industry at large. It should be noted I personally made zero money from the transaction; I promised our members I would never profit from the SMART Group and I have been true to my word.

CONFORTO: The goal was never to sell The SMART Group; it was only to fill in an educational gap missing within the industry for our member-driven group. However, we were approached by PMA as to our interest level. Frankly, at the start we had no interest at all as we were totally committed to the CHA relationship. However, after spending time understanding PMA as an association, we were shocked and impressed at how large they were and the depth of services they provide to their membership.

Our goal from the start with The SMART Group was three-fold: to educate the industry; integrate retailers and manufacturers into working, profitable relationships based on best practices; and grow the industry. We found within PMA an association that talked the talk, but also had the money and resources to walk the walk for its membership.

After spending time with PMA, it was clear that the scrapbooking industry was more perfectly aligned with the photo industry, which is a $90-billion, world-wide industry. Both industries have goals that are intertwined; the photo industry makes money selling cameras and printing photos; the scrapbooking industry takes a photo and then tells a story – often using creative products.

The greater the number of people who scrapbook, the better it is for the photo industry, and the more people who take pictures, the better it is for the scrapbooking industry. If you think about what makes up a scrapbook, it's first about the photo, second about the story, and third about the creative use of products. Beyond that, there is an even bigger market for the scrapbooking market, which is the instant-scrapbooker-non-crafter who is not interested in any crafty aspect of scrapbooking.

At the end of the day it's crystal clear that photo retailers and scrapbook retailers have more in common than, say, scrapbook retailers and quilting, floral, or other craft retailers. Their interests and revenues are tied to each other and therefore an alliance is required to maximize performance.

For the scrapbooking industry to achieve its $30-billion, world-wide potential, it needs to be working with the $90 billion photo category; that is the product-category driver behind the scrapbooking industry. To say it's the craft that is the driving force misses the very essence and core of a scrapbook and the entire scrapbooking industry. The simple fact is that for scrapbooking to grow it needs to have more exposure and new products that appeal to the tens of millions of women who simply are not interested in crafting but are interested in giving a scrapbook away as a personal gift. The day-to-day working relationship and alliance between the photo industry and the scrapbooking industry therefore is a must.

CONFORTO: Sales have slipped 15%, going from $2.5 billion in 2005 down to $2.2 billion in 2006. We have seen record numbers of independent retailers failing throughout North America, now slipping below 3,000 independent retail stores with about 2,200 owners. Scrapbooking publication advertising is down, manufacturers in record numbers are now having cash flow issues, and the industry is at risk if we continue to stay the course.

If we continue to stay the course, there will be very few independent retailers left for the manufacturers to sell their products to. This is bad for the entire industry, including the national chains; they need the scrapbooking communities that only the independents are capable of maintaining. There are fewer numbers of newbies coming into the market place and not enough money spent by retailers or manufacturers to attract new consumers.

Retailers last year spent $25 million, mostly on the converted scrapbooker, through emails, newsletters, and industry publications; they should have spent a minimum of $125 million in advertising to maintain and expand the marketplace.

On the other hand, manufacturers spent at least $12 million on the already converted scrapbooker as well, with very limited advertising to create newbies. The seven-year scrapbooking cycle saw many expert-level scrapbookers spend much less time and money on scrapbooking. In a very real way the scrapbooking consumers market is shrinking, not expanding.

CONFORTO: I can't speak to CHA numbers, but those of us in the scrapbooking industry clearly know that sales are down. CHA's numbers could be based on a small sample size of consumers that made up their research, or it could be based on a skewed view of what CHA considered a scrapbooking product. There is a big difference in someone buying an album for pictures and a scrapbooker. Our consumer surveys were done over a three-year period with more than 1.2 million respondents.

In addition, we have other surveys that are made up of retailers and others of manufacturers to insure our data is tracking correctly from three perspectives, the consumers, the retailer, and the manufacturer. I believe our reporting is a complete and accurate reflection of what is really occurring within the market place.

I believe that CHA shouldn't say the scrapbooking industry is up when most in the market place are suffering a downward trend in sales and dwindling profits. While it's true some businesses are up like some of the majors, it's few and far between and everyone knows the trend for the entire industry is not up but down. Over time this will catch up with the majors whose sales increases are coming from newbies being converted to scrapbooking who were in the store for other categories.

The scrapbooking industry has suffered from enough misinformation over the years with quotes from others who have stated and even taught that one in every four households is a scrapbooker. We now know that only 4.5% of women between the age of 16 and 64 are scrapbookers. That kind of misinformation has lead to bad investments and failed business plans based on flawed data.

CONFORTO: This is not about allegiance for PMA or CHA; this is about allegiance for and to the scrapbooking industry. I believe that the scrapbooking industry needs to be aligned with the PMA winter show, and both retailers and manufacturers need to attend that show.

This is not about not attending CHA but rather attending PMA. As for me, and I hope everyone else retains their membership in CHA. There is, of course, the CHA Summer show for which there is no conflict.

I think it's wrong to portray retailers and or manufacturers or even myself as some sort of traitor by seeing that PMA's membership of retailers and manufacturers has more in common with scrapbook retailers and manufacturers than other parts of the craft industry. To ignore the greater synergies would not only be foolish but would cause more businesses to fail. I believe that the PMA winter show is where the scrapbook industry belongs, and there is nothing wrong with the scrapbooking industry going to CHA in the summer.

What is not needed is a third show which is why we lead the way to, in effect, kill off the Memory Trends show which in many ways was the best show for the scrapbooking industry because it was scrapbooking-only; it was just at the wrong time and became the odd show out.

CONFORTO: The photo industry is working on digital scrapbooking; the scrapbooking industry – for the most part – has limited knowledge as to what is going on in the photo industry, and the photo industry has no idea on a detailed level what is going on with the scrapbooking industry. The more these two industries come together, the faster scrapbooking will grow. We cannot afford to stay the course and expect things to get better if we don't change at many different levels. I have been saying for some time now that we needed to change quickly or a crisis would occur. We didn't change fast enough and now we have a crisis on our hands, a crisis we didn't need to have. If we don't change fast, this time the crisis will deepen quickly and we will end up with even larger marketing and sales issues on our hands.

PMA offered 400 detailed business classes at its last show, I attended some and was impressed with the content and information. It is the information our industry requires but clearly doesn't have access too on a massive scale.

Finally, I believe PMA has the money and resources to invest in the scrapbooking industry for educational and marketing programs that CHA cannot afford. They have already produced a book on scrapbook retailing, which clearly shows that they are walking the walk before they even do the talk.

While trade shows are great, it's what happens between trade shows that clearly matters most. Without the tools and knowledge needed to run world-class businesses in between these trade shows, we all suffer to one degree or another. What PMA deals with besides the trade show is the areas of business that happen between shows, and to me that is one of the signs of an association doing its job completely.

CONFORTO: Again it's not about switching, it's about aligning the scrapbooking industry with the photo industry because the synergies are so great and the common interests are the same. If you are asking, did I start talking out loud about my thinking before the group was merged into PMA, the answer is yes! I have said all along that the photo is the basis for the scrapbook. I did pose the questions to see what others thought, and 98% of those I have talked to see the synergies and the powerful reasons to consider PMA.

Did I meet with CHA before the sale to share with them my thinking and listen to their thinking? The answer is yes! From that meeting and the meetings with PMA, we confirmed that the collective thinking of many industry executives was on track.

As everyone knows, I don't do things behind closed doors; I lay all of my cards on the table face up for all to see. What people say in secret or whisper in the hallways of a trade show I say out loud for all to hear.

Long before I came along with the PMA merger many within the scrapbooking industry had been trying to unlock the relationship between the two industries. What we have done is simply add to the work already begun by others in aligning relationships on a broader basis with a bigger, bolder vision that frankly now most are understanding and are now getting on board more quickly.

There is a cost matrix for PMA, but I believe for the average scrapbook retailer the cost will be about $150 per year. Which, by the way, is 12 times less than The SMART Group charged for 10 times more services, which is another reason why it is in the best interest of our members. There is no need for us to continue creating a wheel that has already been created which is bigger, faster, and cost less money.

I believe the costs between CHA and PMA are on par; however, PMA provides more educational benefits for its members. One reason that PMA is able to provide more benefits is the fact that they have over 20,000 active members world-wide, and with a number that big, it tends to drive cost down and benefits up. The size of PMA makes it hard if not impossible for CHA to compete on a service basis for its membership. This is not about who is better but who has scaled the best.

PMA will have pricing that will be on par with CHA. This is different than what the PMA model has been in the past for larger industries they serve, but based on their size and scope and the fact they are running 12 major trade shows around the world, it is clear that they have a business model that can fulfill the scrapbooking market's needs today and into the future. The new pricing model will be announced by PMA shortly.

Those scrapbooking manufacturers who have gone to PMA in the past will find a whole new experience and show as a result of this merger between the SMART Group and PMA.

Well, this is not about splitting an industry, this is about growing the scrapbooking category and which of the two associations is best suited to do that based on time, money, and resources.

One can make this a very emotional issue, but in the end it's not about CHA or PMA, it's about business and what retailers and manufacturers think the future should be for them.

PMA, in my opinion, is first about the association and second about the trade show, while CHA is less about the association and more about the trade show. The difference in the outcome of both lines of thinking from the long haul is like night and day. PMA is a completely retail driven association while CHA is driven by its trade show. But there is a reason for this.

In many other industries trade shows don't spike manufactures sales but rather allow for introduction of new products. In fact, it is one of the things that kills profits and industry turn rates; that is, the huge spikes in inventory purchases two times per year at trade shows. In truth, the healthy industry business model is equal re-orders every month based sales for that month. This is what I call "cocaine driven" trade shows.

These spikes in trade show sales is forcing retailers to over-buy and manufacturers to over sell two times a year rather than reorder points 12 times a year. Spikes like this happen when an industry is more focused on the trade show than on the industry during the off-trade-show-events.

Many smart manufacturers finally have figured out that to get rid of the cocaine-driven trade show mentality, they have started doing product releases during off-trade-show times and it's working and evening their sales out.

More than 50% of the CHA trade show is scrapbooking, yet nobody on the board of CHA represents a purely scrapbooking company. I think it is a huge mistake on the part of CHA to not have scrapbooking fairly represented on its board. Furthermore, I believe if an association is retail driven, then it should have more retailers on it than manufacturers. PMA has already created a scrapbooking committee that has real power and a real voice for its scrapbooking members, which is totally retail-driven in its focus. PMA has to its credit done this very thing with all of its many different products groups that make up PMA.

So the question again is, do we stay the course while the facts and evidence shows the industry is down with CHA saying sales are up? Clearly that kind of difference in basic information does not help us move forward.

Or do we change for a business reason to lock into an industry that is 45 times larger than scrapbooking and three times larger than crafting and grow with them?. I believe the answer is clear, the scrapbooking industry must choose to grow rather than stay the course of our current down trend. In the end the question should be not about splitting an industry but how do we save it and then grow it. The truth is scrapbooking by itself can be larger than the rest of the craft industry combined, something I don't believe that CHA believes or sees right now.

To CHA's credit it has tried to help where it can, but clearly lacks the funding, resources, and knowledge to make the kind of difference we need today, not tomorrow. CHA is full of good people with great intentions and good hearts, but this needed move is not about any of the emotions, it's about business; it's about growth and profits and, finally, it's about time: the industry is out of time and can no longer afford to wait for CHA to understand in detail the needs of the scrapbooking community from a business standpoint.

I know for a fact that PMA gets it and has to live it everyday in an industry that works on one third the margins and has to have five times the turn rate to make it work. Clearly our industry can learn a lot from those retailers and manufacturers that make up the photo industry.

In the end I don't believe there will be a split in the industry; I believe the vast majority of manufacturers and retailers who are purely scrapbooking will move in mass to PMA for the winter show and attend in mass at the CHA summer show. The challenge will be for those who are part craft and part scrapbooking; they have to figure out how to attend two shows.

Finally, I believe people, rather than being motivated by business logic, will instead be motivated to stay the course because of fear, the fear of change. The fact of the matter is, this decision would be easy for everyone if the industry hadn't adopted the "cocaine driven" trade show model.

CONFORTO: The 26-week series will be similar to the Home Edition program. However, the actual name of the show when produced will be different. Each show will be an hour long and will take a story view from the photo to the completion of a scrapbook and a memory room. The show will evoke lots of emotion based on the simple fact every person is worth a photo and every life has an incredible story to tell. The stories will be powerful and compelling; they will be tearful and joyful all at the same time. However, the most important thing is that millions of new consumers will see it. The show will be worthy of the noble industries that support it which are photo and scrapbooking.

Several companies will be behind the production of the TV series, from the Avalanche Group to the A-Z Media Group, just to name two. The goal is to have one of the major networks pick it up, NBC, ABC, CBS, or FOX. In the end we believe it will be FOX, but that is yet to be seen. The stars of the show will be unknowns, per se, but over time will become household names. They will be an eclectic group of young talent with broad-based appeal who will solve complex problems with simple solutions that will change lives and provide hope.

All of those negotiations are under non-disclosure. But they will be world brand names outside the scrapbooking industry whose focus is on the photo. Only world brands can afford to promote this effort; however, the scrapbooking industry and the photo industry will be the benefactors of the show.

The show will introduce millions of new consumers, both male and female, to our industry and will get out the more important message about scrapbooking which is not about how, or where, or when, but why. Once people feel the message of why, then how, where, and when will drive them to our stores and product category.

We believe it's just one of the many pieces that must come into play for a brighter, bolder vision of our future. Again, the synergies of the photo industry and scrapbooking industry will make it a reality.

CONFORTO: Already people within the craft industry are saying things like, "Well, the slump is on in scrapbooking and we need to find the next new fad." When you believe it's a fad you treat it like one, you manage it like one.

Clearly scrapbooking is more than the typical craft fad because it is by its very nature a sub-category of photography. The craft industry by its nature has passed on some of its bad habits to the scrapbooking industry, and many retailers now have taken on the high-end, craft-store mentality of high margins and low turns, with pricing placed on the back of the products and lack of any kind of sales events or signage. Female consumer surveys show this is the wrong approach to retailing to today's female consumers.

That is fad thinking and 1950's retailing; that type of thinking is why Sam Walton removed Ben Franklin from his locations and decided he wanted to be a better retailer and not get caught up in the thinking that came from the 50's. Funny thing is, it was the craft market's lack of understanding the female consumer and turn rate that caused Sam Walton to start Wal-Mart. You could say the craft industry created the need and idea of Wal-Mart.

When I visit scrapbook stores today I see in many cases 1950's retailing. There are many strong scrapbook retailers in existence today, but there are many more who are suffering from lack of knowledge and education which they should have been getting from the industry but have not.

One could say that it is survival of the fittest, but I say when one retailer fails, we have all failed. It's not that CHA has failed, it just clearly lacks the resources and focus on scrapbooking that our segment of the industry needed three years ago when we started on this journey and created the SMART Group.

We have done many things right, yet in the end we have all failed in one degree or another. We have seen thousands of scrapbooking retailers start and fail. There is a point in time when someone has to say, enough of this madness, this is now hurting everyone, let's get it right, let's not manage ourselves into a fad because we mismanaged the industry. Let's grow with a best business practice model in place to insure more of us succeed than fail.

CONFORTO: The scrapbooking industry has limited focus and limited vision where it is currently at. CHA has 32 craft market segments it has to support; how can they be effective for all 32 categories? Scrapbooking cannot lose $300 million in downward sales trends and stay healthy. Already the industry is so weakened it must go to another industry to team up with it so that we can have more exposure.

Our problem is clear; we don't have enough money to spend promoting our industry; it's all tied up in dead inventory. This is very typical of the craft industry and its fad mentally which spends more time on creating new products than on creating more new consumers, along with the cocaine driven trade show mentality.

There is one thing I know, the photo industry knows how to promote and turn products and clearly that is a lesson we will learn from them, not from the craft industry. Frankly I don't think CHA has a detailed understanding of the needs of the scrapbook industry in terms of really helping it, other than producing a solid trade show. And even if they did have the knowledge, they do not have the resources to implement what is needed right now. PMA and its members dealt with these basic issues decades ago and fixed them – and they will help our industry do the same.

Having said all this, I am and will always be a fan of CHA. I believe they give 110% of everything they have; however, they don't have enough. But this is not about them; this is about the scrapbooking retailers and manufacturers who need to move on to an industry which has already had to solve many of the issues we face today. If anyone says that I have said to leave CHA its not true; if people think I am not loyal to CHA, they clearly don't understand. However, if I have to choose between CHA or scrapbooking then scrapbooking is going to win every single time.

CONFORTO: Yes, they just informed me this week that because of my activities in supporting PMA's educational efforts and the PMA winter show, that it was no longer in the interest of CHA for me to continue to educate scrapbooking retailers, which is really in the short and long term best interest of CHA.

I'm disappointed about it and I feel bad for the 100's of retailers who have been looking forward to these classes. Once again CHA made it about CHA and not about the retailers we all serve.

I guess I have been blackedballed or banned from speaking at CHA going forward at least for now; hopefully that will change. Yet I have provided CHA with two great CHA SMART Stores and tons of detailed workshops which we have done for free for CHA.

I believe I have done much good for CHA and over time I am sure they will see that all of my efforts are not about me at all, but about the scrapbooking industry which I serve at the pleasure of. In that light, to keep my word I will have to teach the course off site in Chicago and find time slots that don't interfere with the show hours.

CONFORTO: Yes! But it's not about PMA per se, it's about their members, the retailers and manufacturers. This is a very tight group that is very retail driven and best-practices driven. They have had to face huge changes in there industry as they have moved from film to digital. The business models have had to adapt quickly and they have had to move each photo category in mass with great purpose.

They have an outstanding association business model that focuses on change based on retail models that drive up revenues and profits. It is something the scrapbooking industry needs right now, and we are lucky we even have this option. Most industries wouldn't be able to move sideways quickly, and then up even faster. I give great credit to those who started on this journey several years ago in their relationships with PMA, who saw the synergies of a world class association running a $90 billion industry forward and with great purpose. But I will encourage the industry to attend the CHA summer show.

Simply stated, nothing works well when only a few show up at trade shows. This is something you don't stick one toe into, but you jump into the water completely. When the industry shows up in mass, then we will see a show unlike any show we have seen before, with more of everything we all need to be successful.

For manufacturers it will mean exposure to 10 other international PMA shows they can use to grow. For the retailers it will mean hard-hitting business courses and certifications. For the photo industry it will mean "Wow, by growing scrapbooking we can grow our photo printing business." Right now the photo industry doesn't see everything we do in scrapbooking, and we in the scrapbooking industry don't have a clue what photo is doing.

CONFORTO: We have been working with the newspaper industry to create a scrapbooking section in every major newspaper in North America. We wanted a section like the auto, theater, real estate, grocery, and other industries have. We know when newspapers provide content to a section and you add advertising to it that readership goes up 200%.

The newspapers were polite but frankly didn't see much if any scrapbooking advertising anywhere in any media to speak of, so they weren't willing to do it. Recently we went back to the newspaper with a message of a scrapbooking and photo section and the reaction was completely different.

The funny thing was the newspapers saw the synergy in a flat second. While newspaper is only part of the answer, it's a powerful one. They need great local human interest stories and our industry has them. These new sections within the newspaper will only help serve to increase the awareness we need along with the TV series. Even if you are a total craft company at retail or manufacturing, each category needs to be allowed to reach its full potential and scrapbooking needs to be allowed to do that by teaming up with photo industry.

CONFORTO: I had seven children, three daughters and four sons. Two sons passed away; one we have no photo of and the of other we have only one photo. Had I known in my younger years the power of scrapbooking, I would have had many pictures and many memories of them, which are now held only in the my memory. When I retired after selling my retail systems company which trained tens of thousands of retail executives around the world I bought scrapbooking.com and turned it into an online magazine with a world-wide community and the number one scrapbooking website in the world.

I found that I had the time to do something noble and something in remembrance of those two boys. So for the reminder of my life, this will be my journey: to insure the global success of scrapbooking so others don't have the regrets we have over not scrapbooking lives that meant everything to our family.

For me it's more than business, it's a very personal and deep commitment, love, and respect for the category and all those who are part of the scrapbooking community. It is the noblest thing I can do with the remainder of my life. This is my journey and will in the end be part of my legacy. I believe that scrapbooking can make the world a much better place. Every person is worth a photo and every photo of a person has an incredible story.

(Note: CLN has sent this column to CHA CEO Steve Berger and asked him to respond. His answer will be in the next issue of CLN. Have any comments on Dennis' ideas? Email them to CLN at mike@clnonline.com.

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