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Challenges, problems, and triumphs -- from a manufacturer's perspective.

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How Can a Scrapbook Start-up Succeed?

The answer may be a "Group" away.

by Denzil Quick, Ellison (May 23, 2005)

(Note: Denzil is the Consumer Products Brand Manager for Ellison.)

Everything in life is about perspective. The age-old question, "Is the weather outside partly sunny or partly cloudy?" may depend more upon mood and attitude than the actual ratio of blue sky to rain clouds. Over the past year, it seems virtually every trade publication, from online newsletters to printed magazines, has at least one article from a retailer who doesnít feel manufacturers are doing enough to help their business. Let's try and take a closer look at the industry and see what the weather has in store for us. Is it time to break out the sun screen and put away the umbrella, or are we all going to get wet in our search for answers with retailer/manufacturer partnerships?

One of the things that many people enjoy about the scrapbooking industry is the passion of the people. It's more than just the fun and crazy consumers we all adore. The retailers, manufacturers, distributors, and media all truly love crafting and scrapbooking. We are blessed to be a part of an industry full of terrific people and great ideas.

With a new and emerging industry like ours, it is typical to have many start-up businesses. Scrapbooking literally has hundreds, if not thousands, of these start-ups. In fact, the overwhelming majority of manufacturers are not true manufacturers, but crafters, scrapbookers, and consumers who had a great idea for a product and/or design, sourced it, and sold it to retail stores. Very few of the manufacturers have an actual factory with equipment and engineers. A similar scenario is true for thousands of retail stores all over America. Countless retail storeowners have never even worked in a retail store before they sank tens of thousands of dollars into a business storefront and inventory.

When you add it all up, this business situation is what is commonly known as a cottage industry.

Who is your competition?

Before we go further, it is fundamentally important to understand that our true competition is not each other, it is other leisure activities and shopping habits that eat up disposable household income. If you own or manage an independent retail store, you need to find and develop a formula, a business model that feeds off of the big retailers. Big retailers really help grow the base of people who begin participating in our craft. They pick products, techniques, and promotions that appeal to a wide range of consumers and ease them into a hobby like scrapbooking. If you want to embrace those beginners, mirror what the big guys do and learn a process to easily transition those newbies into the education and value that your business offers.

A cottage industry like ours often has all the love, passion, and desire to succeed, yet lacks direction, focus, and organization. That is exactly where we sit today. Independent retailers are begging for help from manufacturers, and most manufacturers are jumping through hoops to try and help them. However, the organization and structure of the industry impedes the execution of the needed help. Manufacturers and retailers alike need to focus on what they do best and improve communication channels. The challenge is for manufactures to communicate with thousands of independent retailers and those retailers to communicate with hundreds of manufacturers.

How can we better our communication efficiency? Buying Groups. Crafters Home, The SMART Group, and The Memory Group are all terrific organizations that can help educate and facilitate information from manufacturers to thousands of retailers efficiently. Building that infrastructure to communicate is a key to the success of our industry and the countless businesses within it. It is almost impossible for manufacturers to effectively communicate with thousands of individual retailers one at a time, thus the need for buying groups.

Be aggressive, compete, and turn that inventory.

Granted, manufacturers need to listen and build support programs for independent retailers that will allow them to compete, promote, and succeed in a competitive retail environment. Many manufacturers have done just that, but are finding it challenging to communicate their message and program to independents.

Ellison for example, has a multi-point program that can empower even the smallest stores to match the 40% off coupons of the big guys. Under this program, a retailer can still make up to 30% when they match the coupon on Sizzix brand products and even achieve greater margins on the total sale. Consumers' spending habits are promotionally driven and independents need to understand this fact in order to use it to their advantage.

If independents mirror the chains with their brand assortment, this creates tremendous synergy as beginners can see a continuity of brands from big chain stores to independent specialty stores. For example, if I shop at a big electronic store and buy a Sony TV, then go to a specialty electronic store and they donít have a Sony product, Iím going to walk out.

The same thing is true with crafting. Most beginners start at big chain stores and grow their commitment to scrapbooking. They then go to an independent and want similar brands but different ideas, designs, and more education. Brand synergy can help to break down the wall of "independents vs. chains" and will allow consumers to easily grow and transition from a beginner to novice and then expert. This kind of planning will help independents grow their base and succeed.

Product exclusives are another hot topic and are almost a given, as even the biggest retail store typically only stocks 10-15% of any manufacturers SKUs. Buying groups are the perfect conduits for communicating these types of issues from manufacturers to retailers. They facilitate a single message to 100-200 stores rapidly, which allows support programs that are manageable in size and effectiveness while making economic sense to the manufacturer.

Independent retailers also need to focus some time and energy on developing business and marketing plans for their future. Very few independents have a plan, and most operate from day to day. Remember, goals and objectives always take greater importance and it is easier to move forward when they are on paper.

Buying groups can pull all of these objectives together and work with manufacturers to develop tactics that will ensure independent retailer success when we all work together. In addition, the buying groups can help retailers evolve their philosophy and practices from a strictly margin-focused environment to a promotional, volume, and turn-driven business model.

Many independent retailers are stuck in a cash flow crunch because of their focus on high-margin and low-turn products and inventory. The key to a successful retail business is a good balance between high margin with lower turns and high turns with lower margins (20%-30%). This can dramatically help the cash flow of a business and ensure its longer-term success.

Grow the pie and enjoy your slice.

Finally, no matter what the weather looks like, just above the clouds the sun is always shining. No matter the size or level of sophistication of your business, we are all in this industry together. It is in our common best interest to grow the size of the pie and welcome new consumers. All of the passion, ideas, and channels are in place for our industry to succeed, and it is up to us to effectively communicate and organize ourselves to see past the clouds and focus on the blue skies ahead.

(Denzil's Ellison office is at 25862 Commercentre Dr., Lake Forest, CA 92630-8804; call 949-598-8822 or email dquick@ellison.com. To read previous "Vinny" columns, click on the titles in the right-hand column. To comment on Denzil's ideas or any other industry issue, email CLN at mike@clnonline.com.)

xxx

 

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