Challenges, problems, and triumphs
-- from a manufacturer's perspective.
Key Challenges/Opportunities for the Craft
Industry in 2006
Office Supply, private label, and direct
by Deborah Murphy (January 16, 2006)
(Note: Deborah is an accomplished veteran industry
consultant and President of Deborah M, Inc.)
1. Office Supply.
The challenge and opportunity for the craft industry offered by
competition from the Office Supply channel will be heightened in
2006. Beyond the obvious difficulty of competing on price for basic
craft supplies, storage/organization, and paper products, crafts
will have the additional challenge of this channel continuing to
offer a broader array of craft, hobby, school, scrapbooking and
papercrafting supplies – and store-within-a-store seasonal
At the same time, these imminent threats offer a huge supply
opportunity for manufacturers (and thereby design opportunity for
designers), and a notable educational opportunity to create
incremental craft consumers. There are additional
strategic/competitive opportunities for manufacturers and retailers:
office supply offers no educational component at store level, few
kits (aside from kids), and very little identification as a creative
destination – YET!
A look at some Office Supply data reveals important factors,
(culled from numerous sources, including research from the School,
Home, Office Products Association).:
Size of Sector: $312b in sales
Trends: Linking with freight suppliers, paper companies, and
e-tailers ... Focus on end-user (consumer) ... Direct-to-consumer
sales, and consumer sovereignty ... E-catalogs ... Broader array of
Growth Factors: 3.5% annually ... More income-producing home
offices ... Less public-sector school funding pushes private
sector-spending (at non-coop pricing) ... More home schooling;
supplies are purchased at retail ... Rising employment, increased
employer spending ... Immigration raises public school enrollment
... E-commerce investment and growth ... Global sourcing, supply
Product Array: Furniture ... Computers, Accessories and
Office Equipment ... Paper Products ... Craft and hobby supplies ...
Scrapbooking/paper crafting supplies ... School supplies, including
Back to School which is now being extended ("Back IN
School") across September, October, and November ... Basic
office supplies ... Store-within-a-store seasonal assortments.
Office Supply Opportunities.
Craft Manufacturers: Size of market, including incremental
craft consumer ... Number of "doors"; "channel
blurring" which influences consumer to accept/demand a broad
range of supplies at one stop ... Store-within-a-store assortments
... Kits ... Partnerships in private label.
Craft Retailers: Carry more "office supplies" ...
Carry more storage and organization ... Carry more Back IN School
supplies ... Kits ... Education (on the aisle, and in the classroom)
... Private label (build store brand loyalty) ...
Store-within-a-Store seasonal assortments.
Craft Designers: Alignment with manufacturers who are/will be
supplying this channel.
Craft Consumers: Increased awareness of Craft product ...
Increased destinations for entry-level experience, supplies and
commodities ... Increased loyalty to craft retailers who
2. Private Label/Direct Import.
Private Label and Direct Import are linked by shared market
conditions that first foster their growth. The challenge and
opportunity (for the craft industry) presented by these linked
phenomena will also be heightened in 2006.
Factors influencing both Private Label and Direct Import include
the increasing sophistication of supply chain management and global
sourcing – both with positive impacts on profitability. As various
channel participants (craft, office supply, drug, grocery,
specialty) become more adept at managing their supply chain, and at
the same time rely more heavily on global sourcing, the opportunity
to develop and merchandise Private Label and Direct Import product
becomes critical and feasible. Frequently Private Label and Direct
Import product becomes the same thing – and their availability
applies intense pressure on competitors.
Because of global access to sourcing, and "channel
blurring," the same products are increasingly available at
numerous stores. Private Label offers a strategic means for a retail
operation to differentiate itself, and has the tactical effect of
tightening supply control and bolstering margin. At the same time,
well-managed Private Label product development and marketing have
been shown to build retailer brand loyalty with its consumer.
Today, the growth of Private Label exceeds that of national
brands (SHOPA Flash Report, May 2005). In addition, as the
traditional distribution chain evolves to supply the consumer
directly, Private Label becomes more tenable (distribution is
direct). In addition, Private Label offers retailers a tightly held
entry to "opening price point" and "price
tiered" strategies (Good, Better, Best) that are easy for the
consumer to understand and support.
Direct Import offers the retailer the means to develop and market
Private Label product. As the sourcing event becomes tightly
managed, the opportunity to merchandise Private Label becomes
compelling both from profitability and supply points of view.
For the craft industry, these twin phenomena present intense
competitive threats – and offer supply, design, education, and
competitive opportunities. Top-line trends, culled from numerous
sources, including SHOPA research (School, Home, Office Products
Size of Sector: Across all categories, up to 20% of goods ...
$60 billion annually in consumer spending.
Trends: Growing at twice the rate of national brands ... 5%
annual increase over five years.
Growth Factors: Strategic differentiator ... Margin builder
... Consumer loyalty builder ... Bolsters store positioning and
relationship with consumer (visual merchandising, themes, values)
... Channel blurring (broader shared array, across channels) ...
Consumer recognition and acceptance of private label as a
"brand" ... Supply chain efficiencies and global direct
Product Array: Broadening beyond food and drug ... Mature,
slow growth categories with low innovation requirements.
Private Label/Direct Import Opportunities.
Craft Manufacturers: Participate/partner with retailer ...
Provide expertise, and share in volume opportunity ... Participate,
or be on the sidelines ... Increased shelf space.
Craft Retailers: Introduce private label, which is
well-accepted by consumers ... Build relationship with customer,
build store brand ... Bolster margins ... Differentiate product
(strategic/competitive), especially in mature categories.
Craft Designers: Add value of American design (for American
end-users) to overseas-sourced product in design-led categories ...
Add value of end-uses (creative applications) ... Invent, develop,
and promote unique uses in mature categories ... Customize
educational programs by retailer.
Craft Consumers: Up to 30% price reduction with no reduction
in value proposition ... Higher market basket spend ... Interest in
and support for "brand" product extensions – both in
array and in end-use.
Among the numerous threats and opportunities for the craft
industry in 2006, competition from Office Supply, Private Label, and
Direct Import are among the most critical for us manufacturers,
retailers, designers – and consumers – to acknowledge,
understand, and embrace. By apprising ourselves of these market
trends, evaluating our ability to participate in these areas, and
executing our own competitive strategies, we craft industry
participants can continue to secure our share of the consumer's
creativity dollars, and capture an incremental share – share of
market AND share of mind.
(Note: To contact Deborah, email firstname.lastname@example.org.
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