Home
Business-Wise
Kate's Collage
"Vinny Da Vendor"
"Benny Da Buyer"
Kizer & Bender
Memory, Paper & Stamps
Category Reports
Designing Perspectives
Scene & Heard


Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
Phone: 785-760-5071
Email: mike@clnonline.com


 


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

Printer Version

Key Challenges/Opportunities for the Craft Industry in 2006

Office Supply, private label, and direct import.

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 assortments.

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 product.

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 chain management.

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 support/supply creativity.

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 Association:

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 sourcing.

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 dmurphy3388@earthlink.net. To comment on the issues raised in the article, email your thoughts to mike@clnonline.com. To read previous "Vinny" columns, click on the titles in the right-hand column.)

xxx

 

horizontal rule

horizontal rule



   
   

Vinny's Recent Columns...
ADVICE ON EXPORTING TO THE UK AND EUROPE; An interview with the former CEO of HobbyCraft.

THE HISTORY OF WALNUT HOLLOW; One of the genuine pioneers of the modern craft industry.

HOW MICHIGAN SCRAPBOOKER WAS LAUNCHED; Substantial growth in 3+ years.

THE HISTORY OF PLAID ENTERPRISES, INC.; It's come a long way in 36 years.

"FLASH" SALES COME TO THE INDUSTRY; Q. & A. about the newest way to introduce new products or dispose of overstocks.

SITTING ON A BULLS EYE; What to do if competitors want your market share, or customers want to cut costs.

IS YOUR COMPANY ON THE VERGE OF BANKRUPTCY? 5 SURVIVAL TIPS; Time for a reality check.

FIVE COMMON AFFLICTIONS OF SALES TEAMS; The result: Bad morale and lower sales.

BEYOND MARKET MULTIPLES: INCREASING THE VALUE OF YOUR COMPANY BEFORE THE SALE; How to create a company with greater appeal to buyers.

CHA SHOW NEW PRODUCT REPORT; Hundreds (thousands?) of products, many from new exhibitors.

THE SOLUTION TO MEXICAN DRUG CARTELS; A sure fire way to inspire them to quilt.

ATTRACTING YOUNGER CUSTOMERS; Yes, we aren't our mothers' knitters.

NEW PRODUCTS TO BE UNVEILED AT THE CHAS SHOW; Two parts: new exhibitors and veterans.

WHAT SCRAPPERS ARE SAYING ABOUT MANUFACTURERS AND PUBLISHERS; Scrapbook Updates' readers analyze the problems.

ANALYZING THE CHA ATTITUDE & USAGE STUDY; The rationale and the science behind the number.

REST IN PEACE: JEAN HOWARD BARR; JHB International's Founder and CEO.

POSITIVE NEWS ABOUT THE INDUSTRY; What they want/need from the industry.

COMMENTS FROM INDIE CRAFTERS; What they want/need from the industry.

UNDERSTANDING INDIE CRAFTERS (BY AN INDIE CRAFTER); What they want, what they buy, and how to reach them.

CHA EVENTS FOR MANUFACTURERS; How to get more out of a trade show besides selling your products.

CREATIVE INDUSTRY TURNS TO EDUCATION TO BEAT RECESSION; Simple solutions for vendors and retailers to create online video classes.

WHAT HAPPENED TO CREATIVE MEMORIES? Not adjusting to the times.

COMPLAINING ABOUT SHORT-SHIPMENT PENALTIES; Who pays retail? The vendor?

HOW A VENDOR SCAMMED A SCAMMER; A sharp eye, a sense of humor - and be wary.

HOW A SMALL VENDOR WAS ALMOST SCAMMED; A savvy, suspicious mind averted a serious financial loss.

COMPANY FOR SALE; The owner is retiring.

EXHIBITORS: YOU'RE WASTING YOUR MONEY! Check your customer list before pre-show mailings.

PLAID CONSERVES TO PRESERVE; Simple changes can mean big savings.

SUGGESTIONS FOR THE CHA SHOW; How to attract more buyers and exhibitors.

CHANGES AT A.C. MOORE; They may not be what they seem.

THE TERRI O SHOW IS COMING; Building industry sales by empowering consumers' creativity.

SOME THOUGHTS ON BANKRUPTCY; It's unfair, but...

BOTTLES OF HOPE; A polymer clay grassroots movement.

SEWING SMILES FOR KIDS; Pillowcases and quilts for kids in hospitals.

HELPING THE WORLD IN MORE WAYS THAN ONE; Mrs. Grossman's, C&T Publishing, and Tara Materials.

HELP PEOPLE -- AND THE WORLD; How one company contributes to charities and to Mother Nature.

TAKING CARE OF BUSINESS AND HELPING THE WORLD; Plaid employees' long list of charitable activities.

A SAVVY WAY TO INTRODUCE A NEW LINE; Put it in the hands of consumers and teachers.

CHA AND PMA: SHOULD IT BE EITHER/OR? Why not take the best of both worlds?

A VENDOR'S RESPONSE TO THE PROVO/CRICUT ISSUEE; It's not easy to take sides.

RESPONSES TO CLN'S CODE OF ETHICS...from chain store execs, vendors, and reps.

PROVO RESPONDS TO CRICUT CRITICS; Unexpected demand caused problems.

ADVICE TO VENDORS; Common sense, please!

HOW TO HAVE A GREAT TRADE SHOW; It takes more than great products.

KEY CHALLENGES/OPPORTUNITIES FOR THE CRAFT INDUSTRY IN 2006; Office supply, private label, and direct import.

IS MIKE DUPEY RIGHT? The industry's retail pioneer's criticism of chain stores elicits strong reactions.

RETAILERS: CREATE A "PLACE," NOT A STORE; Customers return if they feel a sense of community.

"HOW AND WHY WE CHANGED OUR BUSINESS"; Sometimes necessity forces gutsy businesses into new, scary areas.

WHY INDEPENDENTS ARE DECLINING AND THE INDUSTRY IS SOFT; We can't improve the situation until we understand the causes.

HOW TO MAKE THE SCRAPBOOK PIE LARGER; "Keep it simple and non-threatening."

INDEPENDENTS: SUPPORT VENDORS WHO SUPPORT YOU; "Support goes both ways. It is a relationship of trust and consistency."

WHAT MAKES A GREAT SALES REP? Colleagues and customers remember the late Bob Watikins.

TRADE SHOW PRESS POINTERS; Maximize your publicity for a minimal cost.

HOW CAN A SCRAPBOOK START-UP SUCCEED? The answer may be a "Group" away.

DO TRADE SHOWS REFLECT THE STATE OF THE INDUSTRY? If we're like other industries, trade shows may be in trouble.

DO TRADE SHOWS REFLECT THE STATE OF THE INDUSTRY? And if so, are we in trouble?

THE STATE OF THE FLORAL MARKET; A blunt interview with Aldik's Larry Gold.

YOU WANT JUNK? YOU GOT IT; Pricing pressures are ruining good categories.

PLANNING THE PERFECT TRADE SHOW; Ten tips for CHA Winter Show exhibitors.

MORE VENDORS RESPOND...; A dialog between vendors and a savvy but unhappy independent.

VENDORS RESPOND TO INDEPENDENT'S PLIGHT; Why vendors have minimums and what retailers can do about it.

RETAIL, E-TAIL, AND "UNFAIR COMPETITION"; Expensive advertising, false promises, and little education.

THE TRIALS OF A SMALL COMPANY, PT. II; Expensive advertising, false promises, and little education.

THE TRIALS OF A SMALL COMPANY; Talent, drive, and product -- but no money.

GETTING READY FOR A TRADE SHOW; Go MAD at HIA.

THE THREE L's: YOU CAN'T SELL WITHOUT THEM; How to look, listen, and learn.

IT WASN'T ALWAYS THIS WAY...; but why does that matter?

WHATEVER HAPPENED TO STRAWBERRY?; Does every new product have to be cheap?