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

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More Vendors Respond...

A dialog between vendors and a savvy but unhappy independent.

by Various Industry Vendors & Lisa Kanak (September 20,2004)

(Note: Inspired and worried by an email from Lisa Kanak, owner of The Cropper's Corner in Fredericksburg, VA. (www.thecropperscorner.com), CLN sent emails to various industry veterans. Lisa's original email is in the 9/6/04 edition of CLN. Various vendors, retailers, and others responded. What follows are three new responses that didn't reach CLN in time. Following them are the earlier responses and now Lisa's answers to them.

Retailers' responses are in Benny Da Buyer); the original CLN email and responses from a scrapbook industry veteran and a top designer are in Business-Wise.)

(New) Gretchen Denker Devinsky, Paper Love Designs

I wanted to give you my comments on the independent scrapbook store article. As a small independent (mostly) scrapbook manufacturer, this is a subject of vital interest to me.

Of course, I also deal with plenty of store and website owners who are prudent businesspeople and run their stores/websites well. Of these, the ones that seem to be enjoying the most success are the larger ones (store sizes over 3,000 sq. ft.) that can stock a very wide selection, plus have the space in their store for lots of workspace for classes and crops which encourage a feeling of community.

One store that you might want to talk to (because she is doing pretty well after little over a year in business) is Scrapbook Territory in Berkeley, CA (www.scrapbookterritory.com). She is a customer of mine and is also the store where I do my own scrapbook shopping!

When I started my company, I did a lot of market research concerning things like paper pack size. As a result, we sold our paper in packs of 25 from the start. We're introducing stickers at MemoryTrends, and those will be in sets of 25 as well. We charge a little more for our paper (which is printed in the U.S. on fairly heavy cardstock) and the same for our stickers and cardstock.

We also have a low minimum initial order and, for now, no minimum reorder. Despite what these last two policies would have you think, our average order size is over $300, for a product line that currently contains only paper.

I'm all too aware of the ever-increasing pace of "NEW NEW NEW!!" that is making it very difficult for small manufacturers to introduce designs/products that will garner some cachet among scrapbookers, thus driving sales and at the same time managing some longevity, thus ensuring that the manufacturer can make some money by selling all of a large paper or embellishment order (large enough to get competitive pricing from printers, etc).

To increase my chances of success, I chose specific themes for my paper that are always needed (travel, life event milestones, etc.). I designed them in a style that's not especially hot or trendy, but has remained popular for years (a vintage look, but not heavily distressed).

I also reach out to find customers beyond the independent scrapbook or craft store mainly higher-end stationery and gift stores. These strategies have, so far, done well; we are growing steadily (not wildly).

I'm not sure what 'universal truths' you can draw from any of this - I just wanted to give you my perspective.

(New) Anonymous Vendor

It's no surprise that many small independents are struggling. Most finance their inventory purchasing via credit cards; of all my independent scrapbook customers, maybe 8% have applied for net-30 terms. The vast majority do not seem to know their inventory levels well enough, or have the time to be proactive, to reorder out-of-stock items unless they are reminded to do it when they receive a catalog in the mail or they just put it off until the next trade show.

I make calls to my retailers two to four weeks after I've shipped them an order to see how the paper is doing (and hopefully net a reorder), and I can't tell you how many times I've been told "Oh, I'm glad you called; your paper just flew off the shelf, and I've been meaning to reorder it for two weeks!"

(New) Craig Curtis, Petersen Arne.

We, too, are seeing many independent scrapbook stores struggle in this economy. I consistently see three issues that can make success impossible: 1) under capitalization; 2) poor inventory

turn; and 3) poor cash flow management. As a distributor, I can help a store with both 2 and 3. However, most independent stores are wedded to the concept of "buying direct." Buying direct without the correct guidelines can stress cash flow to the point that the store becomes illiquid.

(New) Anonymous (Manufacturer's Rep in Great Britain).

Scrapbook products are flying over here. We're really having a party, and I can speak for a number of leading manufacturers, as I represent several in the UK. Although scrapbooking is doubling year on year, it started from a very low base. It's only in the last 18-24 months that we've had product suitable for our taste.

However, the big sales are still to card-makers, who use the same techniques and products as scrapbookers. I've never understood why in the U.S., there is the demarcation between scrapbooking stores and what you call "stamp stores." Why not put it all in the mix and have stores which specialize in paper crafting; then you'll pull in more customers and get the cross merchandising.

Regarding the paper pack quantities, retailers must realize the cost of packaging and distribution. Do they want to pay 30% more per sheet and buy fewer sheets?

We offer several lines in mixed packs only, but then you get the comment that a few lines sell out straightaway, leaving the rest of the pack to trickle through before the store can reorder the mixed pack again. Suppliers hold thousands of SKU's. To add to them will cost.

A suggestion: How about clusters of retailers get together and pool their buying? Hey, they may even get to negotiate terms to help them compete better with the big boxes. Maybe this happens already in the US. The products these days are very inexpensive. Smaller packs will only put up prices. I doubt if anyone other than packaging companies would want this.

(Old) David Wilke, Paper Adventures.

David informed CLN that Paper Adventures will introduce new papers at this month's MemoryTrends show (booth #528) in Las Vegas in packs of 25s instead of 50s. It was already in the works, David told CLN, because he had heard similar complaints from other retailers.

(New) Lisa's Answer.

I (and many of my retailer friends) applaud the work of vendors like Paper Adventures, Leisure Arts, Hot Off the Press, EK Success, Chatterbox, and others who are moving to packages of 25 for papers. This will be an enormous help, and it will also move orders for Paper Adventures higher on my "to buy" list; they are now a "Must See" for me at Memory Trends.

(Old) Sandra Joseph, Reminders of Faith.

(Note. Sandra is the former executive director of the Memories Community. Reminders of Faith sells a variety of scrapbook supplies and books with religious themes.)

I have always (and will always) insist that the small retailers have to understand how to market to women. Recently in The July issue of CNA magazine there was an interview with Brenda Lugannani who just left Michaels' management. I thought her comments were excellent and represented what is missing in so many small stores:

"We have to embrace and understand the craft customer who yearns to be successful. We can capture her for a short time with great price or interesting items, but to capture her heart, we have to embrace her. We have to care for her. We have to build her a community made up of real people who identify with her and we have to invite her to join it."

I love the fact that Brenda said that we have to care for her; that is crucial and something the bigger stores will not be able to do. Also, understanding the niche markets will bring the smaller retailer their core customers. All of this is relational marketing which the smaller retailer must have an understanding of.

I know that Reminders of Faith is willing to work with our retailers to accommodate their ordering needs; it is extra work for us, but we need and want these stores to succeed. Very often stores do not tell us of their needs when they cannot meet the ordering requirements.

(Just the other day, we found out that a store within a 30-mile radius of our warehouse jointly ordered with another store in NY; in other words, we shipped an order to NY which that store owner split and then sent back down to western PA to this store. Another thing to consider here is that the western PA store is not on our Internet listing of stores which could be a great marketing tool for them. We would have been more than glad to accommodate this store by filling a smaller order and figuring out a cheap way to get it to her.

Now we are doing a major program for a Pittsburgh radio station and since we had no idea this store had our products, we were not promoting her.)

Tell the stores to ask vendors for what will work for them. 

(Old) Kathy Brundage, Reminders of Faith.

1. Develop a relationship with the smaller manufacturer (such as Reminders of Faith) who will accept smaller orders and listen to the store's needs.

2. Have an in-store designer who can work with the new products to show how to use them simply.

3. Find a new niche in your area that hasn't been emphasized the home school market, the teenage market teens who have money and love to be creative, etc.

4. Learn how to creatively cross-market, papers and books that compliment in a unique display instead of on the same racks. Have a store showcase that gets rotated to show off a new item(s) every month, then a bulletin board with pictures of the past "showcases": More ideas to stimulate the buyer.

(New) Lisa's Answer.

I also appreciate the willingness of companies like Reminders of the Faith to work with independent retailers to better accommodate our needs. But they probably shouldn't be "shocked" by the local store's decision; the owner probably didn't know, or feel like she could even ask for a "favor."

After all, order minimums are just that, order minimums. It's a fact that most vendors won't work with retailers; it's a "take it or leave it" approach. The minimums should be set to reach the maximum number of stores with the minimum amount of impact to Manufacturer OR Retailer.

There is no way a manufacturer can hope to accommodate all the needs of every independent retailer, but they can make it easier. Packs of 25 for printed papers, and packaged stickers help do just that.

Just keep in mind that even with a pack of 25, you're still going to have people who "need" less, and will still split to get less. Perhaps as a part of your retailer website you could direct individuals to a place like www.scrapbookmanufacturers.com, where there is a forum to create splits. You could let them know that such a feature exists with groups like Crafter's Home, too.

The important thing is for manufacturers and retailers to work together, create dialog, and both be willing to "give". As long as the industry remains "us" and "them" -- we aren't going to solve anything.

(Old) Anonymous. (Major manufacturer).

For us it's a very timely topic as we continue to push the envelope on new product ideas and techniques that could help some of the independent scrapbook retailers. I have no particular order to our collective thoughts. Use them however you see fit.

1. The key for any business is maximizing the cash return on cash investment, not necessarily having the most inventory or best price. The Hallmark card story is an excellent example and helps explain why cards cost so much. Hallmark figured it out with their emotion-based

marketing. Minimums are a tough challenge for all of us. A majority of the products don't turn, but a variety is mandatory for consumers. It's very difficult for manufacturers, whether domestic or overseas, to affordably make minimum production quantities or ship ideal retail minimums and not pass the handling costs of this along to the consumer.

The cost comes in the form of higher unit cost when dealing in volumes that are less than optimal (for producing or handling) or higher cash inventory investment with low unit cost when buying at volumes that are optimal (from a production or handling cost). The chains have the same problem as independents. In spite of their size, they don't always reach the optimal minimums to enable a lower unit cost.

2. Knowing the consumer base is critical to making the bet on how you go about expending cash available to make purchases. Each store has to develop and continually re-develop its sources of cash generation. This enables the business to dabble in other ideas. Although it seems that the scrapbook consumer is always looking for new, the retailer must figure out what the basic supplies for their consumer base are and exploit this to the max and don't stop there; keep looking for other niches to exploit.

3. Don't fall in love with a hot trend for too long. Look for the signs of slowing and de-emphasize and move on. Inherent in all this is willingness to experiment with a variety of offerings. Independents can do it much quicker than any chain can!

4. A lot of independent scrapbook stores do not appear to know how to "buy smart" and calculate retail sell-through and inventory turn. Unlike many industries, distributors are available. This can really assist retailers in their inventory investments.

5. There are many affordable computer solutions to accurately track movement of inventory and profitable vs. unprofitable items. Independents should challenge themselves to maintain this for their business. It doesn't have to be a complex system, but it has to be a disciplined approach.

6. Independents should use their in store classes to learn rather than teach. The consumer invariably "figures things out" that makes something more achievable or easier to do. Pay great attention to what's going on there.

(New) Lisa's Answer.

Unfortunately, the one from the Anonymous "Major Manufacturer" is pretty much the typical response retailers get.

The typical major manufacturer pours thousands of dollars into "new" papers each year for design, printing, and promotion. They have an image and have created demand for their products. In order to create a line of papers and embellishments with a price point consumers are willing to pay, it does take large quantities. No one disputes that.

However, there IS a happy medium. Scrapbook retailers do "know" their customers. The basic supplies for our consumer base include albums, cardstock, adhesives, and the black pen. These are pretty much it. A few other things might be lumped into that group, such as eyelets, brads, perhaps slide mounts, and 8.5x11 vellum for journaling but other than that there are no universal products that people buy over and over again.

And, unlike the assertion by Anonymous, most retailers don't "fall in love" with a hot trend. We usually have it forced down our throats. Demand is created by heavy promotional activities by major manufacturers. In order to attempt to satisfy the hard-core artistic scrapper, retailers wind up buying a product they neither like nor want. We sell a few, and don't re-order them. They allow it to sit around too long perhaps because they don't want to take a bath. Rough edges exist on the when to clear out SKU's for every retailer -- but they don't usually hang onto something because they "love" it.

In my store, I do have some things that have worn out their welcome. But depth requirements cause these problems: a) I have more of certain products that aren't selling than I have clearance space to put it; and b) at clearance prices, I can only afford to replace two-thirds of what I used to have (again due to depth requirements), which means I get more "white space" to use creatively and also means my customer has less product to choose from.

This next comment completely skirted the issue I raised in my original comments:

"A lot of independent scrapbook stores do not appear to know how to "buy smart" and calculate retail sell-through and inventory turn. Unlike many industries, distributors are available. This can really assist retailers in their inventory investments."

This is a total cop-out, and the manufacturers know it. Distributors are great for filling in gaps, such as: I ran out of black cardstock because someone cleaned me out of 100 sheets for a special project, so let me order my Raven Black from Roger's Wholesale this time, because I just got my Bazzill order in last week.

Here are some facts about distributors:

1. Distributors DON'T break down paper packs. If the manufacturer packages it in 50s, the distributor sells it in 50s.

2. Distributors DON'T break down sticker rolls. If the manufacturer packages rolls in 50s, the distributor sells it in 50s.

3. Distributors DON'T break out Packs. If the manufacturer sells it as a pack of 12, the distributor sells it as a pack of 12.

4. Distributors DON'T necessarily carry either the entire lines or the latest and greatest.

I don't get any break on DEPTH of product by ordering the Doodlebug line through Notions, or ordering the Doodlebug line through Doodlebug. I either have to order less, work out a split, or do without.

DEPTH is the major problem. It is product DEPTH that affects profitability. And distributors have not been the solution to paper and sticker DEPTH issue.

And no computer records can solve this because if the DEPTH issue isn't answered, it's merely a numbers game. Sell half profitably, 25% at break even and 25% at a loss.

(Old) Don Guidi, Paper House Productions.

I have seen the similar thing happen over the years in the gift industry as well. The card/gift industry has been flat to declining during the past ten years. I think there are a few ways to improve the business of small retailers (and it's in our best interest as manufacturers to have strong retailers!). Inventory is the number one area that needs improvement.

Managing inventory is the biggest challenge for all of us (small independent retailer as well as a small independent manufacturer like Paper House). In that area we share the same concerns as our retail friends, yet there is also a paradox (small manufacturers have the same issue in reverse because of retailer buying habits).

As a small manufacturer, often we have to do larger runs than we want to in order to compete with larger paper companies who print themselves (they own printing equipment) or in print China (we print in USA with high quality paper stocks).

Often, retailers and consumers don't want to pay a premium price for our quality (who does anymore?) but we won't sacrifice quality for price; it's our competitive advantage when we get in front of our customers and consumers. So we do larger runs to get the cost down to what they will pay.

We also sell in paper in 50's to move our inventory faster so we can introduce more new items for the next show which the market demands! If we sell in 25's, the small store usually orders once and moves on to something new, so I'm left with extra stock of the line just introduced and find myself in the same boat as your complaining independents.

The answer to this problem is balance in inventory and in expectations.

Small retailers need to work with all companies to keep in stock the basic, good selling items; about 70% of their inventory should be in these products, and they should keep them in stock for at least as long as they sell well by the turn standards of the particular store. Ironically, Michaels is famous for this approach and you see how well they have performed.

The independents also can experiment with new items, but only about 30% of their inventory to keep the assortments fresh and on trend. If they could do this, manufacturers could keep most SKU's active longer to amortize the cost of development and help deplete their inventory faster. The trendy new stuff can be managed by a lower, 25-count putup's and smaller initial runs by manufacturers (which I would be happy to do since I'm making money on basic good sellers). Thus, all parties achieve a balance in their inventory that lets all of us make money while keeping new things in the pipeline.

Expectations need to be balanced by the store to the consumer that we don't need the entire store to be new every three months. We are a world of ADD shoppers where what was introduced last month is "old" and something needs to follow up right away. No one can make money if this continues.

Paper House has been in business for 21 years by not falling into the trendy trap, yet staying fresh by selectively offering new products during the year. Many of our best greeting cards have been in the line for more than 10 years. A sunflower or a daisy is timeless, isn't it! We are trying to achieve the same timelessness in scrapbooking with Oz, florals, pets, travel, and sports as our main focus. These themes are always needed and if we keep them fresh, we will do well for years to come in scrapbooking.

Retailers should also be loyal to companies who have always performed well for them and keep open-to-buy for these companies always ready. It's easy to go to a show and get caught up in new and forget that new doesn't mean a guaranteed sale! In fact, SKU's with a good run rate over time tend to sell well for many years (as seen is chains like Michaels). Support your existing companies with reorders on good selling items and your good companies will reward you with more innovative products from the profits they made on the last products they produced and sold repeatedly.

(New) Lisa's Answer.

As retailers, most of us do understand that in order for manufacturers to survive, they have to turn inventory as well. The manufacturing end is dog-eat-dog. However, there has to be another way to skin this cat (so-to-speak).

Manufacturers and retailers know that the consumers demand new products all the time. They purchase an item once and then move on to the next thing; this is especially true for themed papers and stickers, less so for generic papers and stickers (plaids, stripes, gingham, florals, etc.).

Here are OUR suggestions:

1. Don't overwhelm with TONS of paper and embellishments, especially for themed groups. Keep an odd grouping of papers (say three or five). In most (but not all) cases, any themed line (cat, dog, sports, baby, etc.) gets to be overwhelming when there are more than five papers in the line.

Then, add the embellishments; two or three sticker modules (main, border/accent, alphabet), and two or three specialty modules. That pretty much covers it.

2. Do pack in 25s. I bet you will find more stores wanting to purchase from you and will possibly even turn more paper.

Re-ordering is another ball game altogether. Many stores can't or won't re-order ever.You won't be able to change that. The question is, how many MORE stores will purchase from you in packs of 25?

Themed paper is good and bad. Stores NEED to carry it, but thematic papers and stickers are the ones that "go old" the fastest.

Currently, it takes us five-six months to turn a pack of 50 (our store is 4,000+ sq. ft. -- and retail space is 2,700 with annual sales well above national average). Chances are close to zero we'll reorder the same themed paper (other than Disney and military) any time soon and about 50-50 that we'll re-order a handful of embellishments (other than Disney and military).

However, it is important to note that roughly half of our themed paper was gone in six weeks -- with little or no discounting. So, at 25s, I can place an order for new themed paper every two-three months. New isn't always better. However, if I sell through paper -- rotate something else in for a two-three months, I can re-order an "old" paper without people really noticing. In fact, since there are really only four to six vendors who have "pet" lines I like, I'd probably wind up buying 75-100 sheets in 12 months of the very same papers I would only have purchased 50 of before. The same is true for sports, too, and baby.

The question is, why is this "better" for manufacturers? I'd wager that while they might not sell more paper in the short run, they would sell to more stores, increase their visibility in the marketplace, and help to generate more demand and more sales.

This quote baffles me a bit though: "Small retailers need to work with all companies to keep in stock the basic, good selling items; about 70% of their inventory should be in these products, and they should keep them in stock for at least as long as they sell well by the turn standards of the particular store. Ironically, Michaels is famous for this approach and you see how well they have performed."

There simply isn't 70% of the scrapbook market that would be considered "good selling items." A store that is comprised of 70% of "must haves" (cardstock, albums, and adhesives) is dead in the water. Unlike Michael's, people come to me for variety in quality scrapbook product. They go to Micahel's for a deal.

However, I DO believe that the industry needs to change its behavior, before we put ourselves out of business.

I think the frenetic pace of products being produced is actually doing the industry a disservice. I believe it would be better for manufacturers to introduce fewer varieties of printed papers -- with selective embellishments, and find ways to "re-invigorate" older lines through add-ons. Here's an example:

K&Company is my store's #1 best selling line (roughly 15% of my sales come from this one company alone).

We've been selling a number of K&C's papers for two years. Only a few lines have been slimmed down or discontinued; many are regularly re-ordered every three months. How do they do it?

In the last two years they added "new" embellishments to "old" paper lines. Gave everything a fresh face and it sells. It's always the first booth we visit at the trade shows.

And yes, their printed flat papers are sold in 50s, but this is also a non-thematic paper with classic colors and designs. Nothing faddish about it. We have found some of the same to be true of Laura Ashley (EK), Chatterbox, (sold in 25s), and are hoping to see similar results with Anna Griffin and Doodlebug.

However, I should note that had Anna Giffin and Doodlebug been available in packs of 25 and packaged stickers, we would have taken the plunge on those entire lines back in February. I have the space), but due to budgetary constraints, I have had to wait and wait and wait.

And, where there is one store "waiting" for the money to purchase a particular line, there are always more retailers "waiting," too.

We do need to show some loyalty to manufacturers; develop those relationships and continue to build upon them. Here's what gets MY loyalty:

Good selling products; good customer service; things I can pass on to my customers (make-it/take-it ideas; class ideas; articles/education I can re-print in my newsletters; and of course, some freebies.

If I have a good experience with a company, I'm very likely to re-order. Perhaps not exactly the same thing twice (although that does happen, more so when I can purchase in 25s than 50s), but they will be on my radar screen before hitting the show floor.

Right now, we only have a couple of vendors on our "do not buy" list. They lost our business awhile ago because they wouldn't make something right. So, I'm unwilling to take a chance on them again.

There is another vendor that just doesn't sell well for us. We love the lines, but they just don't move, even with classes, contests, samples, demos, etc. I'd love to throw the dice, but a 50 sheets-per-pack gamble is just too much. But in 25's, I'd chance it.

But here's a novel idea: TEST it!

As a former senior marketing executive in the direct mail world, we ALWAYS tested various facets of our design content, artwork, color, lists, size, etc. Because we knew that a half-percent change could mean the difference between a huge winner and a loser.

Change is never easy, and it may be more than a small manufacturer can deal with. So, why not work with a group of stores, say Crafter's Home, and do the following:

1. Choose one themed line (pets, sports, baby, etc.)

2. Poll the membership; ask them how many of them would purchase the complete Line X, if the papers were sold in 25's and stickers sold packaged in sets of 12, etc.

3. Run the numbers -- do you sell more paper or less?

4. If the poll comes out favorable, then make a bona-fide offer to the group. If the numbers "play well" with the test market, roll the concept out to all stores.

I mentioned earlier that I have room for more paper, but can't afford to bring it in. In fact, I could literally DOUBLE my paper selections without making any aisle an inch smaller. And you know what? There are other stores in the exact same boat as me.

I am truly interested in creating a dialog because I believe that by discussing the problems facing the industry we can combat them together.

So much of what we are saying and doing is because "that's the way it's always been done." It's time to challenge our notions of what works, and see if we can tame the scrapbook industry beast another way.

Sink or swim, the retailer's success will depend upon the response from the manufacturers and the manufacturer's success will depend upon the retailer.

(Note: To read previous Vinny Da Vendor columns, click on the titles in the right-hand column.)



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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.


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.


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?