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Wednesday, June 1, 2011

Is the Brick and Mortar Craft Store still a viable Business Model?

Kinda sorta.

I guess it depends on what you mean by "viable." 

Clearly, the market for crafty consumers is strong.  56% of US households crafted at least once during 2010. The jewelry/bead craft industry  boasts 2.3 billion in annual sales, while the needlework craft industry is even larger---generating 2.9 billion dollars in 2010.  

Despite what appears to be a solid customer base, many Crafty Business Owners have decided they are making too little money while expending too much effort, shutting the doors in  impressive numbers.  Blue Moon Beads recently filed for Bankruptcy.  Homer Hillis, of HHH Enterprises, is closing the last brick and mortar store of what was once an 8 store bead empire, preferring to concentrate on his online retail business.  

Homer, who once described his shop as "a hardware store for women"  is one of the most personable, driven, craft loving guys I know.  I first met him in Tucson at the To Bead True Blue show and have come to respect his business longevity and his marketing acumen.  Despite his passion and his experience, Homer believes that the Crafty Business Model has changed so dramatically in the past few years, "the juice just ain't worth the squeeze."    No doubt about it, the large chain stores and major Internet supplies have had a deleterious effect on the local craft store.

It is easy to make the discount internet craft retailer the "bad guy," but the challenges facing the Crafty Retailer are more complicated than that.  Consider the experience of Jackie Goff, a former Crafty Retail Rock Star.  Jackie recently closed the doors of her Toledo, Ohio yarn store, Uptown Fibers.   Jackie did not go into retail as a starry eyed crafter looking to turn her hobby into a business.  She is a savvy business woman who did an inordinate amount of research before signing her lease.  She had a supportive husband and a plan for success.  She crunched the numbers, developed a budget, knew how much yarn she needed to sell at exactly what margin in order to meet her expenses, and decided to GO FOR IT.  She developed innovative and exciting classes which often had waiting lists.  She advertised locally to increase her customer base.  She held in store events to generate interest and excitement.  She encouraged crafty community and sent out regular emails.  She lost thirty thousand dollars her first year.  Undaunted, Jackie upped her game.  She increased her marketing, and wrote a killer email to her customers explaining the economies of running a Yarn Store.

She lost thirty thousand dollars her second year.  She had an email list of 2000 and a customer snail mail list of 500, yet as the economy worsened, her core customer group stood at only 400.  Jackie's shop was located in an area near Detroit.  The local economy was dependent upon the automotive industry,  an industry that has been decimated in recent years.  One third of her customer base had suffered a job layoff or had a spouse who had been laid off or worried about being laid off.    Fear kills the impulse purchase and folks simply didn't have the disposable income to sustain her shop.  Sales fell far short of the $600 required each day in order to meet her expenses.  Inventory started to grow stale and Jackie was reluctant to invest more money in what was starting to appear to be a black hole.

While she was dealing with a depressed local market, Jackie also experienced the double edged sword of the internet.  Her store was stocked with thousands of dollars worth of books and patterns, but her cost conscious consumer knew that she could go to Ravelry and download something similar for free.  Classes that were once a major customer draw started to stagnate as You Tube exploded onto the Craft Scene.  Suddenly it was possible for a wannabee fiber aficionado to learn to knit or crochet FOR FREE at midnight while sitting in her jammies on the couch.  Paying for the privilege quickly became less attractive to her cash strapped customer.   Thrifty shoppers came to the store for inspiration and companionship, but many would order their yarn from the online discounters.


Jackie did everything that she could to minimize her expenses.  She was forced to let go of virtually all of her help, was not on the payroll, and was operating on a shoestring.  She realized that she would soon be in a position where she could no longer pay her bills while servicing her debt.  Finally, after losing another thirty thousand dollars during her third year, Jackie made the decision to close.  I asked Jackie to identify the final straw and was surprised when she told me that the decision was easy.  In fact, the decision had actually been made before she opened the store!  In typically thoughtful Jackie fashion, she and her husband had decided how much money they were willing to invest before they signed on the bottom line.  Smart people, those Goffs!  They took the emotion out of the decision and were proactive rather than reactive.  They defined what they would invest as start up capital, and determined how much they would be willing to invest/lose along the way.  They promised one another that once those funds had been expended, the jig would be up.


Three and one half  years into her journey, it is over.  The fixtures have been sold, the remaining stock will be sold or donated, and Jackie is ready to call it a day, despite the fact that she will be responsible for a $2500 lease payment through October.  She doesn't think that she could have done anything to have brought about a different outcome and I tend to agree.  Timing, and a wicked economy, were against her.   In the end, the adventure will have cost her between $150,000 and $175,000.  Uptown Fibers was  more than a small business statistic....Toledo has lost a gem.

So...is the Brick and Mortar Craft Store still a viable Business Model?

Yes---for those retailers who are in an area with a more forgiving economy and who have crafted a niche market---retail is not just doable, it can be profitable.  Join us next week when we meet a Crafty Retailer who shares her secrets for defying the odds as she slugs it out in a crowded market!


In the Studio
My blog posts have been infrequent of late....all the work has been studio focused!  My youngest is graduating from High School next week and the Empty Nest is looming large.   I am endeavoring to look at this next stage of life as a wonderful opportunity ... creatively.  For the first time since I had children I will be in a position to travel easily and I am looking forward to new teaching opportunities.  The past few weeks have been a bit of a fiber frenzy as I prepared a number of workshop proposals.  Here is a "bits and pieces" preview of my submissions to Swarovski....wish me luck!


Speaking of workshops, I was delighted to learn that I will be teaching at the Southeastern Animal Fiber Fair in Fletcher, North Carolina this Fall.  The event is always spectacular for fiber lovers and I cannot wait to do some shopping while I am there!  The festival is October 21-23 and I will be teaching four workshops.  Two of the classes involve "hands on" fibery fun, while the others are geared toward crafty marketing.

Maybe this empty nest thing won't be so bad after all!

10 comments:

  1. Nice article, Pat. Craft retail is very tough right now. Like Homer, we were once into so-called multi-channel marketing, with 4 retails stores in 3 states along with our website. We've closed all the retail stores and are focusing on our internet business now. Many customers were upset when we had to close a store. But many of those same customers hadn't been in the store for months, or just dropped in for some last minute item, while making most of their purchases online. Bottom line, you vote with your pocketbook.

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  2. Ron:
    Auntie's Beads was a brick and mortar presence to be reckoned with, for sure! As an aside, I have always been impressed by your ability to build a sense of community with your online biz...not always an easy thing to do! While many customers are loyal to their favorite local craft stores, when the economy forces a choice between buying on line or not buying at all, the decision is clear.

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  3. Thank you for such an interesting article that reinforced my decision of closing down a 17 year old bead shop in New England. Not only was I dealing with competition from online stores, youtube, along with the effect of a sluggish economy, but I also had to deal with months of horrendous construction that took place in front of my door. My customers were also upset that I was closing, but as Ron stated, many of these people I saw only once or twice in many months. I always felt like I could have done something more to pull through, but the wallet and my sanity pointed me in the direction I had to take.

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  4. Anonymous:
    I know it was not an easy decision, but with change comes exciting opportunities. Running uphill year after year becomes exhausting, and sometimes the smart choice is simply a different choice. Kudos to you for making the decision to craft a life that will be more workable for you! Good luck in your new adventures!

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  5. I feel really bad that these shops are closing the door. It does seem that you can learn just about anything from You tube, but you lose that connection to others that comes when you can share your art with others. I found this out first hand when I had a chance to share some of my work with others face to face. It was a connection that I will never forget. Although I love to blog, it's the face to face interactions that I feel are priceless! Yikes I didn't realize I was going to ramble on and on. :)

    I also have a child graduating this year...I thought I would be super excited, but I have been really emotional (which is unlike me) over the whole thing......

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  6. Kelly:
    Agreed...there is nothing like the personal connection, which is why so many Brick & Mortar shops remain viable despite the economy and the internet. Interestingly, I am finding that many former retailers are moving into a more creative life...finally having time to produce in the studio, opening Etsy shops, selling at craft shows, etc. Life is all about refining as we go along, I suppose.

    I had a peak at your blog and I love your alpaca yarn! I have a spinning wheel that has been collecting dust since I bought it 1 1/2 years ago....I ordered some How To books and will focus on it once I get my youngest off to college. Congrats on YOUR child's high school graduation...I was very emotional with #1....and #2...and now #3! It is wild... for 25 years I have not been able to totally relax or turn off the Mom Radar. It is a weird feeling to imagine a life beyond being Mom. I guess that is where my baby nubian goats will come in!

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  7. wow. this really hit home. i debate this very idea almost daily as I have $20 sales on some days and this year we have seen the worst slow down in our 4 year history...I don't know if I could live with walking away from such a huge investment, with kids to put through college and a mortgage that depends on my income. I've spent and made back over 500k but we've still had losses every year like the ones you outline above and business is much like what you describe--on a shoestring, no employees etc. Jackie's decision to close makes me wonder about my own decision to stay open and try to revitalize or build out into the online world. In an economy where there aren't a lot of jobs, this struggling craft shop is an oddly comforting focus.

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  8. Pat,
    Thank you for the great article. You captured the deatils and issues perfectly. I am grateful to you for your support, even at the end of my business. As readers should know, the decision to close the shop was made so that we didn't have to sell our home, be seized by the sheriff's office, or end up in a terrible financial mess. As other business owners consider their fate, it is by far better to stop a bit too soon than a bit too late. If you (shop owner) were giving your best friend advice on THEIR business, would you tell them to go deeper in debt (if they could) or continue to suffer? Don't think so. You'd tell them to lay down their hands and walk away from the table. I pray that other owners will know when to do this before staying open at all costs is more harmful than good. Again, many thanks for such great reporting and for caring about the small business owners in the crafting industry. Jackie

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  9. Anonymous:
    I have been thinking about your comment...it rings true in so many ways. I certainly understand the comfort of the familiar, and the decision--to stay or go--is very intense. I am in the midst of transition myself as I seek to hold on to what I love about the business, while remaining clear headed enough about the financial outlook to make some hard decisions. We are sure living in interesting times.

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  10. Jackie:
    Your candor is always so refreshingly delightful...and I concur completely with your decision. I had a nice conversation with a woman who was trying to sell me some costly advertising. It was a program I wouldn't have thought twice about it years past, but I am not so quick to spend my dollars in that manner today. She continued to push the issue so I told her point blank that I had lost money during the first quarter and anticipated losing more in the second quarter. I further inquired as to whether she would encourage her best friend/daughter/sister to sign up for an expensive ad campaign in such a scenario. The light bulb seemed to go off and she Got It. Most crafty retailers are small shops and a bad couple of months can be devastating.

    While I am not choosing to close shop, I am definitely reevaluating and making some big changes. It is a rocky ride and a smart retailer will choose to close a bit too early in the game as staying at the table too long can devastate the family. You were, as per usual, one smart cookie!

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