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!

Define the life you want and refine your business to accomodate it.

It is time to hit the "applause" button.  We deserve it, dontcha think?  Those of us who have survived the last few years and lived to tell about it are due a pat on the back and some raucous applause.

WHOO HOO!  You go, girl!

We have downsized, belt tightened, sold off dead inventory, kept folks employed and tap danced to keep customers happy.  We have paid bills on time and scheduled marketing events and sent out emails.  We have worked harder than ever to keep the doors open.....and they are still open.  It feels good.  In fact, my little business is in a bit of an expansion mode at present.... and THAT feels really good.

You see, not too many years ago the story was much different.  I had huge sales numbers and thought that I was kicking ass.  Ironically, my business was in a crisis mode but I was totally clueless until it was almost too late. Oops.  I didn't realize that the economy was cyclical and that I had simply been riding a wave. [ Errr...you mean the good times don't last forever?   Who da thunk?]    I was more artist/marketing strong than process/accounting strong.  I didn't like the yucky stuff like bookkeeping and there was always a squeakier wheel to grab my attention.   I had a family with three busy teenagers.  My internet business was home based, and in my head that meant that I was a stay at home mom...meeting every need and expectation except for some important ones required by the business.  It only took a few unexpectedly slow months for the world to crash in on me.  Cash flow seemed to disappear overnight.  Gulp.  I had way too much inventory....WAY too much.  The debt appeared to be unsustainable.  Hubby was pissed.  I was freaked.   I couldn't meet my financial obligations for the first time in my life.  I talked to a bankruptcy attorney, but knew that I would not be able to live with that option.  It was a dark time.

Fortunately, I am as tenacious as a bulldog and failure was not an option.  I refused to bankrupt the company --it was a  moral issue for me.  I also determined that my my family would not risk financial security to pay the price for my foolishness.   Some how, some way I needed to pull a miracle out of my ass.  I found a business mentor, learned some humility, and got it together.    I spent the next two years working 12-15 hour days in a state of barely suppressed  panic.    Bad choices necessarily forced other choices and I paid a heavy price for my irresponsibility.    I had to forgo a  paycheck, no money for perks,  not enough time for my family and certainly no time for crafting....every penny was thrown at the debt and every hour was thrown at the business.  It was awful, but it was effective.  Although I am not yet completely debt free,  I am getting close.  The remaining debt amount is insignificant enough to make a banker yawn.  Yup, I have morphed into a halfway respectable business person...my Quickbooks balance actually matches my bank account balance.  It is a beautiful thing!

My two years of  Panicky Debt Hell ended when I realized that I was actually Going To Make It.  I had dodged a bullet---the business was going to survive, the debt was going to get paid.    Now what?  I did what I had to do when I had to do it, but I was no longer willing to work  12-15 hour days.  I wanted more time with my family, with my dogs, in the garden and in the studio.  Once I had defined the life I wanted, it was easy to refine my  business to accommodate that life..  I downsized, dropped some product lines, said good bye to some high maintenance/low margin customers, tightened my belt, watched my inventory like a hawk, and cut back on my work schedule.  If I don't have cash, I don't buy.  It works.  Another benefit?  I learned to work smarter, not harder.



Of course, I continue to refine the business as my life morphs from one stage to the next.   I will soon be presiding over an empty nest. Sigh.  One minute I am a teary, weepy mess as I bid adieu to my daughter's little girl self, and the next I am excited by the new opportunities that await me.  [Menopause, manic depressive, or normal?  You be the judge].

I am putting the finishing touches on  a number of workshop proposals as I seek to increase  national teaching opportunities for 2012.  Additionally, I am getting ready to launch a new line of felting kits, which has me totally jazzed.   I have more ideas than time and  cannot wait to wake up in the morning.   The funny thing is...I am working 12 hour days again, but it doesn't feel like work.  I am happy and invigorated.  I am thankful for the lessons that I learned during those difficult years.  The economic challenges of today seem small by comparison! I will never, EVER, EVER get into debt again. My heart is filled with gratitude and I look forward to each day.

Fortunately, not every retailer has to learn the hard way.  There are many who have good instincts and get it right the first time.  Carol Garfield, of Dancing Beads in Medford, Oregon  is just such a Retail Rock Star.  You first met her a few posts back.

Carol owned a retail bead shop from 1995 to 2006.   The shop was her day job and it needed to support itself and her, so for 13 years she made certain that she was the "go to" place for beady inspiration.  However, as her 50th birthday approached, she decided that she was ready for a change.  [Menopause, manic depressive, or normal?  You be the judge].

Carol was able to close the doors debt free because she had always "paid as she played."   [insert sound of wild applause here].    She packed up her gorgeous inventory and went home, where she started a home based web design business.  Fast forward to June 2010.  Carol was not enjoying the isolation of her home office and decided to rent some space.  While looking for an office, she found the perfect retail space:

As I stood in the middle of the room I was astounded by the light coming into the space.  There were two rooms, and the smaller one was a sunroom!  Hardwood floors, a fireplace, and walls painted a great color further charmed me.  As I stood in the middle of the room soaking it all in a gentle voice declared with much authority, "You just found your bead store."  I didn't even know I was looking.

Carol's return to crafty retail after a two year hiatus came with some surprises....the out of control price of silver, for example.  However, most surprising was the dramatic way that marketing had changed.  

I think I closed the old shop at just the right time, and I know I've re-opened it at just the right time.

I've been amazed at how much the world changed in the two years I was gone.  Of course, the price of metals is beyond ridiculous, but as a red head, I prefer copper anyway, and have gotten my customers excited about it.  Shipping?!  Sheesh, twice as much, and twice as slow.  The online competition is daunting, and before long I will have an online catalog.  I do have a website, a blog, and a Facebook page for the shop, all of which I maintain myself, so the catalog is slow going.

What I've been the most amazed by has been the change in marketing.  I've always been a good story teller, and I've blogged since 2005.  Social networking wears me out, but I do it.  I tend to be more social face-to-face, than online.

I'm celebrating National Craft Month (along with everyone else in our industry) and have sent out an email newsletter to the nearly 600 bead lovers on my email list.  I've started a monthly 'Make and Take' and aa result... I've made bag stuffers outlining all the fun that will be happening this month.  I'll be making bag stuffers every month as I have all my promotions, events, and sales scheduled for the year.  There is dead inventory in the closet that will soon go away as grab bags, challenges, or a donation to a homeless teen center.  I talk about The 3/50 Project to anyone who will listen.  I'm blogging, and posting my status on Facebook as often as possible.  Yesterday, the shop reached 100 'likes' on FB and lucky number 100 has a $10.00 gift certificate waiting to be collected.  I'm filming things around the shop I think might interest my customers.  I email a newsletter every other week, and I make certain I tell everyone thank you.  They're the reason I'm working so hard. weekly Beading Circle.  Seven people volunteered to help me teach classes this session, and we've scheduled 24 different projects, and techniques as

Community.  I had no idea what a hole I'd left by closing in 2008 until re-opening in 2010.  My old customers have been coming back in droves.  They missed the shop, the vibe, and excitement.  They love the new space.  The economy may still be rough, but people will always want to be surrounded by beauty, and are willing to spend a little to fulfill their need to create.  We're in the best business there is, we get to fulfill those needs, and our own at the same time!!

Wow....I couldn't have said it better myself.  Carol's brand new business is supporting her and she has recently expanded.  Her tips for success:

Make a Daily TO DO List and DO IT.  Carol always starts her day with a clear vision of what it will hold for her, whether it is a three hour marketing session or benign store housekeeping issues.   She does what she has to do before she even thinks about doing what she wants to do.  No quick peeks at Facebook, no playing with the inventory, no NUTHIN'....until the list is finished.  

Put your hopes and dreams out to the universe.    "I would like to make X dollars today."  Carol says that more often than not, she finds that she gets what she needs.  Don't laugh.  The universe currently knows that I am looking for a used leather couch for my studio.  It will come.  

Stay Fresh:  Constantly explore new techniques.  Carol loves to teach and says that as she learns and changes, so do her customers.

Be "Other Oriented."  Ask yourself what you can due to improve the shopping experience of every individual who walks in your door.  This one seems so obvious, but ask yourself....When was the last time someone treated you like that?  It is so rare that when it happens, loyal fans are born.  Carol spoke the truth when she told me that her customers are hungry for what they cannot find from on-line retailers...Human Connection.  

Say it, Girfriend!  Unh hunh, Unh hunh.

IN OTHER NEWS: 

Those of you who have been with me a while know that I went through hell and back when I lost my dog to cancer late last year.    I did what I swore I wouldn't and  adopted little Cooper, in part because he had a certain Rosie-ish  shape to his face and in part because he needed a family.   

  Oh.  My.  God.

He is a terror.  An honest to goodness Demon Dog.  He pees with gleeful abandon the second he comes inside....after peeing quite happily and productively outside.   He hangs by the cat litter box looking for tasty treats.  He has slaughtered several of my chickens and even managed to kill the meanest rooster that I have ever owned.  This rooster was huge and had two inch spurs---I cannot even imagine how it happened.   The Roo was an ornery cuss  and would regularly attack  me when I stepped too close.   I guess Cooper actually performed a bit of a favor there, but I have to protect my hens!   

I  Googled "how to stop a dog from killing chickens" and learned ---from resource after resource---that it was fairly easy to do.  It merely involves tying the dead chicken's lifeless body to the dog's collar and letting it rot there for a week.  It is widely suggested that the dog be separated from the family during this process as the flies can be overwhelming.  Wow.  That kind of training is sure not going to happen in my lifetime.  Sigh.  Yesterday I found him in my bed, happily gnawing on the leathery foot of a long dead turtle carcass.  Today he cremated a baby finch hopping about the driveway.  Louder Sigh.    

My dog-loving daughter confessed that she wouldn't be upset if Cooper found another home.  My dog-loving husband thinks Cooper is a nightmare.  Of course, I am into "high maintenance and difficult," so I already adore him.  He looks quite the imp with that little patch over his eye and a dead turtle hanging out of his mouth.  What to do?

I guess it is time for me to pull another miracle out of my ass.  After all, he does remind me of Rosie.  She used to exult in Rooster Chasing, too.  So....Game On.  I am going out whisper the Dog Whisperer.  I am going to win this battle.  I hope.  Oops...gotta go...Cooper is heading toward the cat litter box again!

Pray for me....

A Bad Business Model CANNOT be Fixed by Working Harder or Working Faster!

Don't fall into a Retail DEATH SPIRAL! 3 common mistakes to avoid.

Every retailer makes mistakes, and usually those mistakes are easily fixed. A bad hire can be resolved by a quick fire. A highly charged exchange with your business partner can be mitigated by a sincere apology. However, there are other mistakes that can prove to be much more damaging to the vitality of your business.

What is The Crafty Retailer to do?

Avoid those mistakes, of course!

PITFALL #1: Failure to control expenses. Most business owners have a working understanding of their fixed expenses, but are less tuned in to the insidious expenses that eat away at the bottom line. Every time that you cut $10 in expenses, it is tantamount to ringing up a $100 sale.

There are a number of changes that you can make right now to save money without sacrificing the customer experience. Consider the following:

1. Purchase generic shopping bags rather than custom imprinted ones. Use a colorful bag and attach a business card without sacrificing style. In fact, choose something that is eco-friendly and save the environment as well. Let your customers know the thought behind the change...they will appreciate your thrift AND your environmental awareness.

2. Negotiate better rates with your Merchant Services provider. You probably get an annual letter filled with legalize to apprise you of a rate increase. Don't accept the increase as inevitable---Get some quotes from several credit card companies. Your bank might beat your best quote in an effort to keep your business. A quarter of a percent doesn't sound like much of an increase, but when you extrapolate it out, you might be surprised. For example, you will pay an extra $250 when you process $10,000 in sales. Forget that!

3. Some vendors use "Shipping" as a revenue source. If your shipping costs appear high, ask your vendors for a discount. Are you using Fed Ex? Ask UPS for a quote, and vice versa.

4. Shave an hour off of your sales day. My local Home Depot is shutting the doors an hour earlier each day. I am sure that will change if business picks up, but right now it is saving them a bundle. It might work equally well for you.

5. Eliminate employee over-time.

6. Time is money. Order office supplies online. We used to have weekly, and sometimes daily, trips to Office Depot to get paper, ink cartridges, etc. until we tired of paying staff to make the run. It is an inefficient return on the dollars spent. Many big box office supply stores offer free delivery for orders over $50. While we are on the subject of office supplies, switch to cheaper copy paper. No one will complain about the brightness of the paper used to print a newsletter!

7. Target your advertising so that you are not wasting dollars. I recently read about a gift store owner who analyzed her customer data and learned that 40% of her "bottom feeders" came from one zip code! A bottom feeder is a customer who only comes around when you are having huge markdown clearance events. What a great bit of information! Now she has no need to pay for routine advertising in that market; rather, an e-mail newsletter announcing the big sale should suffice.

PITFALL #2: Failure to manage gross margin. This is particularly dangerous in a sour economy. After all, you can lose money despite record sales numbers if your margin is too low. "50% Off" sale signs are everywhere. I hear retailer after retailer complain that customers won't even consider a full price purchase. OUCH. That sort of discounting might improve short term cash flow, but it will quickly lead to your demise. Moreover, it cheapens the value of your product and gives the impression that you were overcharging the customer in the first place. Do yourself a favor and reserve the deep discounts for those items that have outlasted their prime sell date. Frankly, while Consumers may have come to expect crazy discounts, they are going to pay a high price for that gratification. The bitter reality is that the favorite local craft shop, with the cozy chairs and helpful staff, could soon go the way of the dinosaur if the only sales made are low margin sales. Ohio yarn shop owner Jackie Goff put it brilliantly in a newsletter to her customers.

Jackie, the owner of Uptown Fibers in Sylvania, Ohio, had seen several competitors close their doors. When her own customers started to question whether she would be following suit, she told them that it was up to them. She then gave them the following short and sweet economics lesson:

It’s happening all over the country. Every day our hearts break as we see another “OUT OF BUSINESS” sign on the door of our favorite businesses. A great restaurant, delightful bread store, or especially our favorite yarn shop; here one day and gone the next. The fiber community is still reeling from the closing of Vintage Yarns and Fiberworks, and the question asked of me every day is, “So, how is your business. . .really? You won’t be closing too will you?”

To honestly answer your questions, I am not PLANNING on going out of business, but it all depends on sales. Plain and simple. And, quite honestly, sales are significantly below what was expected and what is needed for long-term survival of the shop as it exists today. The last thing I want to do is break your heart. . . and mine, and I’ll do anything to try to keep that from happening. Which is why I have information to share with you.

Last week, one of my yarn distributors told me that 3 out of every 5 shops in his territory have closed since September ‘08, and that probably one out of every remaining two will not survive this summer. His territory is Michigan, Ohio, Illinois, Wisconsin and, I think, Minnesota. It includes Chicago, Detroit, Cincinnati and other cities bigger than Toledo. He reports this trend happening across the US.

Why Shops Don’t Survive
1. Customers stop buying. No explanation needed.
2. Profit margins fall below what is needed to re-stock. Example: a skein of yarn is sold at $10. The first $5.00 is needed to pay rent, taxes, salaries, utilities and the remaining $5.00 is left to re-buy another skein of the same yarn to restock. If the yarn goes on sale, the first $5.00 still has to pay rent/salaries/taxes, and now there is not enough money left to re-buy yarn because it still costs $5.00. Suddenly there is less to sell, customers get bored or already have it, and stop
buying. (not all “sales” create this condition, but most do, unless the item was greatly discounted to the LYS at the time the shop purchased it)

The above is a very simplistic explanation, and there are things a small shop owner can do to increase the profit margins somewhat, but the two items listed here are the major components to success or failure for retailers.

Jackie then went on to ask each of her customers to spend $40 a month with her. She was referencing the 3/50 Project, the brainchild of retail consultant Cynda Baxter of Retail Speaks, which encourages consumers to spend $50 per month with the three independent retailers that they would be miss the most if the stores disappeared. Jackie spent some time running the numbers and decided that she didn't need $50 per customer since $40 could keep the lights on. I was a little bit surprised by the frankness of Jackie's entreaty. Most sales people are conditioned to avoid anything that could be a downer so I found her forthrightness quite refreshing. Fortunately, her customers agreed. Most had little insight into the retail experience so Jackie's newsletter was a real eye opener for them. She reports that many customers come in the shop telling her that they are "here to spend their $40." Read Jackie's entire newsletter.

PITFALL #3: Too much inventory. There are two sides to the excess inventory pitfall. First, there are those who have too much inventory because they like to shop more than they like to sell. They buy what they like and what customers request. This owner special orders ten gross of crystal beads (in a color she knows is slow moving) because a customer needs 12 to finish a product. The owner would be better served by checking her ego at the door and procuring them from a competitor, reselling them to the customer at a loss. The loss would be less than $1 and result in a happy customer and a happy you, as opposed to the happy customer and unhappy you. You are unhappy because your spent $75 on iffy stock and now can't afford to buy the same bead in Swarovski's latest color, Cyclamen Opal. Bummer. The second inventory pitfall is when there is a plethora of inventory in a few store categories, and a dearth of inventory in others. The empty shelves indicate the most highly sought after items...you know...the items that you cannot afford to replace because you have so much money in the slow moving stock. Bummer.

Inventory is the engine that keeps your business running, but you must have sufficient inventory turns to justify the expense of the product. The delicate balance is hard to achieve in good times. It is even more difficult--but critical to your survival-- in a poor economy.

Work hard, work smart and you will survive this economy. You can do it!


Other News:
We have a new candy template for the month of
November. The "Save a Turkey, Eat More Chocolate" template fits the mini Hershey candy bars and is something nice to pop into a shopping bag as a surprise treat for your customers. Remember...it is all about creating the customer experience. Send me an email if you would like a copy.

Control Your Expenses and Schedule More Promotional Events to battle the weak economy!

There are a lot of frightened retailers out there, and there is good reason to be cautious. 467,000 jobs were lost in June, bringing the national unemployment rate to 9.5%. Further, the June Job Report noted that the average work week has declined to 33 hours. Adding this diminution in work hours to the equation results in a true overall unemployment rate of 11.7%, making this the worst recession in human terms since the Great Depression. Need more convincing?

United Parcel Service reported a 49% drop in second quarter profits due to a decline in shipment volume. If shoppers aren't buying, packages aren't shipping. The fact is, consumers are choosing to be more judicious with their spending. Nervous shopkeepers are ordering less inventory for fear that they will be saddled with unsellable stock and jittery distributors are reluctant to gamble on new product lines, hoping to weather the storm without suffering a fiscal tsunami. Regardless of media spin, the economy is headed in the wrong direction.

What is the crafty retailer to do?

Control Costs and Schedule More Promotional Events

These steps are simple in theory, but many retailers find execution a challenge, particularly when money is tight and fear is starting to cloud rational judgment. Rest assured, the anemic economy is putting pressure on everyone. Although it is very easy to become frustrated and dispirited, chances are good that your competitor feels the same way. Human nature is such that she will be inclined to batten down the hatches, reduce her marketing budget, forgo new purchases, and hope to still be in business when the storm clears. Bad strategy for her, but good opportunity for you. The more opportunistic retailer will take advantage of the situation to step up her game and be IN IT to WIN IT. Lots of people make good money during bad economies. Increase the odds of success by taking the following steps:

CUT EXPENSES!

It is more important than ever to control every expense. If you are operating on a 10% net profit margin, then a $100 savings equates to a $1000 sale. Of course, you should only cut those costs that do not directly effect your customer. Slashing your inventory budget will have a deleterious effect upon your customer, buying cheaper copy paper will not. Other options to consider:

Ask your landlord for a reduction in your monthly rent. The state of the economy is no secret and he has probably heard similar requests from his other tenants. Show him your sales numbers and negotiate a temporary reduction. A vacant space will be harder for him to fill today than it was a year ago.

Ask your vendors what they can do to help you. I frequently send out door prizes for customer anniversary sales or similar celebratory occasions. Other vendors offer trunk shows or discounted merchandise. Take a deep breath and make the call to see what you can negotiate!

Eliminate discretionary expenses that do not make you money. For example, most stores have a cleaning service once or twice a month. The janitorial responsibilities can be shared by your staff. Fun? Nope. Necessary? Maybe. I use an office supply company that charges exorbitant shipping fees, but since the product pricing is quite low and the selection is expansive, I considered it a wash. My partner recently picked up the phone and negotiated a 20% reduction in shipping rates. The call lasted less then 2 minutes and has saved me hundreds of dollars each month. D'OH! Why didn't I think of that?

The people who ask are the ones who get the goods...so ask!

PROMOTE, PROMOTE, PROMOTE!

The importance of store promotional events cannot be overstated. In fact, if I could wave a magic wand and change one thing about how the average craft retailer operates, it would be a no brainer. I would increase the time and attention spent on developing store promotional events. IMPORTANT NOTE: A price cut does not equate to a promotional event. Every other store on the block is cutting prices to attract customers and the approach has become little more than white noise. Do not train your customers to become loyal only to price because as soon as they find someone advertising a lower price they will abandon you. The shopkeeper who creates excitement through celebration will thrive despite the sour economy. A good rule of thumb is to schedule one major event and three minor events EVERY SINGLE MONTH.

Sample Major Events that have proven successful for others:

Alada Bead's Mystic Night described in last week's post, where the store arranged for palm readers, food, a wine tasting, and several "make and take" projects, ringing up $10,000 in sales during a three hour period.

Pajama Party Craft Marathon which includes dinner, wine, and breakfast before heading back to reality.

In Store Product Demonstrations generate excitement for little expense. Oftentimes your customer has the desire to learn something new, but the time and effort required is too much. Show your customers how easy it is to learn a new technique by offering in store demonstrations.


Make it, Take It Projects. Plan a day that includes food and festivities. Design several easy kits that can be completed in a short period of time and get a crafty round robin going! You can also "Go Green" by making the focus of the event a Reuse and Recycle Retreat. Urge your customers to bring in an "oldie but goodie" to refurbish into something spectacular. For example, an old sweater can be refashioned into a cute purse like the one pictured at left. Grandma's old jewelry can be refurbished into a smashing contemporary piece of heirloom jewelry created by Etsy artist, BlueMoss.

Have a crafty garage sale! Customers are encouraged to bring in new or gently used craft supplies for a store Garage Sale event. Sales are rung up and attributed to the customer who brought in the item. Upon the close of the event each participant is provided with a store gift certificate in the amount of her sales. The store generates a heck of a buzz and the happy customers have more money to spend on crafts supplies at the store. WIN-WIN!

Although Major Promotions generally require lots of advance planning, minor promotions are easy and should be a staple on your calendar. One of my more successful passive promotions was a Brown Bag Beader series that I offered every Wednesday. I loved to weave beads, but I was self taught and my stitch repertoire was slim. My customers had never worked with seed beads before, so I invited them to learn with me. The stitch changed monthly (eg., January was Brick Stitch, February was Herringbone stitch, etc) and there was never a fee. I chose a free pattern from the internet and we bumbled and fumbled our way through it, laughing and building camaraderie throughout the process. We got to know each other very well, sharing stories about difficult husbands, ailing parents, and troubled teens along with our beading. I made a genuine investment in my customers and they returned the investment in spades.

Other minor promotions include:

Refer a Buddy contest. Offer a prize to the customer who sends in the most referral customers during a fixed period.

Free Gift Day: Offer a free gift with every purchase on one "surprise" day each month. The catch: the gift and the date change every month so frequent shoppers have the greatest chance of winning.

Gold Star customer card. Did you ever have one of those awful customers who sucks the life out of you? You try your best to please her but it is impossible, despite all of the extra time and attention you direct her way. Now think of your best, most loyal customers....you know, the ones who pay your rent. They don't try to negotiate down your sales price, they bring their friends in to shop, etc. Although it is easy to take them for granted, consider rewarding them instead. Give them a "Gold Star Customer" card that comes with some special privileges. The perks don't need to be excessive: consider offering 10% off all purchases every Wednesday and one free class per month.

Schedule an Etsy Workshop. Family budgets are shrinking and crafters are looking for ways to bring in some extra income. Etsy has proven to be a viable means for many women to earn some cash by selling their handcrafted wares. Help them learn the tricks of the trade! The Bead Gallery in Salem, New Hampshire has offered classes on photographing jewelry, which is notoriously tricky. Stitch Craft provides a class on the mechanics of starting a crafty business to help its customers weather the economy.

Many retailers take a baby step by hosting an event but if it doesn't generate immediate and impressive sale numbers they consider it a flop and never try again. This dour philosophy misses the point....the event does not need to generate lots of store revenue to qualify as a resounding success. Rather, if it builds a sense of community and drives foot traffic to your shop, then you have won the first battle. You goal is to spark interest in your shop. You want people to learn that your store is a relaxing and convivial place to hang out and connect with other crafters. You want them to become a member of your tribe...to belong to your knitting/beading/scrapping community...to become invested in your success. Friendships build slowly. Trust happens over time. Promotional events can be a creative and inexpensive way to build your brand and there is no time like the present to take charge of your future. You can use the slower pace of the sales day to feel sorry for yourself and whine about the economy.... or you can use the time to go over your budget, fatten up your promotional calendar, and get ready to succeed. Believe it and ACHIEVE IT!

Coming next week: 25 ways to THRILL YOUR CUSTOMER EVERY TIME!

Turn your dead inventory into CASH!

Inventory management is a challenge for most Retail Craft Store Owners. Don't let dead inventory put a stranglehold on your cash flow! Buying is the easy part. Unfortunately, we don't score a home run with every purchase. The holiday charms that we thought would be a hit are still on the shelf in January. The pricey skeins of wool yarn that we loved at the trade show have met with a lukewarm response and summer is looming. It happens to the best of us, but dead inventory carries a hefty price tag; it takes up valuable store real estate, ties up your cash, and broadcasts to your customer that your inventory is stale. If inventory has been on your shelf for more than four months it is compromising your cash flow.

What is the Crafty Retailer to do?

Use a little bit of imagination and some elbow grease to turn that stash into cash! Don't simply dismiss the slow movers with a shrug and rationalize that "they will sell eventually" as a recent store owner opined when asked about product that had been around long past its prime. Rather, take an objective look around your store to identify the dead weight. Most of the sluggish merchandise can be separated into three groups:

Low Hanging Fruit--This refers to inventory that is still desirable and thereby easiest to sell. You might simply have over purchased a particular item, or the season is drawing to a close, but there is still demand for the product.

Toxic Waste--Pet rock, anyone? It was great when it was great, but it ain't great anymore. The problem with toxic waste is that it has a tendency to taint all of the merchandise surrounding it by its very presence. The bitter reality is that toxic inventory has no tangible market value. Get it off the shelf....NOW. Donate it to a charity and take the tax deduction. The neon acrylic yarn might be perfect for a preschool art project but it no longer deserves a spot on your shelf. Forget what you paid for it...that was then and this is now. Cut your losses!

Everything Else--This refers to slow moving inventory that is not as attractive as the Low Hanging Fruit, but is not as poisonous as Toxic Waste.

Once you have categorized the inventory that needs to go, it is time to make it happen. The easiest thing to do is to discount it, but you have probably already done that and it still hasn't moved. Consider the following life support measures:

1. Bundle it! Put together specialty "mixes" that includes some hot "current" inventory as well as selections from the Low Hanging Fruit and Everything Else piles. You can put together an assortment by color (all blue beads, for example) or by category (fingering weight yarn) or even by purpose (embroidery embellishment grab bag). Bundles are a favorite with bargain shoppers and allow you to leverage your losses by including some higher margin items to take the sting out of the discount.

2. Have a contest! Challenge your employees to use the marginal merchandise to make up store samples. You know the drill....make it and your customers will copy it. The employee whose design sells the most product wins a prize.

3. Put together a charity raffle! Create a beautiful basket filled with both incredible merchandise and inventory losers and feature it prominently by the cash register. Ask your customers if they want to participate in a fundraiser for XYZ charity. For every dollar donated a raffle ticket will be placed into a fishbowl. At the end of the month a winner will be drawn and half of the money collected will go to the charity, half to cover your costs. It is a win-win and you are doing a good deed, as well. I can see your halo glowing from here!

4. Offer your sales staff a monetary incentive to move the product. Bribery works well with your kids and it will work equally well with your sales team.

5. Discount it! Put it on sale, but do it with creativity, not desperation. There is something "off putting" about a table of obvious rejects. Use some humor and make it fun! Consider putting the Low Hanging Fruit and Everything Else on a table and sell it all by the foot, by the ounce, or however else makes sense. Put beads in a bucket and sell them by the scoop. Some cash is better than no cash and it all adds up!

RETAIL STORE CHALLENGE FOR JUNE: No excuses....Get rid of your dead inventory this month! Procrastination is not an option....December will be here before you know it and then you will have a choice to make: Write off the loss or pay tax on an unmarketable asset. Talk about adding insult to injury! You need to unload the duds but we want to make it fun! Email us with the details of your Dead Inventory Resurrection promotions and five winners will be announced the first week of July. You have a month to unload the baggage and win an embellishment package featuring Swarovski beads and hand dyed silk ribbon!
JUNE PROMOTION IDEAS: Promotions don't need to be complicated. Do something silly! June is National Iced Tea Month....why not offer a fresh glass to your customers throughout the month? Other dates of note:

Perennial Gardening Month
Turkey Lovers’ Month
National Bathroom Reading Month
National Candy Month
National Rose Month
National Safety Month
National Soul Food Month
National Steakhouse Month
Jun. 6-13 Clothesline Week
Jun. 7-13 National Business Etiquette Week
Jun. 14 Flag Day
Jun. 20 Vinegar Day
Jun. 21 Father’s Day
Jun. 21 Summer Begins
Jun. 27 Great American Backyard Campout

ARTIST OF NOTE: It is always fun to spot someone who is mixing media with sophistication and grace. Artist Alyson G combines ribbon and pearls to create the stunning bangle pictured at left. Whether your store is geared to fiber or jewelry....be inspired to attract the cross over crafter!

Have a great week!