For Craft Sales, the Recession Is a Help

http://www.nytimes.com/2008/12/23/business/23craft.html?_r=1&adxnnlx=1230044429-LDYPpMtpEwhP%20mq4EcpdFg&pagewanted=all

A boom in sales of crafts and related supplies contrasts with poor results for traditional retailers, like electronics retailers and department stores
By CLAIRE CAIN MILLER, Published: December 22, 2008
SAN FRANCISCO — Feeling the pinch of the economic downturn, some holiday gift-givers are saving money this year by making their own presents or — for those who lack the time or talent — buying handmade gifts from others.
Michaels Stores is hoping that a holiday spike in sales of craft goods will make up for weak results earlier in the year. Craft stores, from giant chains like Michaels Stores to small scrapbook supply shops, are reporting that sales are higher compared with the last holiday season, and online marketplaces for handmade goods, like Etsy, are seeing a boom in listings and transactions.
Sales at Scrap, a craft supply store in Portland, Ore., were up 33 percent in November compared with the year before. The shop’s customers have made a menorah out of yellow plastic bottle caps, Christmas tree ornaments from wood samples and calendars from fabric and paper collages, according to Sarah Dyer, the manager.
“A lot of people are doing a do-it-yourself Christmas, because of the economic downturn but also wanting to make their lives more sustainable, making stuff as opposed to buying more stuff,” she said.
The boom in crafts and related supplies contrasts with poor results for traditional retailers, like electronics retailers and department stores. The nation’s overall retail sales in November fell 7.4 percent from the year before, according to the Commerce Department.
The craft sector, which has about $5.9 billion in annual revenue, is “operating in its own little niche,” said George Van Horn, a senior analyst at IBISWorld, a research firm. “The number of establishments is growing.”
Last year, 42 million households gave handmade gifts, according to the Craft & Hobby Association, a trade group, and that number is expected to increase greatly this year, its spokesman, Victor Domine, said.
“Across the country, people are crafting more,” he said. “With the recession, people are looking for ways to save money, and doctors are recommending it as a major form of stress relief.”
Elizabeth Ludington, a 25-year-old paralegal in Rochester, N.Y., is one of those who chose a do-it-yourself Christmas. She works for a nonprofit legal aid group that she fears could suffer from a downturn in grants. “I looked at my bank account and budget and realized I didn’t have a lot of cash,” she said.
She usually spends about $20 on each of 10 friends and relatives for stationery, bath products or spa gift certificates. This year, she is stitching cable-knit coffee sleeves to use instead of the cardboard ones at coffee shops. They will cost her $1 each to make and an hour of her time after work while she watches TV at night.
“I wanted something that was affordable but still meaningful and kind of fun,” she said.
Michaels Stores, the chain of craft retailers owned by the Blackstone Group and Bain Capital, hopes that a holiday spike in sales will make up for weak results earlier in the year. For the quarter that ended Nov. 1, the company reported a net loss of $20 million and a decrease of 6.5 percent in same-store sales. But in November and December, Michaels’ 1,014 stores have had sharp increases in traffic and transactions for small-ticket craft supplies, said Brian C. Cornell, the company’s chief executive.
Michaels does not release monthly sales data, and Mr. Cornell declined to discuss specific numbers. However, he said that premade holiday and home decorations, which tend to be more expensive, are not selling well. Less expensive craft supplies, which generally account for 41 percent of revenue, are moving briskly, and sales have been particularly strong for supplies used to make jewelry, baked goods, scrapbooks and decorated clothing.
Michaels has shifted its marketing strategy to take advantage of the trend. The company created an advertising campaign called “Endless Creativity, Endless Savings” to market craft supplies for handmade gifts. It started a Web site, Where Creativity Happens, with videos on how to make gifts like picture frames and candles, and it held free weekly in-store workshops.
“We’re certainly seeing much better results than we would have anticipated,” Mr. Cornell said. “There’s a much greater interest right now in how you decorate your home and create your own gifts yourself.”
Jo-Ann Stores, the craft supply leader with a 19 percent market share, has had a similar pattern. Though same-store sales fell 1.5 percent in the quarter ending Nov. 1, sales of sewing and craft supplies, which account for half of revenue, were stable that quarter and have climbed this quarter, said Lisa Greb, a Jo-Ann spokeswoman.
The cost savings for handmade gifts can be significant. At Jo-Ann, the supplies to make a child’s apron and chef hat cost $7.90 for fabric designed with gingerbread men, iron-on letters to spell “chef” and elastic. Making a hand-knit throw costs $40 for nine skeins of yarn and $6 for knitting needles; a similar-looking item at Pottery Barn costs $129.
Jeanne Nevin, the owner of Stampingly Yours, a scrapbooking store in Clifton, N.J., said the last few months have brought her many new customers buying scrapbooks, paper, decorations, inks and rubber stamps.
“It’s because nobody has money,” she said. Making a scrapbook is an inexpensive alternative to buying a gift. “It’s not like they give a gift, use it up and get rid of it. It’s stuff they can keep forever.”
Even people who do not have the time or inclination to create their own gifts are shunning big-box stores to buy handmade gifts directly from artists, in part to save on the margin in retail stores.
On eBay, people bought 13,137 handmade crafts over the last 60 days for an average price of $8.21, and sales of handmade crafts climbed 34 percent, the company said.
On Sept. 29, a day the stock market plunged sharply, Etsy, the leading Web marketplace for handmade goods, had record sales. In November and December, the site has continued to break records. Last month, artists sold $10.8 million of goods on Etsy, up from $4.2 million in November 2007. Some 135,000 people signed up for Etsy memberships and sellers listed 1.1 million new items, both figures more than double the same month last year.
Some Etsy merchants have had such unexpectedly high sales this season that they are shutting down early because they do not have time to make any more gifts.
Dennis Anderson of Citrus Heights, Calif., was prepared for a 50 percent increase in sales of his soaps, which are handmade from ingredients like olive oil, pomegranate and Pabst Blue Ribbon beer. Instead, orders climbed 300 percent. He said he has sold 6,000 items in the last three months, and he has been working 15 hours a day, seven days a week, to meet the demand.
“I wasn’t expecting this much with the economy the way it is, but I realized it’s probably one of the factors in the increase,” he said. Customers “can knock out 12 people by getting 12 bars of soap for $60 instead of spending $30 a person.”
Apart from the lower cost, handmade gifts have a nonfinancial value that appeals to many buyers.
“I just like the fact that I’m supporting someone who’s trying to make their way in the world by using their talents, and my money is going directly to a person instead of a chain of middlemen,” said Christy Petterson, a jeweler in Atlanta who co-edits GetCrafty.com and has bought handmade gifts this season. “For the same amount of money, the specialness factor is way higher. It’s more heartfelt than if you bought something from a big-box store.”