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Friday, January 30, 2009

For Craft Sales, the Recession Is a Help

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.

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.

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