Business SMART:

The Economy is Up and We are Down
 

By: Dennis A. Conforto
A-Z Media Group

In the last fifteen sessions of the stock market ten all-time stock market records have been set. Corporate profits are up, personal income is up, gas prices are now down and the housing market continues to rock on. Everywhere you look when it comes to the economy things have never been better. This raises multiple questions, like: “Why is the economy up and the scrapbooking industry down?” “How can that even be possible when everything else is so right?” “How can we one day be the darling of the craft industry and the envy of so many businesses and the next day be flat on our backs?”

The answers are simple which is the good news, because if the answers are simple then so are the solutions.

There is no question of the tremendous success the industry enjoyed, after all, that is one of the reasons we all got into the business. It may not be the only reason but it certainly was a good one…

As the industry got its start success came to everyone almost too easily. It was one of the reasons that those who looked at the industry’s fast growth assumed it was nothing more than another fad to hit the craft market. The economy of a fad is something that grows so fast that people who analyze marketplaces can’t explain how it grew, why it grew and what its future is, as was the case with the slinky and the pet rock.

However, it is clear that something is very different about the scrapbooking industry. The growth for the scrapbooking industry lasted too long to be a fad and the growth of retail stores that carried scrapbooking products was too wide.

Everything was set for our continued growth and success. So the question is, “Why did growth all of a sudden slow down this year for apparently no reason?”

Why would it slow down right in the middle of what appears to be a natural business high for just about all businesses across North America?

The reason is that we as an industry broke several very simple rules. The biggest rule broken and the reason for our lack of continued growth is that the industry is not spending enough money to attract new consumers that are the fuel for our growth. The industry requires more new consumers to come into the marketplace to sustain the retailers and manufacturers who are now in play.

Many in the industry would argue that they are spending money on advertising and I would argue that while they are spending money on advertising, they are spending too much money on the same old tired consumer who is spending less and wanting more. There is no question that money should be spent on that group but it should be 25% of the total advertising budget not 100% of that budget. The fact is that as an industry we should have spent $125 million on consumer advertising and sadly at the retail level we only spent $25 million. That is a $100 million shortfall that cannot be made up through word of mouth advertising which the industry is now depending on too much.

There in lies the rub for the industry. We tend to look back in time and try to see what we did that made us successful and then repeat it again. However, the landscape has changed and the old rules no longer apply. The new conditions within the marketplace require us to change old thinking to new thinking.

The only way to change the landscape fast enough is for the majority of those within the industry to change and to change quickly. For manufacturers, it will require them to re-think where they spend their advertising dollars. In addition, they will need to create co-op programs that have incentives to inspire retailers to spend real money on promoting their brands.

Manufacturers have been way too slow in taking known business practices from other industries and applying them to the scrapbooking industry. What is funny is that there are a growing number of manufacturers who believe and understand that they need to make the change but nevertheless find themselves stuck in time and unwilling to change. The problem is that those who wait too long will find that they hurt the very retail channel that is so key to their own success.

So once again I call on all manufacturers to adopt standard matching co-op advertising programs before the damage is too great and we reach a tipping point that causes destruction to the industry. Those manufacturers who like the idea of matching co-op advertising but don’t know how to do it or don’t believe they have the resources to manage it can outsource this important retail service to companies like The Advertising Checking Bureau, www.acbcoop.com.

The relationship between the retailer and the manufacturer is mirror-like. What one party does will only be reflected by the other party! If co-op becomes an industry standard as it should be, then retailers will reflect the standard using it to push not only the growth of those brands that are smart enough to use the standard but also promote the growth of the stores and the industry.

There is an interconnection in a matching co-op policy that would have had a positive effect for retailers. It would have created more loyalty on the part of the retailers who, instead of cherry picking a line, would have bought into more of the manufacturer’s product line-up. If that had taken place, then retailers would have carried more products from fewer vendors. This would have increased turn rates, and would have created stores that, instead of looking all the same and carrying all the same products would have been more unique. Having stores that are less similar would have promoted greater cooperation among retailers. This would have allowed retailers to find it easier to advertise together and grow the industry rather than feeling like they were at war within their own industry.

The more one understands how matching co-op funds really works, the more everyone would truly know it costs nothing. In the end, not doing it cost us everything.

What will it take to make change? It just takes everyone talking about it over and over again until they know it is right and then everyone in the industry jumping into the water at the same time. There is nothing to fear except knowing where the industry is headed if action is not taken. The time has come for change. So, who should start the change? Should it be retailers? Should it be manufacturers? I know who it should start with; it should start with you and that is what being business SMART is all about.