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CRAFTY IDEA

Despite size of its craft superstores, Jo-Ann Stores strives for small-shop ambience

BY JESSICA ROE

Scrapbookers in Newark, Del., have a new corner store. It’s tucked in a corner inside the newest Jo-Ann superstore, which is opening in that city this month. And herein lies a paradox for this, the second-largest chain of craft stores: Superstores are the way forward if the chain is to prosper, and yet maintaining a small-store ambience is essential to making them work, according to executives.

That’s what shoppers are looking for in a sector where countless independents are tough competitors to all the leading national chains, say executives of Hudson, Ohio-based Jo-Ann Stores. The Delaware superstore is one of 30 that Jo-Ann is opening this year in Columbus, Ohio; Tucson, Ariz.; Pittsburgh; and other markets. The company launched the format last year with 16 units, and the plan is to put them in all 47 states that already have traditional Jo-Ann stores, starting with its top markets.

Consumers walking into any Jo-Ann superstore will find that their every scrapbooking need can be met in a designated, store-within-a-store area in the left front corner of the building. In the right front corner there is a floral shop offering silk, dried and artificial flowers. The rear left and right corners feature quilt and home decor shops, respectively.

“We want the scrapbooking shop or the quilt shop to look like the neighborhood shop that might be our shopper’s alternative,” said Alan Rosskamm, chairman, president and CEO of Jo-Ann. “We’ve set up clearly departmentalized shops-in-a-shop that have a warm, shoppable feel.”

The particular choice of crafts that are getting this special treatment is market-driven. Scrapbooking, home decor, flower arranging and painting are among the five most popular crafts and hobbies in the United States, according to a 2002 Hobby Industry Association study. The most popular is needlecraft, and this plays to one of Jo-Ann’s traditional strengths.

Sixty years ago, Rosskamm’s grandparents opened a fabric store, where, while still a boy, he began his retail career. Fabric has been a mainstay of Rosskamm’s business ever since.

The corner “stores” may be a signature of the new format, but these new Jo-Ann stores are still very much superstores. At roughly 35,000 square feet, the stores occupy about 150 feet of frontage and some 245 feet of depth.

“We can be flexible in dimensions and flexible around the footprint, but not dramatically,” said Jeffrey N. Fink, Jo-Ann’s vice president of real estate. The chain prefers locations with electronics stores, home goods stores and other category-dominant retailers.

Jo-Ann is setting up its superstores on a variety of sites. “We have successfully opened in freestanding locations, in existing strip centers, new-construction power centers and existing stores,” said Fink. “We’ve moved into and adapted our prototype in old Kmarts, Service Merchandises and other stores. We’ve also become part of regional malls. Our No. 1 volume superstore is part of a mall in Torrance, Calif.”

On average, every new superstore the company opens replaces a traditional Jo-Ann store. But for the time being, traditional units and superstores will coexist in leading markets.

The superstores average 5,500 shoppers per week, many of whom travel 10 miles or more to come shop.

But the real value of the superstore format is measured in dollars. Three years ago Jo-Ann operated 13 traditional stores in the Phoenix market, generating a total of about $11 million in sales annually. Today, with four superstores and seven traditional stores in the region, annual sales are about $30 million. And the company plans to roll out about six more superstores there. “Over a five- or six-year period we anticipate taking this market from $11 million to $60 million,” said David Bolen, Jo-Ann’s executive vice president of marketing and merchandising.

The Phoenix results are typical of the bottom-line boost Jo-Ann has achieved through its superstore rollout. The company posted $405 million in sales for the first quarter of fiscal 2005, which began Feb. 1, up from $375 million for the comparable quarter last year.

“Given [Jo-Ann’s] continued store rationalization, which should result in growth in square footage of approximately 1 percent, coupled with our 3 percent [same-store sales] growth assumption for [fiscal] 2005, we are forecasting top-line growth of just over 4 percent for [fiscal] 2005,” said Scott Pettit, a retail analyst at Avondale Partners, in a recent report on the store.

Jo-Ann’s superstore initiative is also benefiting from the popularity of crafts, which is feeding an industry that grew to $29 billion in 2002, according to Hobby Industry Association data. The percentage of U.S. households with at least one crafter at home grew to 60 percent in 2002, and more crafters means more money spent on more projects.

These are not people who sew out of economic necessity. According to the association study, the largest group of crafters live in households with average annual incomes of between $50,000 and $74,999, representing 19 percent of respondents. Overall, 43 percent of all crafters come from households with incomes over $35,000 a year. Heavy users, who make up 25 percent, spent an average of $1,552 each on craft products in 2002, accounting for 77 percent of all sales.

National crafts chains account for 20 percent of total craft merchandise sales. The rest of this highly fragmented market is divided up among a great mix of independently owned and operated local craft-specific stores, craft fair and flea market dealers, and online and mail-order vendors. There are also independent hardware and housewares stores that sell some craft supplies, to say nothing of the discounters, such as Wal-Mart, and even some drugstores, supermarkets and department stores.

The three leaders are all enjoying healthy sales growth. For fiscal 2004, ended Jan. 31, Michaels Stores posted $3 billion in sales, up 8.2 percent from the previous year, while Jo-Ann reported $1.7 billion, a 3.1 percent increase from the year before. A.C. Moore ended 2003 with $424 million in sales, 10.3 percent better than 2002.

Market leader Michaels operates a total of 805 stores, averaging about 18,200 square feet of selling space each. The company also runs 158 framing and art supply stores, primarily on the West Coast, under the Aaron Bros. name. In addition, Michaels operates two scrapbooking and paper crafts stores called ReCollections, one in Dallas and the other in San Francisco. It plans to open six to eight more of these. Michaels has no superstores, but it does operate two Star Decorators Wholesale Warehouses (in Texas and Georgia), which cater to professional decorators, event planners and crafts organizations.

Rosskamm says he believes his company faces two distinct challenges when it comes to growing market share. The first comes from other retailers — ranging from the small stores that provide expertise, to Wal-Mart, which offers certain crafts supplies and convenience.

The other challenge, he says, comes from the leisure industry on the whole: books, movies, golf, travel — all of which vie for his customers’ time.

The superstores are designed to raise the chain’s profile and promote crafting in general, says Rosskamm, noting that the strategy has helped The Home Depot and Lowe’s.

“We want to offer a much better shopping experience,” he said, “with better products and more-knowledgeable team members on the floor to encourage people to try new projects.”