The pandemic might have caused an unprecedented boom in crafting, but craft retailers must have a digital eCommerce presence if the market wants to see any longevity.
For many retailers, including Michaels, the period before the pandemic was looking rough. The crafts retailer had temporarily closed stores and declined to share estimates for its performance with investors. According to Retail Dive, S&P Global downgraded the company, alongside others like At Home Group and. But after nearly a year into a forever changed society, the retailer is back on track. However, to keep this upward momentum, it’s imperative that eCommerce operations remain consistent.
In the second quarter of 2021, Michaels reported a net sales increase of 11.1% to $1.1 billion and, most importantly, a 353% boom in eCommerce growth. In early July, the company reopened its brick-and-mortar stores. It launched several initiatives between August and early September, including new rewards program perks, a MichaelsPro program for makers, and two concept stores in Texas.
Along with Michaels, the pandemic bolstered the revenues of Joann Fabrics. The company saw a 24.3% boost in revenue in the first three quarters of 2021 compared to the same period in 2020. New customers made up some of this growth, with the company reporting a 15% growth in their customer base in their S1, which went live in February.
But not all craft stores were so lucky.
Again, the future of the crafting space pre-pandemic was looking bleak, and one of the crafting bigwigs took a fatal hit. In 2019, Arts and crafts retailer A.C. Moore announced that it would shutter all 145 stores. The A.C. More chain, owned by Nicole Crafts, is closing down the 34-year-old chain because it was not making a profit.
Its rival Michaels acquired forty of A.C. Moore’s stores and an East Coast distribution facility. The transaction allowed Michaels to expand its footprint to roughly 1,300 stores in 49 states and solidify its position as its largest arts and crafts retailer.
Many sectors, including the craft market, have been facing online competition from the heavy-hitters like Amazon, Etsy, and brick-and-mortar stores like Target and Joann. The latter revamped its brand in 2018 and dropped “Fabrics” from its name to reiterate all of its offerings and keep things spicy.
Evidently, eCommerce is making things difficult for physical craft stores. But Michaels has made sure to do one crucial thing to hold its standing in the market; expanding and innovating its eCommerce experience.
Consumer demand in-store and online drove comparable-store sales, up 16.3% at the end of 2020, coming off of the first phase of the pandemic. The company’s enhanced omnichannel capabilities, like curbside pick-up, same-day delivery, ship from store, the almighty BOPIS, and new in-app purchasing features bolstered eCommerce growth in that quarter. YTD eCommerce growth amounted to an impressive 249%.
CEO Ashley Buchanan said, “Michaels delivered strong third-quarter results highlighted by comparable-store sales growth of 16.3%, driven by robust consumer demand, improved retail execution, and continued progress against our strategic initiatives.” He continues, “Our expanded omnichannel capabilities, maker-centric branding, and increasingly personalized marketing resonated well with customers. We also benefited from progress we made on our ongoing efforts around strategic inventory management, streamlined store operations and a disciplined approach to pricing and promotions. Importantly, we strengthened our balance sheet by paying down $150 million in debt and increased our financial flexibility by refinancing and significantly extending the maturity of our term loan.”
Behind the scenes, Michaels works diligently to keep up with the likes of Amazon, but will they come out on top as the only available physical craft retailer? That depends on its rivals' initiatives and if it can overcome its own share of struggles due to ongoing logistics problems.
Cristina Fernández, senior research analyst at Telsey Advisory Group, says that the issues weighing down Michaels' pandemic success are its outstanding debt, U.S. tariffs imposed on Chinese imports, and shipping costs on eCommerce sales. The tariffs imposed on Chinese imports at 25% increase the cost of products, but the company will likely have absorbed those costs by next year, Fernández points out.
While there are some setbacks, there’s plenty of room for growth for Michaels and craft stores in general. Companies must take advantage of the upward momentum of the sector by growing its crafting community on the coveted social medias. On Facebook, Michael’s boasts 3.2 million followers and has started to feature more user-generated content and promote partnerships with small crafting influencers like Craft Box Girls.
Pivoting digital efforts to TikTok, Facebook, and Instagram could be the key for crafting companies to stay afloat amidst the growing competition. Customer loyalty and interactive branding initiatives will help to bolster any craft store’s eCommerce identity, and at this point, these stores must go digital.
If you’d like to learn more about SUMO Heavy, drop us a line, give us a call or contact us on social media.