Nov 5, 2007

Stats, Math and Scrapbook Stores...

I got an email through another business group this weekend asking about opening a scrapbook store. In thinking about my answer, I ran the numbers. And while I often run numbers, I REALLY ran the numbers based on current research available in the industry. The end result was exactly WHY it's hard for a store to stay open if they don't spend a considerable amount of time and money marketing themselves. Which is a problem since most stores are run by the owner and one part-time employee. How do you take time out of all that you have to do to reach out to the community?? And, unless you have deep marketing pockets, there simply isn't any money to spend on marketing.

Let me give you a breakdown of a typical scenario here:

Let's assume the population of the city and surrounding area is 30,000. According the research done in 2006 by, 4.5% of women scrapbook. Out of those 30,000 people, roughly half will be male and half will be female of all ages. But let's say 1/3 are ADULT females so we'll start with 10,000.

10,000 adult females of which only 4.5% scrapbook. That's 450 scrapbookers. WOW! Are you shocked? I am. That's not many. But wait, it gets better.

Also according to the same research, novice and intermediate scrappers (the two categories more scrappers fall into) spend an average of $38 a month on supplies. Don't jump ahead of me and think you can do the math and get 450 x $38 = $17,100 and then run off and sign a lease. These 450 women are spending a TOTAL of $38 a month across ALL retail outlets they buy from. That means they might spend $15 at Michaels, $10 at Walmart and $13 at your store. NOW let's do that math - 450 scrappers x $13 at the LSS monthly = $5850. Still, don't get excited - we're not there yet. That doesn't include the cost of the goods sold. Typically, you get a 50% discount when you purchase products for resale. But, it's never that good because a large percentage of product must be dumped at below retail. So, let's assume your profit margin averages 40%. Forty percent of $5850 is $2340. So, we went from you getting excited over $17,100 in the perfect world where every scrappers shops at your store exclusively EVERY MONTH and free inventory drops into your lap from the sky, to only having $2340 to pay your lease, taxes, lights, heat, employees, etc. with.

I can make it better than that even. Not every scrapbooker in town will know your store is there or if they do, there's no guarantee they'll come in each month, if they EVER do.

And, the biggest reasons a scrapper will go to their local scrapbook store is a sale, discount or fabulous product selection. All those cost you money.

You also have to look at the average household income in your area. According to the same research, nearly 50% of scrappers have household incomes that exceed $66,000 a year.

Then you have to think about how much you'd have to sell each day. You're selling mostly paper. That's a lot of paper that has to go out the door on an average day to pay your bills.

And, because the retailers in this industry have rarely reached out to NEW scrappers, they are missing out on a large customer base who will come in a buy a lot their first year of scrapping. Think of it - a new scrapper doesn't already have the punches, scissors, trimmers, ahesives, die-cut machines, albums, etc. that seasoned scrappers do. THOSE are your bread-and-butter customers who can fill your cash register. That is why the industry grew like it had rockets on it in the late 90's. Women were buying those things as they discovered this new craft. But, THOSE are also the people not seeing your ad in the latest edition of Scrapbooks, etc. They are reading Family Fun, Real Simple, or their local paper. They are not at the local scrapbook show, but might be at the local community festival. They are the ones who might think scrapping is too silly, or hard, or stupid, etc. Yet, if you showed them how to preserve their memories and photos in a simple way, they would be all over it.

It's not impossible to make a success of a scrapbook store. Many have done it. The LSS near me just celebrated it's 10th anniversary. But many more smaller stores around it have come and gone in that 10 year time. It's definitely more challenging than most people ever realize. It comes down to having business management and marketing skills more than a love of scrapping and it comes down to taking the emotion out of it and looking at it purely on a business scale and listening to the positives as well as the negatives. Nothing's worse than getting into it and realizing that some that you thought were nothing but "Negative Nellies" were actually correct. At that point, you've made a very expensive mistake.

On a related note: I'm starting a project about owning a scrapbook store and would love to hear from former store owners as to why they closed their stores. Email me if you'd like to share your story.

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