SMART Industry Overview

“The goal of business is producing a profit”

Meeting Agenda

Overview of the Industry

Case Study of a Mass Merchandiser

Overview of the Industry

“Seeing the world as it really is”

Scrapbooking is Not a Fad

It’s not a single product

It’s a subset of a major product category – Photography

It has independent stores nationwide

It’s tied to the family history community

Scrapbooking Market Share

Women Ages 15-644.5%

40.5%

55.0%

Scrapbookers Prospective Growth Free Market

Age Breakdown

Under 181%

40-4929%

30-3934%

26-299%

18-257%

60+4%

50-5916%

Annual Income

$26K-$45K33%

$46K-$65K24%

$66K-$85K19%

$86K+24%

Yearly Revenues of Scrapbookers

Consumer Type

Beginners

Intermediates

Experts

Collectors

Totals

Annual Revenues

$375,000,000

$937,500,000

$1,120,000,000

$15,000,000

$2.447 Billion

Purchases

$150

$750

$1,600

$300

Number

2.5 M

1.25 M

700 K

50 K

4.5 M

Number of Scrapbookers

1.25 Million

2.5 Million

700 K

50 K

7 Years

Beginners

Intermediates

Experts

Collectors

Trial: Hands-on trial

of scrapbooking.

Information: Customer identifies problem

then finds the solution

Decision:

The customer

decides they like scrapbooking &

invest.

Scrapbook Addict: The customer has made scrapbooking their hobby of choice.

Pictures in shoebox or on computer

.

.

Knowledge

Synthesis

Application

Comprehension

Analysis

Evaluation

Instant Scrapbooker

• Digital

• Ready Kits

• Themes

• Solutions

• 10 minute shopping

• 1 to 2 hours complete

• Now! Event or party tonight

• No social

• No learning

• Pure results & quick

“Solutions from manufacturers that meet the

Instant Scrapbookers

needs.”

Instant Scrapbooker vs. The NewbieCrafter

40 Million Instant Scrapbookers40 Million Instant Scrapbookers

Number of Scrapbookers

1.25 Million

2.5 Million

700 K

50 K

Scrapbooking Publication Share

Industry Publications

85%

7%4%

4%

No Scrapbooking Publication Scrapbooking.com MagazineCreating Keepsake Magazine Memory Maker Magazine

Retailers in Traditional Magazines

Paper Magazines

Creating Keepsakes

Memory Makers

Simple Scrapbooks

PaperKutz

Readers

56

56

19

0

Store Lists

$135

$135

$135

$0

Subscribers

160k

140k

70k

Bankrupt

Case Study of a Mass Merchandiser

“Every industry has a GIANT”

Case Study of a Category Killer

“In search of the perfect store” Aggressive, focused merchandising Exciting and fun in-store experience A leading source of information More classes and demos Informative signage Strengthen the brand with more awareness More circulars New forms of marketing Consumer surveys

The CEO’s Vision

Case Study of a Category Killer

Sales in 2004 $ 3,000,000,000100%

Pre-tax profit $ 300,000,00010%

After tax profit $ 177,000,0006%

Cash on hand $ 400,000,00013%

Inventory $ 892,000,000

Market cap $ 3,300,000,000

Full-time employees 12,700

Part-time employees 25,000

Operating Performance

Case Study of a Category Killer

ReCollections 6 new stores per year 400 total

Aaron Brothers 10 new stores per year 600 total

Village Craft 10 new stores per year Unknown

Michaels 45 new stores per year 1,100 total

Total Stores 71 new stores per year

Average yearly sales per store is $3.9 million

New store growth is $276.9 million per year

New Store Openings Total Goal

Sales per store $3.9 million Goal: $5.0 million

Sales per sq ft $184 Goal: $310

Per employee $120,000 Goal: $200,000

Inventory turn 2.12 Goal: 5.16

GMROI $1.41 Goal: $2.81

Productivity

Case Study of a Category Killer

Average store size 2,500 sq. ft. Vs. 5,000 sq. ft.

Sales per sq. ft. $300 Vs. $184

Sales per store $750,000 Vs. $920,000

Per employee $150,000 Vs. $120,000

Inventory turn 6.00 Vs. 2.12

GMROI $5.00 Vs. $1.41

Gross Margin 48% Vs. 36.7%

Average sale $50.00 Vs. Unknown

Mailing list 7,500 Vs. Unknown

SMART Stores Michaels

The SMART Profit Model

Get SMART, Be SMART, Stay SMART!

Believe that your industry can do much more annual volume

Believe that the industry is here to stay – and so are you

Know that an independent retailer can run circles around national chains

Push for better operational performance from your retail business

Be a retailer first and a crafter second

Recommendations

SMART Industry Overview

“The goal of business is producing a profit”

Lunch Time

“There is a free lunch, really there is!”