Do-it-yourself suppliers find opportunities

While most retailers are seeing sales steadily decline, craft stores hope to remain among the bright spots.

The slumping economy and tightening budgets are prompting more people to make their own Halloween costumes and give handcrafted gifts for Christmas.

Purveyors of scrapbooking supplies, yarn and beads want to draw those shoppers -- adding classes and stocking more inexpensive items.

Dawn Zimba has been looking for a job since moving to Garner from New York in late July. Until she finds one, she and her boyfriend are getting by on his income alone.

To help fill her time and stretch her small holiday gift budget, Zimba turned to jewelry making. She has found some local shops and bought some basic equipment.

This week, she learned how to make a "bauble ring," a wire ring with beads threaded into the top.

"It's a really cool gift," she said. "It's something that nobody else will have, and I think that these personal gifts mean a whole lot more."

After the $50 for pliers and other equipment, Zimba estimated that each ring would cost her about $10 and 30 minutes to produce. "Once you get all the supplies, it's really not that expensive," she said.

While an economic slump could lure more make-it-yourselfers, a full-blown recession could still hurt crafts retailers.

Overall, the U.S. craft and hobby market has grown from $23 billion in 2000 to $31.8 billion in 2007, according to the Hobby Industry Association.

However, the industry experienced a rapid rise in sales following the Sept. 11, 2001, terrorist attacks and a subsequent fall in demand, said Mary Stowe, owner of Yarns Etc. in Chapel Hill and Great Yarns in Raleigh.

"The peak was in 2004, and then it went downhill," she said.

Demand is back

Now that demand is back on the rise, stores have to figure out how to make the most from the upswing.

Craft stores operate on thin margins and have struggled in recent years with competition from the likes of Wal-Mart.

They've been mired in gluts of extra seasonal merchandise that had to be sold at a severe discount and have been working on improving their ordering and inventory systems.

The key may be trying to offer the best balance of quality and value, Stowe said. Traffic at her Chapel Hill store is up about 10 percent in the last two months.

"People I haven't seen in a long time, people who haven't been doing it for awhile, are coming back," Stowe said. "People are really looking for good yarns and good quality, but I feel like people are being price-conscious as well."

Cynthia Deis said she is seeing changes in how people are buying at her two stores, bead and jewelry-making supply shop Ornamentea and craft store Panopolie, both in Raleigh.

"We see ladies walking in with $20 or $30 or $40 cash, and they literally don't bring their purses in," she said. "They're like, 'This is the money I have to spend.' "

Any holiday-related spike in business comes with a gray cloud. Times are tough for even the biggest craft retailers.

Michael's, A.C. Moore and Jo-Ann Stores all reported quarterly net losses in August, though all three chains also reported sales increases for the quarter.

The companies have been trying to streamline their inventory systems and use other cost-cutting efforts, but the end of the year remains uncertain.

And that means that any boost in sales as the economy sours may be only enough to even out the losses.

"I am very much thinking that the best retailers with all of these economic pressures will only see modest growth," said Holly Guthrie, a retail analyst who follows A.C. Moore for Pennsylvania-based Boenning & Scattergood.

"Best-case scenario would be a few [retailers] up 10 or 15 percent," she said. "But in general it will be 2 to 4 percent."

That makes attracting new customers even more important.

Store owners like Deis are making every effort to encourage fledgling crafters.

Her stores offer classes in areas such as metal work and jewelry making, but Deis said she's adding more beginner sessions.

"We're going to do some beginner-level, gift-oriented classes when you come in and make three of something or four of something," she said. "We've never done that in the past, but ... just in talking to customers, we've had a lot of people say that's something they would like."

Some stores are also tweaking what they stock.

The big chains are stocking fewer items and emphasizing the ones they think will be hot sellers, said analyst Guthrie.

"The aisles are definitely wider," she said.

Diamonds? Maybe not

And retailers are buying smarter. At Deis' stores, she has purchased fewer strands of diamonds, which can cost several hundred dollars a strand, and ordered thousands of small picture frames she thinks will be popular this year. They cost $2.

"I just don't think people are going to spend the money for [the diamonds]," she said. "But the frames are very sweet, they're very sentimental. That's going to really be big this year."

People new to crafting may bolster the industry, but Garner resident Zimba did say there's one big factor that will determine whether she continues to do craft projects: "I have to be able to get the technique down."