Michaels transforms its stores to fill voids left by Joann and Party City

They include expanded assortments and new services. The Knit & Sew Shop features both the Joann and Michaels logos, as Michaels acquired Joann’s intellectual property and private-label brands in June. It will offer an assortment of threads, sewing notions and yarn.

With the new party section, Michaels can now accommodate 700 new products including DIY balloon arch kits and tableware, as well as themed paper goods and accessories. Each store also features a dedicated balloon bar with latex, foil and customizable balloons.

Modern Retail met David Boone — who joined Michaels as CEO in February — at one of its stores in Flower Mound, Texas, near its Dallas-area headquarters, to view the new departments. Boone was previously interim CEO of the wholesale, e-commerce and 3PL company Essendant, and has also been CEO of Staples Canada.

“I just saw lots of opportunity for the business to continue to become more relevant in what it does,” Boone told Modern Retail. He said one way to do that has been to seize on opportunities in the market such as party, celebrations, knit-and-sew and balloons. “That has been the focus of the organization since I joined.”

Despite Joann and Party City going out of business, Boone said Michaels comes into these categories from a position of strength. “We have been in the arts-and-crafts business for 50 years [and] the celebrations business for that long,” Boone said. “These are really natural adjacencies for us to go into.”

Boone said the company didn’t walk away from any other category, but that there were opportunities to “densify” other departments.

“If you were to walk our framing department, for example, the way that we display frames and show our collections has changed as a result of this,” Boone said. “But we were able to keep largely the same assortment as we brought [the knitting and party] businesses into the organization.”

Picking up where Joann left off

Michaels now carries fabric in more than 840 stores, with plans to expand to over 250 additional locations, meaning it now has more stores selling fabric than Joann did when it shuttered.

By next quarter, about 75-80% of the fleet will have fabric, Boone said. The company has also increased the existing space dedicated to fabric in stores by almost 25%. In addition, it is expanding its yarn selection by 25%. Fabric cutting tables will be in more than 650 of the company’s 1,300-plus stores by mid-October.

“Joann had a lot of fabric, they had a lot of yarn; they also had a lot of arts and crafts,” Boone said. “What we’ve done is worked hard to find out the things that were most important to those customers — it was a beloved brand by many users of that brand — and make sure that we’ve got those relevant products and services added to our assortment.”

Searches for “fabric” on Michaels.com increased by 77% over the past year, according to the company. Boone said Michaels acquired the Joann IP because its brands including Big Twist, and the Joann IP as a whole, were so beloved by a certain segment of customers.

“You simply can’t replicate that,” he said, adding that Michaels believed somebody had to serve that customer. “How we’ve used the brand since then is primarily to communicate to customers to acknowledge that they’ve lost where they were shopping for that and to tell them where they can get products with us.”

But moving forward, Michaels will deepen its use of the newly acquired Joann IP. The popular Big Twist brand of yarn, a Joann private-label product, will hit shelves at the end of October. Michaels will also sell products such as Gütermann threads, new sewing machines from Singer and Brother, sewing notions, and needle-crafting kits.

Abby Glassenberg, co-founder of Craft Industry Alliance, said it was smart of Michaels to bring in fabric and acquire the Joann intellectual property to make up for the loss of the chain. She said there is a place in the market for fabric at an affordable, big-box retailer, but that independent retailers are also trying to take market share from Joann.

Glassenberg also said that cutting fabric to order — in addition to blowing up balloons, fulfilling pick-up orders and doing custom framing — may be a lot of work for Michaels workers. “It’s just something to think about, as far as an already very stretched workforce being asked to do two new things,” she said.

Boone said Michaels is giving stores more hours and more employment to support these services, which, he said, comes with growth. “We have a pretty sophisticated hours management and planning system, and we’re leveraging that.”

He also said Michaels is pulling out non-value-added administrative tasks from stores and moving them to the home office so employees can spend more time with customers.

“We have reduced 40% of the tasks that stores have to do that are administrative in nature to give them more time to serve the customer and to talk to them about what they’re doing and help them be successful in their creative endeavors,” Boone said. “So there’s a huge part of leveraging and engaging our associates to not only be part of our brand, but to also talk to our customers because they want to.”

Creating a celebration destination

As for the gap left by Party City, Boone said he hopes Michaels will become a one-stop shop for celebration, from party supplies to materials that help consumers decorate their homes, like floral fabric.

“There are lots of different elements of what could be brought together in Michaels to help consumers celebrate,” Boone said. “So I don’t think you should think of it as simply stepping in where Party City was. I think it’s stepping into a need for celebration, and party supplies being part of that, and helium balloons being part of that.”

Michaels said it is the only national retailer with an online “reserve a time” balloon feature, allowing customers to order ahead and have the balloons ready at a specific time. Additionally, customers can build custom balloon bundles online for in-store pickup and schedule deliveries up to four days ahead, including options for same-day delivery.

The company also cut the starting price of in-store birthday parties from $299 to $149. The parties include guided craft projects, a collection of themes to choose from, customizable add-ons like balloons, goodie bags and pizza, and the ability to send invitations and manage RSVPs on the Michaels website. So far this year, the company has hosted more than 4,200 birthday parties.

The company has also lowered prices by 25-70% on more than 200 party products such as plates, napkins, party streamers and table covers. “We’re trying to find elements in our business to make it more affordable, such as dropping the price of birthday parties,” Boone said.

Despite the current consumer environment, he added that “people care about their hobbies, and they care about celebrating. And you might even argue that, in an environment where consumer spending may be constrained, people do more celebrating at home and it’s more affordable. And I think we can step into that quite nicely.”

Boone also believes the new selection will help customers celebrate Halloween — as of late September, the company has had Halloween items in stores for about a month, he said.

“Take balloons, take party supplies, take all of our decor items, and take something like black twill or ribbon or things that creatives use, and we can help customers really celebrate Halloween unlike any other retailer in North America,” Boone said. “Put it all together, and it’s a real solution around celebrating events. … It’s taking all the creative elements and applying it to the celebration business, which is bigger than party supplies.”