Independent shop owners who adapt to changes in the retail framing market will not only survive but be ready to grow when the economic climate improves
When my wife and I started our frame shop in 1988, the framing industry was different. Nearly all our competitors were independent framers in single locations. Technical skills were almost as important as business skills in running a successful frame shop. Customers were plentiful, and they responded to all kinds of advertising.
In 2000 everything changed with the dot-com crash. The terror attacks of 2001 further damaged consumer confidence, even as the economy improved. More significant was how consumer spending on custom framing changed in neighborhoods where mass-market framers opened. Their professional marketing strategies and big-budget advertising rendered the previously successful advertising of small independents ineffective. Suddenly, customers stopped coming through the door. Advertising stopped working. Revenue dropped.
When we first looked for ways to remain competitive, we expected to retain the main operating features of our business. We cut prices and advertised more. Our advertising improved dramatically in quality and frequency. But that did not help. Advertising costs went through the roof while revenue remained dismal. And, because we had reduced our prices, profitability also suffered.
It was a strategy that many independent frame shop owners have ridden into uncomfortable retirement or bankruptcy and others are still struggling with today. Fortunately, we recognized that the industry had entered an era of radical evolution and would never again be the same. We saw that we needed to adapt to the new market in retail framing. Our strategy continues to develop, and we are prepared to deal with almost any further changes that might happen within our market.
Here is how our survival strategy has developed:
Change of Focus
Everyone knows the first responsibility of a business is to bring in revenue, and that is what we used to concentrate on doing. We used to create more net profit by stimulating sales, and the cost side of our business remained mostly untouched. But when it became impossible to stimulate the necessary increases in revenue, we turned our attention to making the most of the dollars in our control. That is, we began to concentrate on keeping more net profit, even as revenue went down. This has resulted in a detailed evaluation of every cost of doing business as well as our material costs and retail prices. By reviewing and changing such basic products and services as phone and Internet service, trash collection, accounting services, banking fees, shipping, mailing expenses, and office supplies, we have been able to save thousands of dollars per year.
Payroll is a major expense in the labor-intensive framing businesses. We had to cut back hours for our employees, one full-time and two part-time, because we simply did not have enough work to keep them busy. One part-timer was eliminated, which provided some relief. When our full-time framer retired, we did not replace her. Instead, we increased the hours for our remaining part-time employee, who is still with us and is still working at another job. My direct work in the shop has greatly increased as a result, but my sacrifice of some peripheral activities has been a conscious decision toward keeping more profit.
In certain markets, including the one where our store is located, large retailers have drastically affected custom framing in recent years. These professionally managed companies have specific expertise, and it just happens to be the same as most small framers—ordinary framing of paper and canvas. They rely on large-volume, standardized framing designs, which are compatible with their production and the least demanding in terms of labor for specialized framing.
Rather than continuing to compete with mass marketers in their areas of greatest expertise, we made the decision to specialize in framing projects that our competitors either do not want or cannot sell profitably. We redeveloped our marketing plan with two specific targets in mind: protective framing of valuables and innovative framing of three-dimensional objects. This required us to develop new framing products and services, and that also required a new commitment to specialized framing education. The payoff was that, in a short time, our average price per frame increased because of these more elaborate framing projects.
Advertising these specialties has also worked because mass marketers are now referring the customers to us that they choose not to serve. We encourage that by visiting their stores occasionally to maintain friendly relationships and to remind them about our specialties. Because these specialties are unique and competition is sparse, pricing is less of an issue. And that has helped our profitability.
A mass marketers’ pricing philosophy is similar to what worked for our frame shop for years, with retail prices formulated to support some discounting. The difference is that our shop’s pricing traditionally had been set up for occasional discounts of 20 to 40 percent, while mass marketers’ pricing is set up for frequent discounts of 40 to 60 percent. Adopting their always on sale, deep discount pricing strategy would probably not work for us because we could not keep up with their big-budget advertising anyway. Regardless of the real net prices, framing consumers in our market are now conditioned to shop for the largest-percentage discount. This explains why our advertised discounts abruptly stopped working. As a result, we stopped advertising discounts except on rare occasion. Now we advertise our unique specialties.
We always trained our framers to do everything in the shop, from sales to fitting and finishing. Each of us had our “special” customers, but otherwise we took customers in an informal rotation. All of us gained expertise quickly, and our system worked well for a long time. The prevailing wisdom was to offer customers the best frame designs, including special features. If we met price resistance, we reduced features until a customer was ready to buy. That is a strategy that has worked for many framers, but what we found was that the sticker-shock that often accompanies such an approach can send too many customers away without buying, especially today.
Today, with fewer customers coming through the door, we have to make the most of every sales opportunity. When the doorbell rings, we are ready. Our shop is cleaner, and our merchandise is better organized. We have manufacturers’ published data and show-and-tell samples prepared, and we know how to use them. We start with a detailed conversation about the item to be framed and the customer’s intentions for it. More significantly, we now offer a moderately priced framing design and add features one by one, making clear the value that each provides. We use brief, well-rehearsed explanations and demonstrations. This approach eases customers into buying better framing without the dreaded sticker shock that comes with high prices they do not understand. Because customers “own” the frame designs they approve step-by-step, buyer’s remorse is almost nonexistent.
Another important change involves commercial sales. About 30 to 40 percent of our revenue used to come from commercial buyers—reduced-price orders for special projects or for resale by others. Many of these involved a bidding process, and some of the prices were based on cost-plus calculations. We used to enjoy the larger revenue of those orders and they kept the shop busy, although profitability was marginal.
In recent years commercial sales have become difficult to earn because so many other independent framers that have suffered losses in retail framing have entered this field as a new revenue source. The cost of acquiring a commercial order has risen, while profitability has declined. As a result, we decided to stop going after low-profit commercial framing orders and focus instead on capturing higher-profit retail orders. We still enjoy some commercial framing, but only when it comes at retail pricing.
Framers in our shop used to construct the frames they designed and sold, which worked out well in several ways. Each framer would design and sell only within his or her capabilities to build the framing, which kept everyone in their comfort zones. Each had specific areas of expertise, so everyone shared customers liberally. And since each of us built what we sold, it was unnecessary for each order to have accompanying notes that others could understand. But that system was inefficient, and its deficiencies became quite apparent.
With reduced work hours in the shop, we had to work more efficiently. We reviewed our production habits and found several areas where we could do better. For example, instead of each framer building frames one at a time, start-to-finish, we initiated a batching system. One framer cuts all the frames we need for a period of days; another mounts and cuts mats. The progress of that work determines who would cut glass and start the fitting/finishing process first. Speed has increased and so has quality, since we are crosschecking each other’s work more objectively. Perhaps best of all, our record keeping has improved.
Informal time studies were also revealing. For instance, we used to spend more than three minutes installing a wire on a typical frame. Now we install a more costly two-point hanging system in about two minutes. At our shop labor rate, the labor savings exceeds the increased hardware cost. And our customers appreciate the better hanging system.
From the outset, our shop had the best selection of frames in the area. We used to display more than 3,000 corner samples and purchased from almost a dozen suppliers in chops and length. We also stocked all types of mats from the three primary suppliers. We placed orders daily as required to bring in materials for each day’s sales. Our shop was not a significant customer for any particular supplier.
As we changed, we found that cultivating deeper buyer-seller relationships with key suppliers is a good way to save. Today we buy most of our materials from three primary suppliers and use only a few others on occasion. Since we buy more from them, we receive better prices. We also pay early and earn cash discounts when offered, so we save even more.
Our inventory value remains about the same as it was in the past, just under 10 percent of our annual sales. The difference is that we stock fewer line items but in greater quantities. For example, instead of buying 50’ of a particular moulding, we save by buying 100’ to 500’ per order. We also do a better job of tracking our usage and clearing out the odds and ends of inventory that used to fill up valuable bin spaces. Now, if we have an opportunity to buy extra glass, or matboard, or a few boxes of moulding at an especially favorable price, we have a place to put it.
The Bottom Line
Our new strategy has developed around the concept of maximizing net profit, not revenue. Because of forces we could not control, our revenue has declined by about 25 percent from its peak. But with our new strategy, we are earning more net profit now than we did then. Our revenue is growing again, but future growth may remain hard-fought. Some frame shop owners are successfully diversifying into other products and services, such as engraving, sign-making, digital imaging, or selling cards and gifts. I have chosen to do the opposite and specialize, narrowing the scope of my custom framing business into its most profitable segments, featuring unique designs and innovative techniques. Whether by diversifying or specializing, small frames shops can survive profitably in a declining market. The key is to make informed decisions and take decisive action to enhance the bottom line—net profit.
Our economy is presently in recession, but that is a relatively new part of our problem. Like previous recessions, it will pass. The economy notwithstanding, our main issue is that the custom framing market has fundamentally changed and will continue to change. A lot of small frame shops are closing because their owners underestimate the impact of the changes and fail to adapt. Perhaps the least fortunate framers are those hoping to hang on until the framing market gets back to “normal.” That won’t happen because what is normal has changed. The custom framing market will never be the way it used to be.
If you are among the few retail framers who have still not experienced a decline in the market, you need to realize that changes are underway. Examine what is happening throughout the industry and begin adapting to the new framing market now, not later. The present trend will eventually level off, although the decline of retail custom framing may not end soon. However, framers who understand and adapt to the changing conditions will not only survive but, when the custom framing market resumes growth, those who remain will also be prepared to grow with it.