Michaels Tests Wholesale Units

At 30,000 sf, the Scottsdale store is considerably smaller than Atlanta and Dallas. And, its location at 10220 N. 90th St., is tucked into a high-profile shopping center at a high-traffic intersection in a decided turn from the norm of being part of a traditional wholesalers' mecca. The Fiesta Center location is the most significant shift in Michaels' plan for a one-store acquisition, bought in May 2000 and now being groomed to be the dominant player in a supply chain for small businesses.

Duane Hiemenz, senior vice president of new business development for the Irving, TX-based Michaels, tells GSR that the Scottsdale spot will be the real test for the model and determine the next step for the concept. "We're still defining our site criteria," he says. It's just part of the plan to pit a retail location against traditional wholesale warehouses in Atlanta, which opened in 2003, and the original one in Dallas, which opened nearly two decades ago.

Regardless of which type of location wins the face-off, the concept will be taken to other cities. "It appears to be a good business that's in an underserved segment of the business community," Hiemenz explains. "As with any concept, you test, make changes, refine and tweak it before you plunge into a campaign of openings."

The Atlanta Design District location at 1611 Ellsworth Industrial Blvd. is 38,000 sf or 12,000 sf less than the original Dallas store at 8223 N. Stemmons Freeway. Hiemenz says preliminary indications are the Scottsdale's 30,000 sf and retail location will be the right formula for going forward with the plan. "We're optimistic," he says. "We'll know more as we unroll and are able to analyze the results. It will give us an idea of what our next steps are for expansion."

Star Decorators' wholesale-only store in Scottsdale will have 15,000 SKUs of high-end, home-decor merchandise to supply operations like small retail florists and floral designers, interior designers, event planners and gift shop owners. Hiemenz says the stores have top-of the-line inventories with geographically tailored merchandise to customize its appeal to local business owners. The lineup consists of permanent and dried botanicals, floral supplies and accessories, ribbon, containers and party and wedding supplies.

"There's really no national wholesale competitor to us out there," Hiemenz says, adding suppliers historically have been "mom and pop" shops. In setting up the expansion, Michaels plans to become the dominant player with its nationwide network of seven distribution centers and thousands of US and import vendors. Of the utmost importance is ensuring the fashion-forward inventory, including seasonal, does not overlap with Michaels although a number of the same vendors will be used, Hiemenz explains.

The 21-year-old Michaels Stores' crafts chain is up to 845 stores in 48 states and Canada. Its Aaron Brothers framing chain has 165 stores in Arizona, California, Colorado, Georgia, Idaho, Nevada, Oregon, Texas and Washington. ReCollections, the scrapbook and paper-craft arm, now has eight shops in Texas. But Star Decorators is the only family member tailored to the wholesale-only crowd.

The US Census Bureau's latest statistics show the overall merchant wholesale industry accounted for $286.8 billion of sales in December 2004, up 0.9% from the previous month and 13.9% from a year ago. The home furnishings category ranks second in 2004 sales, $4.2 billion, and second only to vehicles and their parts. And its the merchant wholesale segment that Star Decorators' Hiemenz has his eye on, setting up a venue for them to buy on the spot and take it with them rather than "purchase and wait" for supplies to come in from ships, trucks, planes or trains.