Once in a while, pop culture gives a retailer an unexpected lift. Twelve years ago, Gap Inc's Banana Republic got a boost from the "Mad Men" television series when consumers snapped up its men’s and women’s suits inspired by the show about 1960’s ad executives. More recently, Fendi was in the spotlight when Sarah Jessica Parker wore its iconic Baguette handbag in the television show “And Just Like That.”
This year, Michaels Stores got such help twice. Once when knit clothing made by crochet appeared recently on "The Bachelorette” and set off a rush of buying crocheting supplies, which Michaels sells. And more importantly, when Taylor Swift fans went to the store in droves during the megastar's American tour this this spring and summer to get materials for the friendship bracelets, which are ubiquitous at her shows. "It started catching on like fire," recalls Michaels CEO Ashley Buchanan, who was a longtime Walmart executive before joining Michaels in 2020.
But while Buchanan appreciates the serendipitous help from such exposure, his focus as CEO has been fixing the foundation of the company and re-tooling the $6 billion-a-year retailer to expand its customer base and win market share in a mature industry barely growing at 2% a year.
In the first phase, transforming the retailer involved Buchanan improving Michaels' e-commerce presence, streamlining its assortment of arts and crafts supplies that had grown unwieldy and full of overlapping products, fixing its supply chain problems to reduce out of stocks, and making stores more appealing, all while navigating the pandemic.
Now, he's in the second phase of remaking Michaels, which was taken private in 2021 in order to transform the company without undue pressure from Wall Street for quick results. Buchanan’s plan is to expand its customer base by casting a wider net to reach not just hobbyists, but people who sell their arts and crafts for a living. To do that, he has expanded Michaels' online assortment to 1.5 million items, many of which are products for pros. What's more, the company is testing MakerPlace by Michaels, an online marketplace it has launched that will allow people to sell their arts and crafts online on a site similar to Etsy. Buchanan is betting that growth for Michaels will come at the expense of rivals like Hobby Lobby, Joann and, of course, Amazon.
He says he doesn't want to rely on Taylor Swift or "The Bachelorette" for growth, and that means pushing Michaels to craft its own destiny. "You will struggle if you're not innovating," warns Buchanan.
This interview was edited and condensed for clarity.
Fortune: Michaels got a boost early during the pandemic from people stuck at home indulging in hobbies like arts and crafts. How have you adapted the company to spending habits returning to more normal levels?
You still have a very hardcore kind of core customer at the entry level of arts and crafts and crochet. But there is a part of our customer base that wants to make a business selling what they make and who are professional arts and crafts makers. So we have about 50,000 kinds of items in stores and it covers a lot of categories. But the feedback we got was "You don't have enough breadth and depth for me to prove out the business idea." So that led us to opening up our online marketplace that went to 1.3 million items and makes us a one-stop-shop for anybody.
And now you're testing an e-commerce site called MakerPlace akin to Etsy to let them sell their wares online?
Our vision was: "Could we offer them all the stuff they need to make their products and then sell it, but charge a lower commission?" They can make more money. They also like to teach classes so we are giving them the ability to offer classes. There is really no other player in the marketplace that can do this for arts and crafts makers.
You've spent a lot on remodeling stores to make them more than the glorified, cluttered warehouses many Michaels locations had become. At a time when supplies can easily be bought online, what's the case for Michaels to invest in stores?
It's a very tactile product category. If people want a yarn and want to feel it or make sure it's the right color, or the same with jewelry, they can come in. But we also have experiences like offering classes in stores, or birthday parties. And if you look at our competitive set, Hobby Lobby is mainly a bricks-and-mortar business, and Amazon has a lot of third-party sellers in this category rather than sell these products itself, so we win because we can buy more efficiently and be cheaper. Our stores have never been run better.
If we look broadly at retail, do you feel brick-and-mortar chains have finally as a whole risen to Amazon's challenge with their own top notch e-commerce?
You have to parse out which companies. Some have risen to the occasion but others are failing. It's binary. If you haven't modernized your supply chain—and we just put in an entirely automated robotic warehouse— and if you don't make customer friendly decisions like offering curbside pickup and ship-from-store, you're going to fall behind. You will struggle if you're not innovating.
There have been labor shortages in the last two years and higher turnover in the wake of the pandemic. What can retailers do to restore the sense that retail can offer a career?
We've spent a lot of time recently thinking about career paths at the store level. How do you bring people in as a first job and say, "Here's your first job, here's your second job" and give them a timeframe for when they might become managers and have the reward structure around that and create a pool of people who can become management once they're ready. It's important to the customer experience that we have people be knowledgeable about our products and wanting to serve customers.
You are on Macy's board. How does that help you be the CEO of Michaels?
Being on Macy's board has been remarkably beneficial to me. I'm surrounded by such a unique group of people. I just soak it up because you get all this experience in the room, people with different experience sets. I spend my time during the breaks asking them questions and it makes you reflect on your own approach because there are different ways of running a business.
