• by Sarah Mahoney  @mahoney_sarah, May 6, 2024

Michaels, the national crafting retailer, is taking a sharp turn toward value, lowering prices on more than 5,000 items. The move is part of the chain’s promise to make creativity more affordable but is potentially high-risk, especially given the category’s struggles.

While S&P Global Ratings recently upgraded Michaels’ corporate credit rating to B- from CCC+, the agency noted a 6.4% decline in the company’s same-store sales and expects consumer demand for arts and crafts to remain soft for the year. And rival Joann recently entered bankruptcy. Mandy Rassi, Michaels’ senior vice president and chief marketing officer, tells Marketing Daily what’s behind the rollbacks.

Marketing Daily: Why cut prices now?

Mandy Rassi: People's dollars are stretched, and inflation continues to be challenging. Our space is a more discretionary one. Many of our customers are struggling with their budgets, and they can't create as much as they'd like.

We rebranded almost a year ago around fueling the joy of creativity. Customers get joy from doing these creative pursuits, and the price has become a barrier. We see this as an investment into the [customer] relationship and hope it builds more loyalty.

Marketing Daily: Where are you cutting prices?

Rassi: In many categories people use most often in their projects, whether art supplies, frames, T-shirts, and even Mod Podge, a glue used in many projects. It's in a third of our baskets.

Marketing Daily: You mentioned the rebranding, but Michaels has made several moves recently. How do the price cuts tie into broader strategies and initiatives?

Rassi: This has been a time of much transformation for Michaels. We launched MakerPlace, our online marketplace for handmade goods. We don't control the pricing, so while we’re not lowering prices there, we do hope that the marketplace suppliers will be able to build more products to sell. It’s all about creating that ecosystem and helping makers keep more of what they earn. This is another way of giving them value.

Everyone in our loyalty program is earning 3% off. We also offer savings of 6% off if you spend more than $300 a year, and many professional makers hit that level fast. We’ve expanded our assortment of fabric, too, with a low-price guarantee. The point is, there are lots of ways for people to save. We want them to feel good about the value equation they get on each trip.

Marketing Daily: What’s hot right now besides Mod Podge? What are the unexpected things you see in the long tail?

Rassi: High-end markers. Helium tanks. Twelve-pack bundles of unfinished birdhouses.

Marketing Daily: Joann, your largest competitor, recently entered bankruptcy and plans to go private. Do you worry that your price reductions might somehow create “Going out of business” impressions among shoppers? How will you communicate the price cuts without making people feel like they’re buying last year’s yarn?

Rassi: It is a very real challenge. When we did the rebranding last summer, we spent a lot of time talking about how to be value-forward in ways different than the type of clearance we might do, for example, after the holidays.

Our brand design system has some beautiful components. There’s an elevated font. We use lovely macros of the products, whether zooming in on yarn or a paint pour. We try to make the product and the design feel beautiful so it doesn't just feel like we’re screaming, “Closeout!!!” That’s not the impression we want to give.

In the case of new prices, the design includes an arrow and lower prices. There’s a bit of branding to the messaging. So far, the feedback we've gotten is that the approach is working well, improving our value proposition and quality perception. And that’s our ultimate goal.

Marketing Daily: How will people who aren’t regular customers learn about the lower prices?

Rassi: There’s a 360 plan. Our website has some messaging, and so do social ads. When you come into the store, we have window graphics and a sign at the front, as well as flags on all the items where prices have dropped. It’s very clear.

Marketing Daily: Why cut prices now? Is it because summer is a slow season? Halloween and winter holidays are your busiest times, right?

Rassi: Yes. But these price changes aren’t seasonal or temporary. I expect we will continue to do waves of this rollback approach for the next six to 12 months. We're seeing how customers are reacting to these new prices, but we expect that it's something we will continue to do for the foreseeable future.