Protecting a business in hard times

Apparently someone stole a check of ours on its way to the Staedtler Company, a supplier of rulers and technical supplies. Big deal. Well, it’s turning into a big deal and could have been a business disaster, except we were lucky. Here is a story of how we’re changing our business to protect ourselves in hard times. You might consider how you can protect yourself.
The depression is affecting all banks, even the strong ones. One effect we discovered is the rising tide of fraud. Our one missing check has turned up in three separate frauds and a lot of people are getting hurt.
That missing Staedtler check for 8 thousand dollars was washed. Staedtler’s name came off and a thief deposited the check in a Chase bank. The bank suspected foul play and Chase and our bank T.D. Bank North caught the fraud, but that was only the first.
The thieves sold or gave our routing number to counterfeiters who manufactured checks with a new name, but with our routing number. They sent these checks to people as prizes for winning a make believe contest.
The plan was for the “winners” to deposit the check (our check) into their bank accounts and mail the thief a few hundred of their money to get the second half of their award. For some reason the new checks kept our Portland address and two “winners” found us. We closed the account and so far Artist and Craftsman have lost no money, but I imagine some “winners” are “losers”.
Last night my comptroller called me to announce bogus credit card charges were appearing on our closed account. This morning lots of restaurants and merchants are victims of chargeback’s. The third fraud was against these merchants.

Here is our response.
We will have three bank accounts. The first will be our checking account that will issue checks. After each check run we will deposit in that account enough money to cover the checks, but little more.
The second bank account will be our savings account where we will have our assets. Our line of credit will be attached but our savings account will have no outside contact. Routing from the savings to the checking account will be internal and secure.
A third bank account will be our receiving account where credit card and store deposits will be received. Money from this account will be transferred to the savings account periodically.
To lessen the danger of checks being intercepted in the mail, checks will no longer mail in check like envelopes. Electronic transfer of funds will be preferred and we have signed up for bank monitoring programs which allows us to spot fraud the same day, not at the end of the month as is the case today.
So I welcome you to the future.

Larry

In The Recession Hole

Here are the realities as I see it.
The captains of industry are not stupid but they have been affected by the same short term interests that affect all American society. The manufacturers of SUV’s were not stupid; it was mere short term self interest. Profits were fat.
Those fat profits paid heavy union wages and benefits. They could let the Japanese seek short margins. The profits lasted for generations, but the bosses and the workers knew it would end some day. It’s ending now.
And we borrowed a lot to keep the image afloat.
There will be a shrinking of the economy as we retrench to what we can afford. This will be complicated by two factors: 1. paying off debt and 2. Insecurity in the credit market.
I think paying off debt will be easy. We’ll print lots of money but so will other so called advanced societies. It will be a race to the bottom as governments cheapen currency so as to pay back loans with cheap money.
Who is the money owed to? Well not you and I because we never saved and loaned (invested.) In the short haul I think it will be the Chinese and Arabs who get shafted. I think.
But no one in your generation will trust the greenback, perhaps not the Pound and Euro.
And that brings us to the more difficult issue- trust in the markets. That is what upsets me as I glance at the dow.
The markets control huge parts of the economy. I believe layoffs and mortgage defaults will be more affected by Wall Street than Main Street, I’m sorry to say.
So in a nutshell, The best cure is an orderly retreat on Wall Street down to realistic levels. If our economy was measured at the peak at 14 thousand, I expect the dow will continue to settle till 6 or 7 thousand.
Then things should stabilize and life will go on, poorer but O.K.
Forget about national debt. They can always print on toilet paper.


Larry

My job, what is my job?

I do it every day, you’d think I know what I do. Let’s try to figure out what the owner of a middle-sized art supply does.

I often feel that I’m like a father to the 75-80 people who work with me. And like most parents I mess up. But if there is any reality to this self-image then Artist & Craftsman is a family life with all the strength and weakness so associated.

They drift in and out of our lives. Many who quit or are fired come back, sometimes older and wiser. Some of us just stay for decades.

I guess my job is to try to understand as many of them as I can. To help them grow and develop their best potential, even if my words hurt. To listen as best I can and to protect the security of this family-like group.

I guess that’s my job. I love my job and, my actual family – 4 children and many wives have given up trying to convince me to retire. I’m one of the luck ones.

-Larry Adlerstein

Jeff and Rob, the Cambridge crew.

First there was Rob.

I don’t remember how I met Rob. I was opening our first store in Boston and I believe he simply answered my help wanted ad. He was quiet and it took a few months to discern who he was.

The store had a slow start, located in a basement across the street from Pearl Paint – then the dominant player in our trade. But Rob in his gentle way won over artist after artist and built a solid business.

One day Rob came to me to say he and his wife Jamie wanted to buy a home and they couldn’t afford Boston housing. They wanted to move to Philly. O.K. We’ll open a new store in Philly.

Enter Jeff. Jeff had always been there as assistant manager but I knew little about Jeff.

After Rob went south Jeff stumbled around for a little while and then that thing happened: that thing that sometimes happens when the lid is off and an assistant has to become master. It happened to Jeff. So now I have two great managers.

The other day he came to me with an invitation, “come to Boston.”

“You visit the stores when there are troubles or problems. Why don’t you visit when things are good? We’d like to get to know you better.”

So I did. Even this old dog can learn from Jeff.

-Larry Adlerstein

Dear Artist,

In our 2002 catalogue I wrote…

“This catalogue finds my business and our world in an interesting time in the circle clock of history. The shrinking world puts each of us in contact with humans all around the globe.

We can’t ignore international trade and business. Our clothes, food, and even art supplies are made everywhere. Shopkeepers, like me, seek their best values for their customers – often to be found in the low wage third world.

How do I feel about today’s retailing? Pretty good.
Yes, it’s true that American jobs are being lost, but third world jobs are being created. Our world will be a more peaceful place only if jobs and money are more evenly spread. Containers coming in from China and India may be our best insurance against the anger of war and terrorism.”

Beware; sometimes the things that you wish for come true.

Now a days people come into our store looking at labels. What they’re not looking for is “Made in China.”

Here’s our dilemma. Here’s our position.

There are economic realities that we ignore at our own peril, but within those realities we can steer towards a better result.

The dilemma is that the American consumer’s present standard of living is based on the import of cheap Asian goods and retailers who ignore that reality are put out of business. Another dilemma is that domestic management, companies, and jobs are being lost so that we are even more dependent on those overseas factories.

Our position: At first we named our Asian imports honestly so we sold “Mao Brushes” and “T’ang Easels.” These were products made to our specifications in China.

Our later position is to support domestic companies even if they use Asian manufacturers. Better yet we keep production closer to home if possible. We presently buy all the Canadian stretched canvas they can make for us.

Larry Adlerstein

A&C, DaVinci Paint & Leon Nicaragua

A&C partners with DaVinci Paint to help repaint a historic mural in Leon, Nicaragua. Marcello Dworzak, President of DaVinci Paint, of Irvine, California is donating gallons of his new fluid acrylic to the artist community of this small Nicaraguan city on the Pacific. The mural depicts the plight of the Nicaraguan peoples who have suffered with many invasions. A&C President, Larry Adlerstein, came across the mural when he was visiting his 19 year-old daughter who was “gap yearing” in Central America. The teenager was traveling alone, often hitchhiking for months. Dad went down to “check up on her.” They stayed at Rancho Esperanza, a hammock hostel on the beach. $12 a night room and board. They had 2 flat tires getting there. The mural graces the walls of the Central Square. The hot Central American sun has faded the years old painting. The cooperation of DaVinci Paint and local artists will brighten the mural with Artist Grade Pigments. The Leon effort is being organized by Danilo Gutierrez Garcia.

Click Here for Photos

MAP – Minimum Advertised Pricing

At this writing, February ’06, the individuals and companies that bring you color, brushes and surfaces are embroiled in a debate about MAP – Minimum Advertised Prices. We are having an important dialogue.

Some manufacturers (and we support these manufacturers) feel the excessive discounting damages the reputation of their products. It makes them look cheap.

The also feel that this deep discounting will centralize distribution. Only the most efficient, the Wal-Marts, will survive and the smaller retailers will fail.

As the retail distribution becomes more focused the few big survivors can dictate terms and smaller manufacturers will be pushed aside and the manufacturing base may slip away to china where manufacturing is cheapest.

Right now we have a healthy art material trade. but there are indicators that the above fears are becoming reality. As one of your retailers I am pleased to offer you a variety of colors and materials available from many continents – an industry that draws on efficiency and also traditions.

We will continue to present value and diversity to the best of our ability. We will also support MAP which proposes to allow all manufacturers a modest profit, all retailers a modest profit and the most efficient of those manufacturers and retailers a more than modest return.

As an aside, Golden Acrylics has cut off Jerry’s Artarama because Jerry’s allegedly violated Goldens Minimum Advertised Price program. Even though MAP programs have been in our trade for a time, this is the 1st time a major manufacturer has refused to supply a major customer for violations of minimum pricing guidelines.

We hope that Mark Golden's brave effort to protect his brand’s reputation does not result in lawsuits and excess harm. We do hope that Jerry’s will respect Golden Acrylic’s well earned reputation for quality and that a normal business relationship will resume.

Q: Is the internet responsible for the poor health of the traditional retailer?

A: No, I don't believe the internet is a major factor as yet. Many retailers have the option of entering internet sales if they want to learn this new market (as we are).
For those who do not diversify, there is an uncomfortable phenomenon - your rents, salaries and other expenses stay constant but the internet drains 10% or so of your sales. That must be addressed. But overall, including internet sales, the art material industry is down. Ask any manufacturer.