Good morning!
A beloved American crafting institution, Joann Fabrics, has gone bankrupt not once—but twice.
The chain of stores had been facing headwinds for decades as sewing in America transformed from a necessity into a niche hobby. And despite a few boom years during the pandemic, its other struggles eventually proved too much to bear. A leveraged private equity buyout, a rotating cast of CEOs, and a failure to keep up with savvy competitors have resulted in the company deciding to close hundreds of stores.
But in chronicling the process of its downward spiral, my colleague Lila MacLellan learned about another critical business decision that helped hasten Joann’s demise: staffing cuts.
Unlike grocery store customers who can reach for a can of soup or a head of lettuce with little fanfare, fabric store shoppers often need several pieces of cloth cut from different large bolts of fabric. Each must be unspooled, measured and folded—a laborious process, but also a highlight of the shopping experience.
“Usually, while the cutting process is happening, there's a conversation. ‘What are you making?’ ‘What else do you need to go with this?’” says Elizabeth Caven, an Ohio-based crafts business investor who is also a vendor at the company. Savvy sales clerks were often “one of the reasons why originally you would want to go into the store,” she says.
When financial issues pushed the company to cut back on the number of store workers, it became much more difficult for shoppers to get their cloth in a timely manner, and wait times for fabric could stretch as long as 45 minutes.
Companies in financial straits must often make difficult choices about where to cut costs. But staffing cuts in particular can often start a domino effect of other problems—especially in a customer-facing business. And investing in people would have helped Joann stay in the good graces of their patrons, according to one former long-time executive.
“There needed to be that point where Joann said: ‘Yes, we're going to take it on the chin from a profitability standpoint for the next couple years, but it's the only way we're going to get our customer back,’” he said.
You can read the whole story about what went wrong with Joann Fabrics here.
Azure Gilman
azure.gilman@fortune.com
