A Framing Puzzle

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cvm

cvm

SPFG, Supreme Picture Framing God
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A Framing Puzzle
by Bryan Caplan


Here's a puzzle I'd like to resolve before I teach Industrial Organization again: Why are there so many framing stores? It seems like there is a place that puts your artwork into frames on practically every street corner. According to yellowpages.com, there are fourteen framing stores in Fairfax, compared to only eight Pizza Huts.

What's the puzzle? We normally see lots of small stores in markets for frequently-purchased low-price goods. Think 7-11. On the other hand, we normally see a few large stores dominate retail in market for infrequently-purchased high-price goods. Think Best Buy.

The economic logic is simple. Retail has economies of scale, but for petty purchases, these are outweighed by transportation costs. Convenience stores cost more, but they're usually a lot closer. This is especially true for low-price items. It is probably worth 30 minutes of your time to save 50% on a $100 purchase, but not worth 30 minutes of your time to save 50% on a $4 purchase.

Where does framing fit in? I doubt most people frame more than two or three items per year. No one gets home at 7 PM and says "My God, we forgot about our framing! Luckily we can just run down to our corner framing store." Furthermore, framing is expensive. A custom frame usually runs around $100-$200. Both of these reasons lead us to expect the opposite of the market structure that we see.

So what gives? I'm genuinely baffled. A few possibilities that don't convince me:

1. My area is weird.
2. This retail market does not have economies of scale.
3. Framing is an "impulse purchase" - unless they pass by the framing store on a daily basis, people will not bother to frame anything.

When a market doesn't work in the way that economists intuitively think it should, they usually have one of two reactions. The first: "Market failure!" The second: "Maybe there is something about this market that I don't understand. Does anyone out there know more about the details of this industry than I do?"

I don't rule the first answer out of court, but the second one is usually more promising. After all, I've been in school my entire life! The world is full of people who know more about the framing market than I do. The question is whether any of them read Econlog.

Anyone?


Bryan Caplan co-edits EconLog, and is an Associate Professor of Economics at George Mason University, and an adjunct scholar of the Cato Institute. Caplan's articles have appeared in the American Economic Review, the Economic Journal, the Journal of Law and Economics, Social Science Quarterly, and numerous other outlets. His homepage is http://economics.gmu.edu/bcaplan/
 
The term 'Framing Store' coveres a multitude of sins.
A lot of people see the prices of good custom framing and think they can do it cheaper and make a vast profit with very little work. It's the "How difficult can it be?" sydrome. Of course they rapidly discover that there is a lot more to it than meets the eye and tend not to last long.
So for every established store there are always going to be a few chancers.

What I really would like to know is: Why are they so many pet-grooming parlours? ;)
 
Why did so many jump on the bandwagon?

It has been a profitable industry with very low start up costs.

There's really not a lot more to it than that.
 
There are five custom framing shops in our small city of 15,000, but only two of us are keeping our business surviving on custom framing alone. The other three are staying afloat on other inventory such as antiques, trophies and plaques, etc.
 
Comparisons....

cvm said:
... We normally see lots of small stores in markets for frequently-purchased low-price goods. Think 7-11. On the other hand, we normally see a few large stores dominate retail in market for infrequently-purchased high-price goods. Think Best Buy....
Click to expand...

Bryan's "Economic Math" is a little fuzzy...

In his two comparisons above, he sites vendors that sell staples of life: Everyone purchases Milk and everyone purchases TV's and Washers/Dryers, so this may not be a good comparison.

The other variable that factors into this equation is that the startup costs for opening a Best Buy, or even a 7-11 are substantially more than that of a custom frame shop (as Jan pointed out.)

Another variable is that of human nature: With passion and desire to do something, due to where the heart lies, many will be drawn into the framing and art field (like the pet groomers as well, Prospero.), whereas I don't know too many individuals feel that they need to get out of a 9-5 corporate world job to open a 7-11?

A fourth variable that this writer should be aware is economic variance in communities. Although most of the United States / Canada is similar in affluence and lifestyle, there are obvious pockets of exception. Examine a well maintained lawn and you'll note that there exist areas where the grass flourishes and still some hard to eliminate brown spots.

In solid economic times, a rule of thumb used to be (1980-2000) that it took approximately 6-8,000 people to support one independent frame shop. Big Boxes and other frame/art outlets have impacted this rough number.

Sister said:
There are five custom framing shops in our small city of 15,000, but only two of us are keeping our business surviving on custom framing alone. The other three are staying afloat on other inventory such as antiques, trophies and plaques, etc.
Click to expand...

That still fits the rule of thumb above.



John
 
I'm no economist, but I'd offer a few observations:

1. Most large-ticket commodities have a lower price margin. It takes more sales to produce a sustainable profit. Fewer retailers can survive in those markets. Custom framing is part commodity, but the product requires a significant amount of labor per unit sold. This results in higher margins. The result is that more retailers can enter the market successfully.

2. As has been mentioned, most framers do not rely as framing as their sole revenue stream. Many sell original art, prints and imaging services. So the business really is more of an art/decor department store.

3. Framing is not purely a commodity like a gallon of milk or a dvd player. In many respects, framing is art. As each artist varies in the way they portray an image, framers are different too. Potential customers seek out artistry that they like. There's more room for entry into the market because each "artist" is actually a unique market - no one else provides what they do. There may be other framers, but no one frames the way I do.
 
Then factor in the hobby framers. I call them this for lack of a better term. These are the people with storefronts, usually females, retired persons, or those with a real job who enter the market, not to earn a living, but for something to do. They do not expect to support themselves by framing, as they or their spouse has a real job, or their retirement income essentially supports them.

One of the other categories containing the "hobby" folks is real estate sales.
 
FWIW... I searched yelowpages.com for picture framers in my area.

I know at least three shops listed that are out of business.

One shop was listed three times for the same address another was listed twice.

Found one guy nearby who is aka: !*&^$# Small Engines, another is Framing & Pets. Interesting diversification.

Doug
 
Ya know, if I was a professor of economics and had been in an educational environment for all of those years and I wanted to get the low-down on the whys and wherefores of frame shops, I bet I'd dig out one of my many accumulating diplomas, certificates or whatevers and take it into one of these myriad frame shops (as a pretext, of course - not to actually have it framed!) and just ask the kwestion.

And these are the economics professionals who are steering the sinking boat of our economy???

Terrific.
 
Doug Gemmell said:
Then factor in the hobby framers. I call them this for lack of a better term. These are the people with storefronts, usually females, retired persons, or those with a real job who enter the market, not to earn a living, but for something to do. They do not expect to support themselves by framing, as they or their spouse has a real job, or their retirement income essentially supports them.
Click to expand...

For the life of me I dont know why those women run business's just for something to do. It is a lot of hard work. But, I see business's like that all the time. It was my big mistake, trying to run a shop without a spouse. I did it backwards.

My store was run by two previous owners of which neither needed to make a living. Especially the second owner, it was a tax write off for them and apparently that helped the husbands business. Along I come needing to make a living and that is where everything fell apart. I was trying to make a living on a biz that didn't demand that before.
 
Quite the experience for you though Cathy. I'll bet you learned a lot and made some good friends.

Sounds like me and my sailboat. I sold it shortly after someone reminded me that I could get pretty much the same experience by standing in my cold shower at home and tearing up hundred dollar bills.
 
HMMMM.......

Let's see.....Here we have(according to what phone book) 20 -30 framing shops/galleries.I would guess that being a university/tourist town means there is enough art to go around. Conversely, we have a Rite Aid, or other drug store on every other street corner....YIPES! Oh, and MHO? I think we could use a few less professors here...... L.
 
In my opinion, it is a sign of the times. In the last 2 weeks we have had 2 coffee shops close - not enough business to sustain 3 shops, Starbucks won out, same with hair cuts, liquor stores, hardware stores, etc. Supply & Demand. If there is enough business, in good economic times businesses flourish, in bad economic times business close up. That is the cycle. Same with frame shops, people willing to spend money on framing, business open, people decide to hold onto their funds and not frame, business close. IMHO, it's the way it is, has been in the past and always will be, you don't have to be an economics genius to figure that out.

Now to answer the question - when did he see a frame shop on each corner - not recently...
 
I`ve come close! There is an M`s here with a small frame shop beside(across the road to one side)it....And another neighborhood area with two indies almost opposite each other across the road.How`s that?BTW,there really are drugstores on virtually every corner here...scary. L.
 
I wish my market was that lightly saturated with frame shops. I did a Google search of "Picture Framing Myrtle Beach" and got 291 phone listings. Now many of these are duplicate listings and several are out of business.

I would guess that there are about half of the 291. This town and 6 other small comunities here have just over 50,000 residents. During the last 2 years I know of 4 that have opened and closed in that time period.

Many people ask me about my competition and quite honestly I have only been inside of one and that is one that closed a year after opening. It would be impossible for me to know what 140+ other shops are doing in my market. The one thing I know for sure is that the competition is dwindling as there are additional closings every month.
 
Jeff Rodier said:
I wish my market was that lightly saturated with frame shops. I did a Google search of "Picture Framing Myrtle Beach" and got 291 phone listings. Now many of these are duplicate listings and several are out of business.

I would guess that there are about half of the 291. This town and 6 other small comunities here have just over 50,000 residents. During the last 2 years I know of 4 that have opened and closed in that time period.

Many people ask me about my competition and quite honestly I have only been inside of one and that is one that closed a year after opening. It would be impossible for me to know what 140+ other shops are doing in my market. The one thing I know for sure is that the competition is dwindling as there are additional closings every month.
Click to expand...
WOW! next to you,we are lightly populated shopwise! Still neat to know the indie is still kicking that close to the M`s....And yes I have stood out front of the M`s and redirected a few customers :) ! L.
 
Our countless number of frame shops are outnumbered only by the nail salons and tattoo parlors. Nail salons and tattoo parlors are doing better than frame shops btw. :shrug:

I'm thinking of replacing the "Framing" in our name with "Salon" or "Parlor" just to trick them into coming in.
 
If an economics professor thinks $100-$200 to have something custom made is expensive, perhaps he needs to rethink his choice of profession. I should think that at some point in his education, he might have studied the contributions of a guy named Henry Ford to the field of manufacturing.
 
A Kingdom for a Frame
by Bryan Caplan

In response to my framing puzzle post, [a reader] asks:

"My puzzle is different: why is framing so expensive? The frames are just finished wood, which you could import or buy cheap at a lumber yard. The framing labor is often immigrants. Yet a good framing job can cost more than a refrigerator or washer/dryer set."
Click to expand...
I'd say the answer just comes back to my original puzzle. The price is high because firms are not realizing economies of scale. Consumers therefore wind up paying for a ton of overhead (like the typical framing shop that is totally empty 2/3 of the time). The real mystery remains why market forces have yet to consolidate this industry.

Of course, by the time we figure out why this can't happen, Allposters.com may go ahead and do it.
 
cvm said:
A Kingdom for a Frame
by Bryan Caplan

In response to my framing puzzle post, [a reader] asks:

I'd say the answer just comes back to my original puzzle. The price is high because firms are not realizing economies of scale. Consumers therefore wind up paying for a ton of overhead (like the typical framing shop that is totally empty 2/3 of the time). The real mystery remains why market forces have yet to consolidate this industry.

Of course, by the time we figure out why this can't happen, Allposters.com may go ahead and do it.
Click to expand...

A.Reader is making a bad comparison. If they went to a washing machine/refigerator factory and asked them to make a machine to their exact requirements, it would probably cost about $500000.

It's the difference between buying a frame and having a picture framed.
 
prospero said:
A.Reader is making a bad comparison. If they went to a washing machine/refigerator factory and asked them to make a machine to their exact requirements, it would probably cost about $500000.

It's the difference between buying a frame and having a picture framed.
Click to expand...
Right– and that's IF you could get an organization geared toward mass production to agree to customize a product for you.
That "overhead" or "inefficiency" is really the name you are giving to paying for the benefit of the existence of an organization capable of and willing to produce an individualized, highly specific, handworked product on as as-needed basis.

:kaffeetrinker_2: Rick
 
A. Reader is also missing out on the fact that when chooses to place business with a quality custom framer, the customer is not just purchasing the raw materials and the physical labour required to assemble them. They are choosing to pay for the services of a designer (skills that take years to develop).

Although many perceive custom framing as very expensive, I would ask those who do to compare our prices with those charged for having a couturier(e) design and make made-to-measure or unique garments for them.
 
Every day in the NY Times there are pictures of extremely ordinary looking outfits, and the cotton shirt is $450, a pair of shorts $250, etc. etc. (And these are NOT custom made. They are probably made in a sweatshop.) The comparison I use quite often to put prices in perspective is going out for dinner at a nice restaurant, bottle of wine, etc. The next day it's just a pleasant memory. Spend the same amount on custom framing and you have something that will give you pleasure every single day for many years, and you can pass down to your kids, etc. Which is the better value?
:cool: Rick
 
Rick Granick said:
Every day in the NY Times there are pictures of extremely ordinary looking outfits, and the cotton shirt is $450, a pair of shorts $250, etc. etc. (And these are NOT custom made. They are probably made in a sweatshop.) The comparison I use quite often to put prices in perspective is going out for dinner at a nice restaurant, bottle of wine, etc. The next day it's just a pleasant memory. Spend the same amount on custom framing and you have something that will give you pleasure every single day for many years, and you can pass down to your kids, etc. Which is the better value?
:cool: Rick
Click to expand...

Preaching to the converted ;)

But 100% CORRECT :)
 
On a similar theme, I have often had conversations with moulding reps on the lines of "I like that one, but can you supply it unfinished?" Now, given the fact that it has to be plain before the finish is applied you would not think that is unreasonable. I wouldn't even expect to pay less in some cases. But to do this, I would have to buy maybe10000ft. For the average custom framer, that is a lot. Not to mention cash flow and storage factors. But I can understand it up to a point. A big manufacturer will have automated production lines for each moulding. They almost literally shove a tree in one end and wrapped moulding comes out the other. Interupting this process to take out a few 100ft is not feasable. It does mean they lose out on my potential order, but WTH, they probably make thousands of miles of the stuff per annum.

A lot of the frames I make are truely unique. Built and designed from the ground up. A customer will never see another like it. From that perspective I think they are amazingly cheap. :thumbsup:

Another point. A good frame will carry on doing it's job for maybe centuries. How many washing machines would you have to buy in that time? :icon21:
 
Rick Granick said:
The comparison I use quite often to put prices in perspective is going out for dinner at a nice restaurant, bottle of wine, etc. The next day it's just a pleasant memory.
:cool: Rick
Click to expand...

Rick,
I totally agree and use this comparison myself - but ask the buyer " And what does it change into by the next day?";)
Their answer usually makes them smile - as they start to see the long lasting qualities of a hand made frame.:thumbsup:
 
I have heard many a customer bemoaning the cost of remodeling in their homes - kitchens and bathrooms are especially costly - one guy was carping that his dam countertop cost over $10,000 alone (and this was at least 15 years ago - I am sure the cost has risen in that time) - not to mention the new applianaces, plumbing fixtures, etc.

And it takes people weeks and weeks and months and months to arrive at their perfect design features. They even have psycologists to coddle people along during this traumatic period of redesign for their homes.

Then they sell their houses and move. And all that time and money and anguish and triumph just stays put in their old house -

And yet they could invest a fraction of the time, money and effort into fine custom framing and easily take it with them anyplace in the world forever and ever. Amen.
 
Keith L Hewitt said:
Rick,
I totally agree and use this comparison myself - but ask the buyer " And what does it change into by the next day?";)
Their answer usually makes them smile - as they start to see the long lasting qualities of a hand made frame.:thumbsup:
Click to expand...
My version of that as an alternative to the "pleasant memory" version is (depending on the customer), "Spend all this money on an expensive dinner...which you HOPE never to see again..."
;) Rick
 
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