When your two biggest competitors go bankrupt in the same year, you can either wait for their customers to find you — or you can go get them.

Michaels chose the second option, and the results are reshaping the entire arts and crafts category.

Since Joann ceased operations and Party City closed all nearly 700 locations in 2025, Michaels has executed what might be the most aggressive market-share capture in recent retail history. The company has rolled out two entirely new store sections across its 1,300-plus locations, acquired Joann's intellectual property, slashed party pricing, and debuted a new store format — all while its competitors' customers were still looking for somewhere to buy yarn.

The Party Shop and The Knit & Sew Shop

The centerpiece of Michaels' transformation is two dedicated sections now appearing in every store: The Party Shop at Michaels and The Knit & Sew Shop.

The Party Shop fills the void left by Party City's disappearance with over 700 new party products, a dedicated balloon bar, and a birthday party hosting service that the company slashed from $299 to $149. Prices on 200-plus party items were cut 25% to 70%, with online balloon reservations and same-day delivery now available. Michaels hosted over 4,200 birthday parties in 2025 — a number that will grow significantly as the service scales.

The Knit & Sew Shop targets Joann's former customer base directly. Fabric is now available in over 840 stores, with expansion to 250 additional locations planned. Fabric cutting tables will be in 650-plus stores, and the yarn selection has been expanded by 25%. Combined, these two new sections now comprise roughly a quarter of each store's selling space.

Acquiring the Competition's DNA

Michaels didn't just fill the shelf space — it bought the brands. In June, the company acquired Joann's intellectual property, including the Big Twist yarn brand and licensing rights for Singer and Brother sewing machines. These aren't just products; they're the brands Joann's loyal customer base already knows and trusts.

CEO David Boone has been blunt about the strategy. He identified the collapses of Joann and Party City as "tremendous disruption" and made capturing that displaced demand priority number one. The data supports the urgency: searches for "fabric" on Michaels.com surged 77% year-over-year, a clear signal that Joann's former customers were actively looking for alternatives.

A New Kind of Craft Store

Beyond the category expansion, Michaels is fundamentally rethinking what a 20,000-square-foot craft store should look and feel like. The company's new store format moves an open classroom to the front of the store for drop-in classes and community programming. Five "inspiration hubs" — small pop-up shops with rotating seasonal and trend merchandise — are scattered throughout the selling floor, replacing the warehouse-like aisles that customers had long complained about.

The company has also reduced store-level administrative tasks by 40%, freeing associates to spend more time on the floor helping customers — a move that echoes what Marks & Spencer is doing with AI Copilots at a much larger scale.

Boone frames the categories as "natural adjacencies" for a company with 50 years in arts, crafts, and celebrations. He's not wrong — but the speed of execution is what stands out. Michaels has essentially absorbed two competitors' core businesses, launched new store formats, and integrated acquired brands in under a year.

The Digital Play

The physical transformation is only half the story. Michaels is also building a digital ecosystem designed to make it indispensable to the maker community. MakerPlace by Michaels — an online marketplace launched in 2023 — lets crafters sell handmade goods and take classes. The platform charges no listing fees and takes just a 4% referral cut on the basic plan, directly undercutting Etsy's fee structure.

Placer.ai data shows that foot traffic to Michaels stores increased 9.2% year-over-year in the months following Joann's closure. Industry surveys indicate that 74% of former Joann customers planned to shift their spending to Michaels or Hobby Lobby — with Michaels positioned as the clear first choice given its broader product assortment and digital capabilities.

What It Means

Michaels' playbook is a masterclass in competitive opportunism. When two rivals collapse, you don't just wait to absorb their customers — you rebuild your entire store around their needs, buy their brands, cut your prices, and make it impossible for them to go anywhere else.

The arts and crafts category is now essentially a two-horse race between Michaels and Hobby Lobby, with mass retailers like Walmart and Target picking up crumbs at the margins. Michaels has made it clear it intends to run away with the lead.