This is Part 2 of a 2 Part Blog on Hobbii, if you haven’t read the first part, feel free to check that out here.
The forces behind Hobbii’s unraveling — and what brands paying attention right now should do instead.
| 📉 The Pattern: PE (Private Equity) buys a beloved brand, strips its identity, and calls it optimization 🧵 The Stakes: A creative community with shrinking retail options and growing AI exploitation 💡 The Opportunity: Brands that actually listen to this community will inherit extraordinary loyalty |
💼 The Private Equity Playbook — You’ve Seen This Before
| TL;DR — Skip here if you’re short on time PE (Private Equity) firms buy companies, cut costs, and optimize for resale — not community health. Joann Fabrics is the cautionary tale: beloved brand, PE acquisition, bankruptcy. Hobbii’s post-acquisition decisions follow the same pattern, beat by beat. |
If the Hobbii situation feels familiar, it should. The private equity acquisition-to-decline arc has played out publicly and painfully in craft retail before.
Joann Fabrics — once the go-to destination for crafters across the US — filed for bankruptcy in 2023 after years of PE ownership that prioritized debt-financed expansion over the community-building that made the brand worth acquiring. Thousands of stores closed. Crafters lost their primary in-person option.
Hobbii sold a majority stake to Verdane Capital in April 2022. Since then: layoffs of reportedly up to 50% of HQ staff, the end of international shipping to multiple markets, closure of the affiliate program, and now — AI.
| “It takes Hobbii from a group of artists who just love making things and wanted to share that with all of us, into more of a business — a global business that is just concerned with making money.”— Knotty Bear Crochet, YouTube |
PE firms are not making decisions based on community loyalty metrics. They are optimizing for margin and exit. The people making these calls are not yarn enthusiasts. They are not fiber artists. And as multiple creators have observed, that shows.
The layoffs weren’t just a financial story — they were a community story. Hobbii had built genuine parasocial relationships between their hosts and their audience. When those hosts were let go, abruptly and without explanation, the community didn’t just notice a staffing change. They grieved. They got angry. And they started paying close attention to every decision that followed.
The AI announcement landed in that environment. Which is why it landed so hard.
| Key Takeaways from This Section The Joann comparison isn’t alarmist — it’s a documented pattern with a documented outcome. Community-facing relationships are strategic assets. PE firms tend not to account for them. Each unpopular decision has made the community more alert to the next one. |
📊 What the Numbers Are Actually Saying
| TL;DR — Skip here if you’re short on timeHobbii’s 2025 online revenue: ~$33.4M, growing only marginally. 2026 revenue forecast: projected decline of 20–50%. US tariff impact, market exits, and now community backlash are compounding simultaneously. |
The financial picture is concerning for anyone who wants Hobbii to survive. Online sales for 2025 were approximately $33.4 million — up only marginally from the prior year, in a market that had boomed post-pandemic.
The 2026 revenue forecast projects a decline of 20 to 50 percent. The drivers: tariff-related price increases in the US (Hobbii’s largest international market), exits from multiple international markets, and now — community backlash that is actively translating into lost sales.
Hobbii moved to reduce prices in response to US tariff pressure, which signals that customer loss from that quarter was significant enough to require immediate action. But price reductions don’t address brand trust erosion.
A customer who left because of the AI announcement isn’t coming back because yarn got cheaper. They left for values reasons. Values-based departures are the hardest to reverse.
| “It is basically a death sentence to the company. They don’t realize the power this community has.”— Autumn Johnson, YouTube |
The Joann comparison is instructive, not alarmist. Joann didn’t close because it had bad products. It closed because the people making decisions had lost touch with the community those products served — and by the time the damage was visible, it was too late to course-correct.
The fiber arts community now has fewer in-person retail options as a direct result. Hobbii going the same way would not be good for anyone.
| Key Takeaways from This Section The financial headwinds are real and compounding — not just one bad news cycle. Price cuts won’t fix a trust problem. They’re different problems requiring different responses. Fewer retail options hurt the entire community, including Hobbii’s competitors. |
🎙️ The Creator Economy Angle: You Can’t Have It Both Ways
| TL;DR — Skip here if you’re short on time Hobbii has been extracting free labor from creators for years — up to 16+ posts per campaign, paid in yarn. When creators asked about money, they were ghosted. The roster quietly shifted to newer, more compliant creators. The AI announcement is the same pattern applied to photographers and models. |
One of the most damaging threads in this controversy is the creator relationship story. Multiple creators have shared, with names and details, that Hobbii’s collaboration requirements escalated significantly over time.
It started with one or two posts in exchange for gifted yarn. It grew to campaigns requiring 16 or more pieces of content across multiple platforms, with strict deadlines, for the same compensation: yarn.
When creators asked about monetary compensation, they were ignored or ghosted. When enough creators spoke publicly about the pay issue, Hobbii quietly shifted to working with newer, smaller creators who were more likely to be grateful for the yarn — and less likely to ask uncomfortable questions.
| “The second people started asking for monetary compensation, they got ghosted. I feel like especially since this is an industry full of young women — people know that young women are afraid to speak up for themselves.”— Stitched by Emma, YouTube |
This matters for the AI discussion because it reveals a consistent organizational attitude. Human creative labor is a cost to be minimized, not a value to be invested in.
The creators are free marketing — until they ask to be paid. The photographers are overhead — until there’s an AI tool that can replace them. Several creators noted explicitly that AI-generated patterns based on human designers’ existing catalog could be a logical next step for a company with this track record.
Whether or not that happens, the fact that the community is already thinking about it tells you how far trust has eroded.
| Key Takeaways from This Section The creator pay issue and the AI announcement are the same problem: undervaluing human creative labor. Gifted campaigns can be ethical — but not when they involve 16+ posts under rigid deadlines.When your community starts anticipating your next betrayal, recovery gets much harder. |
🗺️ The Retail Desert Problem: Where Does the Community Go?
| TL;DR — Skip here if you’re short on time Joann is largely gone. Hobby Lobby is ethically off-limits for many. Michaels has its own AI problems. Local yarn stores exist but aren’t accessible or affordable for everyone. The community is actively building and sharing a list of alternatives. That list is spreading fast. |
Here is the difficult reality that multiple creators named directly: the fiber arts community is running out of places to shop. And that’s not a complaint — it’s a structural problem.
Joann is largely gone. Hobby Lobby carries ethical baggage that many in the community won’t accept. Michaels has its own AI controversy — including a Jonathan Adler collaboration where crochet kit packaging featured what appeared to be an AI-generated photo.
Local yarn stores exist, and creators consistently advocate for them — but they’re often an hour or more away, and their prices reflect the reality of small-business economics. That’s not a criticism of local stores. It’s a structural access issue.
| “We want to continue to do our craft, but we also don’t want to support these companies and their shady business dealings. It really just feels like a lot of us are stuck between a rock and a hard place.”— Faded Wildflower Crochet, YouTube |
The community is not staying stuck. Creators are actively sharing alternatives: Kilborn Woolens, Jimmy Bean Wool, indie dyers on Instagram. The tool yarnsub.com — which helps crafters find comparable yarns from different brands — has been shared widely.
Worth naming clearly for any brand paying attention: there is a large, passionate, high-spending consumer base that is actively looking for somewhere to put its loyalty. The brands that earn that trust are not just making a values statement. They are positioning for extraordinary retention in a market currently characterized by distrust.
| Takeaways from This Section The retail landscape for fiber artists is shrinking — which makes each remaining brand’s decisions more consequential. The community is not waiting to be rescued. They are finding alternatives and sharing them at scale. The brand that steps into this trust vacuum, credibly, will inherit a very loyal customer base. |
✅ What Brands Paying Attention Should Do Right Now
| TL;DR — Skip here if you’re short on time Five concrete actions that separate brands who get it from those who are about to learn the hard way. These aren’t values lectures — they are strategic moves with measurable loyalty outcomes. The window to act before the community hardens its alternatives is narrow. |
The Hobbii situation is a case study, and the lesson is not subtle. Here is what it tells us about serving a community like the fiber arts world.
1. Know what your community is fighting before you wade in. A basic audit of community conversation would have revealed the AI-pattern-scam crisis immediately. Before making any announcement that touches on a hot-button issue for your audience, understand the landscape first. This isn’t research — it’s respect.
2. Pay your creators — not in product. The ‘we’ll pay you in exposure’ model has been untenable for years. Creators asked to produce 16+ pieces of content under strict deadlines are doing professional marketing work. Compensate it professionally. Creators who are paid fairly advocate with genuine enthusiasm — which is far more valuable than coerced content.
3. Be transparent about AI — proactively, not defensively. Multiple creators said they could potentially accept some AI use if brands were upfront and honest. What the community cannot accept is discovering it, or having it announced in a way that reads as proud and dismissive. If you’re using AI tools in any aspect of creative work, say so clearly, frame it honestly, and be prepared to actually listen to the feedback.
4. Protect community-facing roles in cost-cutting decisions. The people your audience has formed relationships with are not interchangeable cost line items. If cuts are unavoidable, engineer transitions slowly and communicate deliberately. The silence vacuum is always more damaging than the difficult truth.
5. Understand that this community votes with its wallet — at scale. Fiber artists spend significantly on materials, buy in volume, and maintain large stashes. When they disengage from a brand, they don’t just stop buying — they research alternatives, share those alternatives with their communities, and create content that shapes others’ purchasing decisions. Losing this community’s trust is not recoverable with a promotional email.
| Key Takeaways from This Section Each of these five actions is a strategic business decision, not just a nice-to-have. The brands that get this right now are positioning for loyalty that money can’t manufacture. The window to be the ‘good’ option in a market full of bad press is open — but not forever. |
📌 The Strategic Bottom Line
Creative communities are not passive markets. They are active, values-driven ecosystems with long memories and significant collective purchasing power.
The brands that earn their trust by respecting their values — human creativity, fair compensation, environmental awareness, transparency — don’t just win customers. They build advocates.
The brands that don’t have been given a very clear preview of what happens next. The fiber arts community is not going anywhere. It survived Joann’s closure. It will survive Hobbii’s stumbles, or it will find somewhere else to bring its business.
The question is which brands will be ready to receive it. That answer is being decided right now — one decision at a time.
Sources
- Community creator perspectives drawn from YouTube video transcripts:
- Are We Done With Hobbii Yet? (The Cost of AI Is Losing Your Customers) (Autumn Johnson);
- Hobbii: A Masterclass in Alienating Your Customers (Stitched by Emma);
- Hobbii’s AI Controversy and What That Means For Us As A Fiber Arts Community (Faded Wildflower Crochet);
- Is Hobbii the Next Joann? (Knotty Bear Crochet);
- The Beginning of Hobbii’s Downfall — Hobbii + AI: What Is Going On? (Fiber Art Community Reacts); (Cozi Crochet Co)
- The Hobbii AI Controversy (Once Upon a Stitched Nook).
- Financial data: Grips Intelligence (revenue/forecast).
- Ownership data: PitchBook (PE backing, employee count).
- Verdane: Partnering with Hobbii
- Community discussion: Reddit r/craftsnark, r/YarnAddicts.
- Hobbii LinkedIn post: public record.
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