In the knitting and crochet world, LYS stands for "local yarn store" (or shop), which is exactly what it sounds like: a small, local store, usually more personal and offering higher-quality yarn than a big craft chain. A sense of community is an important feature of an LYS - they often host knitting and crocheting groups, classes, and other social events, creating community both in the sense of sharing a hobby with other practitioners, and offering a neighborhood gathering place.
In fact, the two LYS's I'm most familiar with both seem very rooted in their neighborhoods, particularly Looped Yarn Works. Looped is in the Dupont Circle area of DC, which means its neighbors include the Phillips Collection, the Textile Museum, and more broadly, the many museums in the city. It has been fun for me to see Looped showing up in a museum context, and vice versa, museums being a part of Looped's activities. Staff from the store are present at the Renwick's wonderful Handi Hour events (a happy hour/craft party after-five event) to offer knitting instruction or companionship. Looped has a podcast that recently interviewed a curator from the Textile Museum, and next week they are hosting a "super secret event" to celebrate an exhibition at the Phillips. I will admit that I'm not sure what Valentine's Day, the Phillips exhibition, and yarn-bombing Dupont Circle have to do with each other, but I guess that's why it's super secret. In any case, it makes me very happy to see two of my favorite things finding ways to intersect and mutually benefit each other.
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