Greeting Transformation

Opportunities abound amid inroads by e-cards.

There is a potential $1 billion sales opportunity in the greeting card aisles of mass-market chains this spring.

During the second quarter, about 300 million units of greeting cards are expected to sell. Those units represent Mother's Day on May 12, considered the third-largest card-sending holiday, with about 141 million units sold; Father's Day on June 16, with 93 million units; and graduations, typically held from mid-May through mid-June, with 67 million units, according to the Greeting Card Association (GCA) in Washington, D.C., and Hallmark Cards Inc.

Considering that the average greeting card retails from $2 to $4, that's a possible $600 million to $1.2 billion in revenue during those selling occasions.

A billion-dollar revenue potential can't be ignored, especially when retail competition remains fierce and major greeting card companies are struggling to maintain their sales as digital platforms rapidly expand.

Online Impact

Los Angeles-based market researcher IBISWorld says greeting cards and other paper products such as day planners, calendars and yearbooks are rapidly losing sales to online substitutes. The erosion is dramatic, with revenue falling at a 5.4 percent annualized rate over the past five years to $5.4 billion for greeting cards and other published products. The dropoff is expected to slow this year with an improved economy, IBISWorld reports.

The U.S. Postal Service's (USPS) decision to go to a five-day-a-week delivery schedule, beginning Aug. 5, is a sign of the times. Exacerbating USPS's budgetary headaches is the fact that mail volume has dropped 21 percent, from 202.7 billion pieces mailed in 2008 to 160 billion pieces in 2012, due to the impact of the Internet, online services and social media marketing.

The greeting card industry, which has worked closely with USPS to promote its products, is fighting the move in Washington. Last year, USPS used on all first-class mail special Mother's Day postmarks, two of which specifically called out greeting cards, to promote the occasion two weeks before it occurred. The promotion is not likely to repeat this year, GCA reports.

Evidence of greeting cards' decline can be seen in falling sales revenues and reorganizations at the two major card companies, Hallmark and American Greetings Corp., which together capture about 82 percent of the mass retail market, according to sources.

When it comes to online sales of e-cards, growth estimates are impressive. In the five years leading up to 2012, e-cards have grown at an annualized rate of 19.5 percent, according to IBISWorld's Online Greeting Card Sales in the U.S. report. The researcher projects online greeting card revenues will grow from $3.5 billion in 2012 to $4.7 billion by 2017.

"Consumers are transitioning to online greeting cards primarily because of two reasons: convenience and cost-effectiveness," says Agata Kaczanowska, an IBISWorld research analyst.

The space devoted to greeting card departments at grocery chains remains relevant and relatively unchanged, however, even as the major card companies invest in online models, food retailers say.

"It is certainly true the Internet and the introduction of social media provide more ways for people to connect with each other," says Suzi Robinson, a spokeswoman for the Ahold USA-owned Stop & Shop Supermarket Co. in Quincy, Mass., whose key card supplier is Hallmark. "However, people do not connect with everyone the same way; a consumer tailors how they share a sentiment, depending on the person and the circumstance. Greeting cards continue to fill a 'bond' that is much deeper and personal. Greeting cards continue to be relevant, and we continually look at the department needs around size, visibility, traffic flow and display options."

Upcoming Merchandising

Retailers can be expected to offer traditional incentives through their loyalty cards, circulars and coupons during second-quarter holiday occasions.

Supermarket chains have a slight advantage over those in other channels by merchandising synergistic departments and products where greeting cards can be displayed to capture impulse purchases.

"Merchandising elements such as end caps and off-shelf displays and signs are the most impactful ways we promote our products and trigger a greeting card purchase," a Hallmark representative says. The Kansas City, Mo.-based company reports that some of its grocery retailers with floral departments "will outpost cards there for Mother's Day. Father's Day cards can be merchandised near dad-appropriate gift cards." Outposts in high-traffic areas such as checkout lanes and in the seasonal aisle can boost unit sales the company notes.

Hallmark departments will integrate offers of gifts and greetings, some with coordinated gift wrap, to promote one-stop shopping for Mother's Day gift-giving needs.

Along with greeting cards and gift wrap, grocers will offer Hallmark Blooming Expressions items as a main gift opportunity for Mother's Day.

With greeting card revenues shifting to digital platforms, innovation and retail differentiation will be critical to capture future sales.

Hallmark will introduce Magic Prints for Mother's Day, which it says is an example of innovation at retail. The cards come with a "magic solution" that a child can use to personalize with a handprint as a keepsake for Mom or Grandma Examples are available at www.hallmark.com/blooming-expressions/.

Changing Landscape

Factors impacting retail cards sales are not all due to online and social media, according to DeAnna Bracket, general merchandise category manager at United Supermarkets LLC.

"The economy has an impact on this category," she says. "Another thing that should be considered is the internal direction we have taken with the category."

Over the past decade, Bracket says, "The average retail [price] has had a slight increase. There are fewer suppliers [other than niche companies] available, due to consolidations. And the retail landscape has changed due to more players in the category, such as dollar stores and drug stores."

The Lubbock, Texas-based chain is in the process of a "branding initiative" to differentiate its greeting card product mixes in its Market Street, United and Amigos banners, Bracket explains.

"As we remodel existing stores, the location of greeting cards may change, or linear footage may increase or decrease, which could have an impact on the category," she says. United carries Hallmark and Papyrus, a brand owned by Cleveland-based American Greetings.

"Greeting cards continue to be relevant, and we continually look at the department needs around size, visibility, traffic flow and display options."

—Suzi Robinson, Stop & Shop Supermarket Co.