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    Cents-Off Greetings

    Demand for dollar greeting cards causes industry disruption.

    By Christina Veiders

    ?Woo-hoo! Look ? 47-cent cards!?

    That was a sentiment expressed by several shoppers at a local Walmart store in Danbury, Conn., last month before Father?s Day.

    Dollar greeting cards emerged more than a decade ago, even before the Great Recession spurred a resurgence in value shopping, according to those in the greeting card industry. Dollar stores spawned the $1 greeting card price point. Since then, value-priced greeting cards have been in big demand as those prices have spiraled downward to below the 50-cent level. Often, when consumers care to give the very best in a greeting card, it?s priced below a dollar.

    The Krazy Coupon Lady, an extreme-savings blogger, last year promoted American Greetings? Today and Always brands for 17 cents with a coupon and the purchase of three cards at Family Dollar.

    Another savings website, bargaineering.com, recently observed: ?Greeting cards can cost upwards of $6 at card and grocery stores. I was expecting the dollar store to sell cards for, well, a dollar, but they actually sell them for 50 cents each. If you send out 20 cards a year, you can save up to $100 just by buying your greeting cards at the dollar store.?

    Steven Gimbelman, president of Edison, N.J.-based Designer Greetings, notes that dollar stores grew rapidly through the 1990s, with the format becoming a ?hidden treasure? for shoppers.

    Mass merchants, Walmart in particular, quickly adopted the concept, and others, including grocery, were forced to follow suit. It became another way for retailers to compete for shoppers? dollars. Shoppers can now find both small- and large-size value card sections across food, drug and mass merchandiser channels.

    Buehler?s Fresh Foods, a 14-store grocery chain based in Wooster, Ohio, merchandises greeting cards in all of its locations. According to spokeswoman Deb Wilcox, Buehler?s, supplied by American Greetings, offers a limited selection of value cards, and they?re not available in all stores.

    Wilcox says that what Buehler?s shoppers value most in greeting cards are ?quality, variety and the leading-edge card choices available to them. ?Our customers want a quality card, with the message of the card being the driving decision behind their card selection. They look for promotional events as an opportunity to purchase cards.? she notes.

    Designer Greetings, established in 1982, has been publishing value card lines for more than 20 years. ?The value of a greeting card selection at $1 or less creates traffic,? Gimbelman says.

    ?No one is doing it to sell just one card,? he continues. ?They are thinking of consumers stocking up and buying their list for the month of [occasions such as] birthdays [and] anniversaries at a one-stop destination for all their needs. I believe strongly the whole mindset is to sell more cards, work on less profit and create traffic in a retail destination.?

    Value card sales hurt manufacturers like Cleveland-based American Greetings Corp., which sells its cards to dollar stores. In its 10-K statement for the fiscal year ending Feb. 28, 2014, the company, which went private last year, noted the negative effect of the trend on value shopping.

    ?Over the past several years, consumers? shopping patterns have continued to evolve, and that shift is impacting us,? the report said. ?As consumers have been gradually shifting to value shopping, this shift is resulting in a change in mix of product sold to a higher proportion of value-line cards that lowers the average price sold of our greeting cards and has an unfavorable impact on our gross margin percentage.?

    The company added that it would focus on efficiency and cost reduction in its operation to counter the value shopping trend, which it expects to continue.

    American Greetings is in the process of conducting a study on value shoppers. ?Our established research findings are consistent with current learnings that shoppers tend to be more value-sensitive than price-sensitive,? says Megan Baucco, the company?s assistant marketing communications manager. ?Whether a card costs 49 cents or $5, consumers expect value at every price.?

    Keeping Up with the Competition

    Over the past five years, the greeting card industry has struggled to stay relevant in a digital world and is bucking retail consolidations, grocery included.

    ?The trend of supply chain stores consolidating, such as supermarkets, is increasing their leverage to negotiate low prices, thus heightening price-based competition for publishers,? Los Angeles-based IBISWorld notes in its latest research on greeting cards and other published products such as postcards, calendars, coloring books and yearbooks.

    ?The core business of traditional manufacturers is shrinking and is likely to continue to shrink,? asserts Jim Wisner, president of Libertyville, Ill.-based Wisner Marketing Group, who follows nonfood categories. Wisner points to free e-cards as the ultimate greeting cards for value shoppers.

    Falling Revenues/Profits

    According to IBISWorld, ?During the five years to 2014, industry revenue is expected to fall at an annualized rate of 3.8 percent to $6.1 billion, including a 5.6 percent decline in 2014 alone, due to contracting demand for industry products from downstream markets, including bookstores.?

    Profit estimates are down from 7.2 percent of industry revenue in 2009 to 6.6 percent in 2014. The researcher also projects industry revenue to decline at an annualized rate of 2.4 percent to $5.4 billion.

    The Greeting Card Association, based in Washington, D.C., estimates annual retail sales of greeting cards between $7 billion and $8 billion. Some card companies, however, claim they?ve maintained sales on their $3-to-$5 cards.

    Avanti Press Inc., based in Detroit, recently concluded a 90-day ?price elasticity? test at more than 100 stores. The study showed that ?shoppers respond positively to Avanti cards in the $3?$5 range,? says Dave Phipps, Avanti?s communications and marketing manager.

    ?I don?t think a ?standard? card like Avanti needs to be priced above $5 right now. We have the most success at $3.99, when there is something extra, like our StandOuts, or $4.99 [with] our Motion lenticular cards. I think the right card for the right person is something you add to your cart without blinking when it is under $5.

    ?Grocery has limited space for extreme-value lines ? they can make more dollars per square foot with a higher-quality product,? Phipps concludes.

    Scott Young, VP, strategic relationships and business development at Kansas City, Mo.-based Hallmark, acknowledges the ?new normal? in value shopping. ?Consumers at times have a frugality mindset and are being more thoughtful about their spending,? Young says.

    ?What shoppers value most in greeting cards are quality, variety and the leading-edge card choices available to them.?
    ?Deb Wilcox, Buehler?s Fresh Foods

    By Christina Veiders
    • About Christina Veiders

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