Roses Are Red, Violets Are Blue, Hallmarks Online, But What Can It Do? - Company Business and Marketing

Industry Standard, The, Nov 27, 2000 by Susan Orenstein

Hallmark's old-fashioned wholesomeness isn't exactly a natural for the Internet. But the company has a strategy for putting "memories" online.

Hallmark is the kind of company where people smile at you in the halls and really mean it. Its headquarters in downtown Kansas City; Mo., gets that end-of-the-day hush before 5 p.m. The company cafeteria has hanging crown chandeliers and feeds thousands a day on lunches that go for a few bucks and change. It's a company where the aphorisms of the founder ("Good taste is good business") still hang in the air.

Given all this traditionalism, Hallmark was hardly primed to jump into the high-speed online world. But it knew it had to. After all, Hallmark is in the communications business, and the Internet was turning communications on its head. So it revved its fledgling Web site into a sizable online operation, then moved it into a renovated train station. From the conference rooms named after New York, Paris and Rome to the video arcade game housed near the staff kitchen, the new digs of Hallmark.com scream Silicon Valley chic.

But something is slightly off-key, like a Valley executive who is not quite rumpled enough to pull off his casual look. There are no signs of disorder, no people or papers flying about. The pace of the Internet world is still something to adjust to at Hallmark.com, where more than half of the 90-person staff has moved over from traditional wings of the company. In fact, by the time Hallmark.com opened its new offices last spring, the Internet Economy was in the midst of its first big meltdown.

Was Hallmark too slow off the mark? Maybe not. It used to be that you had to plant your Internet flag first -- companies that were stars, like Drkoop.com, rejected old traditions and struck out with lusty bravado. But new rules can become old quickly; many of those companies today are downsizing or shutting down, and some old-fashioned concepts -- having a plan to actually make money, say -- are back in vogue. A year ago, Hallmark would have just seemed slow, a sluggish old-economy player attracting its share of chuckles. Today, it finds itself in the lucky spot where, without exposing itself to too much ridicule, it can claim it has been smart all along.

Its competitors, of course, eagerly note that Hallmark.com has a long way to go to catch them. It lags far behind its archrival, American Greetings, in the number of visitors to its site, and even further behind industry leader Excite Blue Mountain. But as the card companies gear up for this all-important holiday season, the folks at Hallmark say they can afford a longer view; Hallmark, after all, declares its opposition to going public as one of its core beliefs and values. It doesn't want to be a prisoner of a short-term profit strategy. It bears the confidence of a 90-year-old company whose revenues are $4.2 billion, and has traveled far from the humble origins it touts at every opportunity.

For decades, it has dominated a stalwart all-American market: Cards sell in good times and bad, literally following the seasons. But selling a card for $1.99 doesn't pay off on the Web the way it does in the local drugstore; it's too small a sale to make the shipping and back-office expenses worthwhile. As for electronic greetings, Hallmark watched helplessly as they became one of those products on the Internet that consumers came to expect to be free, and that expectation swiftly became almost a religious conviction. So Hallmark is focusing on selling other things, such as upscale gifts and gourmet foods, which it hopes will bolster holiday sales. For the first time, it will accept online orders for printed Christmas cards. It has launched its own flower business. Unlike its competition, Hallmark has no plans to accept advertising, no deals with America Online or anyone else to drive traffic.

"We're very comfortable. We really are," says John Sullivan, the Hallmark senior VP who oversees its Internet business. "We don't think we have our head in the sand at all."

The company first ventured into cyberspace in the '80s, working with Prodigy and CompuServe on experimental e-cards, which back then were not much more than a few lines of text. Hallmark.com launched in November 1996. The site was really a place for corporate and product information, though it also offered a few primitive electronic greetings for free. At the time, its customers, traditionally more than 90 percent female, were hardly clamoring for more. They were what company spokeswoman Kathi Mishek politely calls "late-adopters" when it comes to PC usage.

By the fall of 1997, Hallmark started letting people buy and sell ornaments online, as well as pick from limited gifts like stuffed bears and jewelry. The move, requested by ornament enthusiasts who chat on the company's bulletin boards, was less about making money than learning about e-commerce, Mishek says. "Our biggest challenge was managing expectations." The company experimented with flowers, striking a deal with FTD. But giving partners too much control makes it nervous, and Hallmark.com soon abandoned the relationship. It also started selling some of its better e-greetings while continuing to give away primitive cards that were little more than decorative e-mail. Hallmark charged as much as $2.95 per card, though the average price was $1.50. The company was not alone in trying to sell its electronic cards -- until last February, so did American Greetings.