Traditional greeting cards are not folding to online cards

Drug Store News, March 4, 2002 by Rob Eder

Despite reports that the Web has shifted the paradigm in card sending, the retail greeting card business remains alive and well and appears to be showing some modest growth in the wake of the Sept. 11 tragedies.

According to household penetration data compiled by the Greeting Card Association, more than 90 percent of U.S. households continue to purchase at least one card a year, generating total retail sales of more than $7.5 billion on sales of more than 7 billion cards. And though online greetings drew a lot of attention from younger consumers through the late '90s, it appears that adults--which make up the vast majority of chain drug store customers, despite efforts by many chains to attract teens to their stores-- remain committed to traditional, paper greeting cards. Household penetration in the United States has grown more than 6 percent over the last 10 years, according to GCA.

Recent results reported by the two dominant players in the category, Hallmark and American Greetings, however, were somewhat of a mixed bag.

On the one hand, Hallmark reported a 2 percent to 4 percent sales increase in the period between Thanksgiving and Christmas. Deidre Parkes, a spokeswoman for the company, attributed the increase to somewhat defiant consumers, perhaps more intent than ever before to maintain their traditions in the wake of Sept. 11, she told Reuters. As such, it would make sense that cards carrying themes related to patriotism and peace have driven the majority of that growth, she explained.

Meanwhile, though American Greetings' fourth quarter sales were not available in the third week of February (the company was set to announce results Feb. 28), AG reported a net sales decrease of 6 percent, or $30.6 million, in its social expressions business--where it tracks sales for greeting cards--during its fiscal third quarter, which ended Nov. 30. The company chalked up the loss to the impact of its new pricing strategy, introduced over the last year, which includes a higher mix of lower-priced greeting cards in mass retail channels and the company's move to reduce inventory levels at its customers' retail stores. Hallmark increased its mix of value-priced greeting cards to include a collection of 99-cent selections in 1999.

On a more positive note, American Greetings increased its online sales some $6.2 million during its third quarter--a direct result of the company's move to begin charging online users to send electronic greetings through any of its sites, including AmericanGreetings.com, BlueMountain.com, and e-greetings.com. These sites, once free, in December began charging users a yearly subscription fee of $11.95 for unlimited usage.

Interestingly enough, it seems that AG's decision to charge for online greetings has helped drive traffic over to Hallmark.com, where electronic greetings are still free. Hallmark.com grew unique visits to the site 67.5 percent during that period, according to Jupiter Media Metrix.

Another positive sign that retail sales of greeting cards will hold steady on a go-forward basis is most retailers' unyielding commitment to the category. No chains seem to be cutting back space in greeting cards, and it remains a strategic category for most drug retailers. Wal-Mart remains committed to the category. The chain's newest Neighborhood Market prototype increases the space in greeting cards to 76 linear feet from 48 linear feet.