The Stationers Guild

Almost a year ago, I recall exchanging email correspondence with a gentleman who worked for a well-known greeting card company and was responsible for one large big-box store account.    He had recently been laid off as part of a corporate downsizing exercise and lamented that it is “tough to compete when Walmart is selling a similar greeting card at $0.46.”

Now, I have not corroborated his story with a visit to Walmart to check out their pricing, but I suspect that the pricing is not too far off.    Target is selling greeting cards at under a dollar and offers promotional discounts if you buy three or more cards from over 600 cards offered at their stores.

Not much is known about the greeting card industry as a whole and what little information we have available comes from American Greetings, which is a publicly traded company on the New York Stock Exchange (symbol: AM).   I would like to quote a few excerpts from American Greetings 2009 Annual Report:

• Competition:  “The greeting card and gift wrap industries are intensely competitive. Competitive factors include quality, design, customer service and terms, which may include payments and other concessions to retail customers under long term agreements  (my emphasis).   There are an estimated 3,000 greeting card publishers in the United States, ranging from small family-run organizations to major corporations. In general, however, the greeting card business is extremely concentrated .  . .  The market for consumer photofinishing and digital imaging services is highly competitive and still emerging. The major competitors in the consumer photofinishing and digital imaging market are Kodak, Snapfish and Shutterfly.  There are no significant proprietary or other barriers to entry into the digital or
  consumer photofinishing industry (my emphasis).”
• Concentration:   We rely on a few mass-market retail customers for a significant portion of our sales.    Approximately 55% of the North American Social Expression Products segment’s revenue . . . was attributable to its top five customers, and approximately 40% of the International Social Expression Products segment’s revenue . . . was attributable to its top three customers.   The loss of sales to one of our large customers could materially and adversely affect our business,results of operations and financial condition.” (Author’s note: Walmart accounted for roughly 16% of total revenue).
• Relative Share Price Performance:    Using 2004 as a benchmark index of $100.  The share relative price of American Greetings is $18 vs. the S & P 400 (composite stock index) of $80.  In other words, the overall value of American Greetings shares fell by 82% vs. an average of 20% for the leading 400 non-financial stocks on the New York Stock Exchange.   This is four times worse than the S & P composite!

The purpose of this analysis is not to throw cold water on American Greetings or their management, but merely to point out the extremely difficult competitive environment in which the second largest company operates.   With such a concentration in sales, it is inevitable that they succumb to cutting margins to retain volume.   At a price point of a dollar a card, it is difficult to see how an  independent retailer can make money.  In the case of American Greetings, their overall revenue has been stagnant at just under $1.7 billion and I suspect corporate headquarters would be a lot happier if the company were private and sales were half the present volume and far less concentrated.

Implications for Independent Stationers

• With greeting card displays now occupying nearly every square foot of “usable” space in supermarkets, pharmacies, box-stores, car washes, Starbucks, delis and most every store that hangs an “OPEN” sign, it is reasonable to say that we have an oversupply of greeting cards.    While one might have the “best” supply of handpicked greeting cards in the neighborhood, market-pricing has  been set so low that  most consumers are no longer willing to pay $3.95 or $4.95 a card – regardless of the quality.    People that wouldn’t bat an eyelash at spending $10,000 or more to buy a Lexus rather than an Audi often go apoplectic when they see a handmade card by an accomplished artist priced at $10 or so.  In effect, the mass retailers have set the bar so low that the value of the greeting card has become diminished in the eyes of the consumer. 
• While each independent stationer faces a different set of competitive circumstances, I believe that market conditions suggest the following rational behavior (one or more may apply):
  • Conduct an informal survey of stores selling greeting cards within a 3 and 10 block radius.  If you have five or more stores selling greeting cards within a three block radius and 20 or more within a ten block radius, I would recommend disengaging (reducing exposure and concentrating on unique lines).
  • Avoid carrying lines at sold to mass-distribution retailers and box stores.  Pricing has already been compromised and you are at a competitive disadvantage.
  • Avoid lines where the retail price is quoted on the bar code.  This is normally done for mass-marketing retailers.  If you would like to carry a particular line that pre-prices their cards, suggest a discount of 10% to 20% off the keystone wholesale price.   
  • Buy or create greeting card lines from local artists that are unique to your store or unique greeting cards that are sold on a far more exclusive basis (Constance Kay springs to mind).    This is a good way to support and encourage independent artists and build community spirit.
• It strikes me that greeting card companies (based in the United States) with a heavy concentration of revenue to mass-retailers will inevitably destroy their businesses since pricing pressures will not allow them to maintain the necessary margins to produce a quality product that warrants a “brand” premium. 

The greeting card industry is changing, but there are still informed consumers who believe that a well-designed greeting card printed on beautiful paper sends a useful and personal message.   It is far better to create a following with this knowledgeable clientele than duke-it-out with the mass-retailers.  

Richard W. May
Thérèse Saint Clair

In my recent post entitled Walmart State of Mind, I stated that Walmart accounted for over 50% of the state’s total retail sales in seven states.   Several readers were shocked by this information and requested more detail.  Happy to oblige:

States where over 50% of total retail sales are Walmart

Oklahoma – 66.8%
Arkansas – 64.7%
Kansas – 57.5%
South Dakota – 52.4%
North Dakota – 51.5%
Nebraska – 50.6%
Louisiana – 50.4%

States with 40% to 50% by Walmart

Indiana – 45.9%
Iowa – 45.6%
New Mexico – 45.6%
Missouri – 45.1%
Utah – 41.8%
Arizona – 40.0%

Several states have imposed serious zoning constraints on Walmart; however, the list of “affected” states is substantial.  Draw your own conclusions, but I suspect that Mom-and-Pop retailing is probably not doing too well on Walmart’s playing field.   There is always a tradeoff when it comes to competitive pricing and convenience.  Could this tradeoff be the loss of a “sense of community,”  meaningful employment opportunities, entrepreneurship and even hope?    I certainly hope not, but if you think “big” is good and Walmart’s retail sales growth are good for our society, then the 13 states listed above might be places where you wish to retire.  

Richard W. May
Thérèse Saint Clair

The news clip below highlights one of the major advantages of shopping online for stationery and custom invitations:  No need to get dressed up for the big occasion.

In fact, if you are shopping online, you can do so in your pajamas, nightgown or – for that matter – buck naked.  Just make sure your have your credit card handy, but perhaps you are using Google Checkout or Paypal to facilitate the sale.

As more shoppers embrace the convenience of shopping online,  even fewer consider the limitations of the online shopping experience.  It is one thing to download a book on Kindle or buy an iPhone, but quite another to buy “fresh” vegetables or “fine” stationery.  In the case of the Kindle or an iPhone, it is a narrowly defined “gadget” or “device” which may be available in several different colors or memory capacity, but all of those characteristics are narrowly determined by the seller.

Buying “fresh” vegetables or “fine” stationery is quite another matter altogether.   You can’t see “fresh” on the Internet; nor can you see or feel ”fine” stationery.  Paper is as much a tactile experience as a visual experience and, frankly, digital limitations of the Internet do not allow one to capture the color and design subtleties of “real” stationery or custom invitations. 

Where extensive customization is involved it is best to get dressed up and visit your local stationer to see what “real” paper looks like.  Many online dealers spend thousands of dollars in promotional online advertising to con you into thinking you are getting a “beautiful”  wedding invitation or “stunning” stationery.   If it sounds to good to be true, it probably isn’t.  Trust your senses: all five of them!  A dose of common sense also has been known to help.

The Internet is great for purchasing products with defined characteristics.  Once you begin to introduce customization into the purchasing decision or are faced with choices that require a value judgment or cause the forgotten senses (smell and feel) to be engaged, it is wise to consider shopping the old-fashioned way.

Richard W. May
Therese Saint Clair

Following the dissolution of the long-standing relationship between Sweet Pea Designs and PrintsWell reported upon earlier this month, Stacy Claire Boyd reports that PrintsWell will provide “all customer service, production and fulfillment services beginning April 15, 2010.”

According to an eMail distributed by Stacy Claire Boyd (“SCB”), they claim that they will be offering their “designs at a new lower price point” to provide their dealers with more “competitive pricing.”    It also appears that through PrintsWell, SCB clients will be able to have their “own online stationery store, offering all of the SCB catalog products to its customers 24/7.”   Clients who wish to avail themselves of this online service will be able to “brand” the SCB online store with their own logo and collect commisions based on orders processed through the store-branded website.    According to the release, this service is free for the first 4 months and $15 a month thereafter.  Call 866-481-4414 to take advantage of this offer.

Editor’s Note:  With the many changes, consolidations and growing impact of the internet on the stationery industry, it is difficult for independent dealers to know which way to turn.   As readers on the Stationers Guild Blog are aware, I have found no compelling economic argument that would lead me to believe that “lower” or “more competitive” prices make for a stronger industry.  Quite the contrary.  Lower prices necessarily lead to lower quality stationery products for the consumer and profit margins that are not sustainable to support the manufacturers and the craftspeople and designers  who produce quality papers.

While I do not doubt the genuineness of Stacy Claire Boyd and Printwell’s intention to provide its dealers with a competitive product 24/7, the numbers simply don’t add up.    For instance, let us assume that in the past you were able to sell a SCB baby announcement from the album for $200.  If you are like most dealers and earn a 50% margin you would receive $100 for the sale.  Now, under the new PrintsWell agreement this same invitation may sell for $160 (20% less).  Your margin is now $80 for the same amount of work and same level of fixed costs.    Does this make business sense?  I think not!

Well, how about the online store where I make money 24/7?  Glad you asked and, again, sorry to disappoint.  Imagine if all 1,000 or more SCB dealers and existing PrintsWell dealers launch their own private-labeled SCB online stores:  All that adds up to is another 1,000 pages of the 37 million pages now indexed by Google when you search for “baby announcements.”  Unless you are a real pro at internet search marketing and website optimization, your SCB online store will simply be confined to the outer-reaches of internet oblivion.    Even if it can be found, do you think you have much of a chance to compete with Costco and eInvite, who are driving prices and quality standards to levels that even the Chinese would envy.

I know this sounds like a bummer, but trust me it is time to wake up.  Brand integrity is worth talking about!  As dealers we should insist on quality papers and designs that do the industry proud and are sold at  prices where the consumer receives “fair value” and at “price levels” where the dealer, manufacturer and designer are fairly compensated.  To do so, dealers should simply quit carrying lines where that value proposition no longer exists.    Let’s talk vigorously about the many great papers and designers we respect and not spend time apologizing for companies with boring designs, cheap papers and service quality to match!    Fine paper companies who compete on price will go the way of dinosaurs.  Don’t let them take the rest of us down.

Richard W. May
Editor Stationers Guild

The New York Times reports that a price war is developing in the merchandising of books that threatens to destroy the industry.  New York Times writer, Motoko Rich, says that a price war between Wal-Mart and Amazon accelerated on Friday with many bestsellers offered online at $8.99. 

Writes Motoko Rich, “Publishers, booksellers, agents and authors, meanwhile, fretted that the battle was taking prices for certain hardcover titles so low that it could fundamentally damage the industry and ability of future authors to write or publish new works.”   If you like Chainsaw Al, you’ve got to love Wal-Mart.  Once Wal-Mart  gets a stranglehold on an industry the resulting landscape will be as barren as Georgia after Sherman’s march to to the sea during the Civil War. 

A similar, but not so dramatic, battle is taking place in the stationery industry.  Yep!  Wal-Mart has got its paw into this industry too, selling greeting cards for $0.46.  American Greetings and many other greeting card companies are suffering by these predatory practices of Wal-Mart.  As Wal-Mart pushes for the last cent from its suppliers to provide the “cheapest” product on the market, hundreds if not thousands of artisans, craftspeople, workers and families are displaced and marginalized by their practices.  

While the current bestseller from Amazon, Wal-Mart and the town bookstore are identical, one might ask “why should I pay more?”   I guess it is for the same reason why discerning consumers pay more for “green” energy:  they are concerned by the implications of their purchasing decisions.    I think it would be a stretch of credulity to assume that Wal-Mart really cares about the future generations of authors, craftspeople and artisans that no longer can support themselves in an industry dessimated by Wal-Mart.   I guess these would-be artisans will be obliged to lay down their paint brushes, sell their Heidelberg presses and donate their book-binding tools to museums and become sales clerks at Wal-Mart.

As a stationer, I see many inferior designs and poor paper quality touted   as “fine stationery” by online marketing companies and their  paid internet marketing mercenaries who shamelessly promote their brand  in social media channels.   Stationers and Fine Paper companies simply must do a far better job in “educating” the consumer that there is more to fine stationery than a disingenous advertising ploy.