The Stationers Guild

I participate in a number of forums related to the stationery industry.   For the most part, these forums are used by the participants to promote their products rather than provide useful advice to newbies and a few old-timers (like myself).  As the groups grow larger, the level of relevant communication diminishes which I guess helps explain why those who speak loudest or more often tend to dominate forum discussions.

Over the last couple of months a couple of themes have emerged:

• How to outsource to China and get cheaper products
• Advice on how to market store retailers to sell products that are now currently sold online.

Outsource to China

I have often been accused of denigrating the quality of products from China.  This is simply not so.  Let’s face it, the people who outsource to China are Gringos who insist on the “lowest price,” not the “highest quality product.”  I have no doubt in my mind that Chinese craftspeople can (and do)  make or design products of unmatched quality and design.  The problem is that these “outsourcing Gringos” want the “cheapest product” rather than the “best” product.

Therefore, if you are buying greeting cards manufactured in China, would you really like your client to lick the envelope?

Should you promote “new” products that are now sold exclusively online?

A common problem for many “new” artisans in the greeting card industry is that they first begin to sell their greeting cards online directly to the consumer.  It is a relatively inexpensive way to get your product out in front of wider audience, but requires a great deal of online marketing skills that these artisans don’t possess to develop a sustainable business.

Frustrated, they now reach out to store retailers to market their greeting card line.  Should your store carry their line?   In most cases, I would simply say “no!”  The reason is quite simple:  Why should I invest my time and resources to market an undifferentiated product for a new vendor that sells the same product online?    I am often told in these forums that “the customer wants the convenience and choice of shopping online or in a store,” as if that were sufficient justification for marketing a new line.  Sorry, but it simply doesn’t make  business sense.   Why use my expertise, store space and limited marketing budget which often tends to drive clients to an online store?

As most of my advertising and promotion is online, I am extremely careful to market stationery products and custom invitations lines that have either an affiliate program or do not sell online.    The goal of my online marketing campaign is to drive people to my store.  Nevertheless, we need to talk about products and lines that we actually carry in the store and, I suspect, that the first thing the online buyer does is to visit the suppliers website.  While I am certainly disappointed not to make the sale in the store, I feel my marketing efforts have not been lost if that “marketing lead” generates an affiliate commission.

Affiliate programs by leading companies in the stationery industry is, in my opinion,  an important way to raise the standards in the industry and provide the consumer with useful information about quality stationery.  Personally, I no longer feel threatened by promoting the brand of our vendors, using their images and promotion campaigns.   In effect, it is good business for my store, my supplier and the industry as a whole.

I do hope other stationery stores will soon embrace affiliate marketing to help the cream rise to the top.   Read more on how affiliate marketing can help your business.

In yet another sign of the times, Borders filed for bankruptcy protection and will close some 200 of their 632  stores according to articles published today.  I am sorry that this is taking place, but others may think that this is only fair since the Big Box stores were responsible for putting so many small retailers out of business.   So creatively documented by Tom Hanks and Meg Ryan  in You’ve Got Mail,  I suppose it is now somewhat ironic that Borders was itself brought to its knees by the Internet, which fueled Tom and Meg’s email romance.

While most business pundits seem to think that Borders will not survive the restructuring, it is interesting to note that most of its store closures are “super stores” and that Borders Express and the old Walden bookstores will continue to operate.   “Thinking small” seems to be the operative word these days and I suspect that the consumer is beginning to find the comfort and intimacy of smaller stores to be less intimidating than the Big Box experience with floor-to-ceiling products and cheap prices.

There are many parallels between what is taking place in the publishing industry to the greeting cards and  stationery industry.   It seems evident to me that the industry as a whole is simply digging themselves a deeper grave by throwing increasingly more product of cheap designs and low-quality paper into a market that is  already over-saturated and at prices that reflect the “real” value of the merchandise  (i.e. practically nothing).

Furthermore,we are aggressively marketing this compromised product to consumers that have already embraced alternative forms of communication.   This is not a good situation, but very few companies seem to have taken the lead and stated that  “I am not planning to run my brand into the ground and will, instead, create  a quality product that consumers, distributors, craftspeople and designers and my employees can be proud of.”

These are difficult times, but patience and clear vision will reward those who focus on excellence rather than growth or simply running with the herd.

Richard W. May
Founding Member 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

I just learned that Atomic Greetings (strange name!) now allows users to customize a greeting card with a digital recording or video recording that is opened through a digital code that is embedded in a standard “100% paper” greeting card.    Clearly, the techies have outdone themselves with this silly greeting card concept which, in my estimation, is the equivalent of sending an email text message by boat.  This is too funny for words.  Please see the instructional video below if you receive an Atomic Greetings card:

I quote from the introduction of Atomic Greetings new “cutting edge in greeting card technology – augmented reality. Augmented Reality or as we prefer to call it, Enhanced Vision Xperience (EVX), is one of the technologies that allows you to send an audio/video message with our cards. Our patent-pending greeting cards are the world’s first 100% paper greeting card that allows you to record and send not only an audio message but video as well! Just think how easier it is when you say “I Love You!” or sing it, or do a little dance… and just think about how great it would be to receive a card and see your friend or loved one speaking or singing to you! Not only does an Atomic Greetings card do so much more than old cards – they do it for the for the same price as the musical cards you see in stores AND they work on both Macs and Windows without any software downloads to your computer’s hard-drive required! Atomic Greetings truly allow you to show someone that you really care.”

I didn’t realize I needed “augmented reality,” but I suppose that the people who watch 3-D TV might find greeting cards from Atomic Greetings an interesting addition to their augmented digital experience.  I just hope the cards don’t blow up in your face.

Richard W. May
Thérèse Saint Clair

I recently was engaged in an  interesting discussion on LinkedIn within the “Greeting Card, Stationery & Gift Industry Gurus” Group.   Without going into a lot of detail, the discussion focused on the future of paper greeting cards and how best to create the next generation of eGreetings to connect with a new generation of “tech savvy” users.   While I do not question the impact of the digital revolution on paper greeting cards, I could not see an economic rationale to create a sustainable and successful eGreeting business.  Found below are brief excerpts of some of the comments I made during this discussion. 

 There is no question that digital greetings and invitations are rapidly eating into the “paper” market. While I don’t happen to think of paper as a “device”  since color reproduction and print quality on paper remains far superior and authentic to anything on the web (band-width restrictions), the whole point of the discussion is how to make money with digital greeting cards.

Personally, I think it is a losing proposition because I don’t believe any company will be able to create designs or unique delivery capabilities to compete on a sustained basis with the many (and growing) “free” alternatives on the internet. I have yet to hear how someone will be able to create “brand awareness” around something so mercurial as a greeting card and convince a critical mass of “subscribers” or “buyers” to pay for something that is pretty much free.

To draw from just one example. Take Blue Mountain Greeting Cards which was one of the first digital greeting cards to make a splash in electronic greeting cards. They are now owned by American Greeting Cards (AG), because they wouldn’t have been able to survive as a stand alone venture. Is AG any better off? I think not. Their sales are down 25% since 2002, they lost over $200 million in 2009 and they may break even this year.

Why Paper? A well-designed greeting card with a personalized message printed on quality paper is often worth “saving.” On the other hand, a digital greeting card or image maybe worth “storing” (there is a huge difference between mechanically deciding to save a physical object as compared to storing it on your computer). While you may eventually want to print the stored image, what will you print it on?: 20lb copy paper stock. There is a reason why people go to art museums: they want to see the real thing, not some digitally reproduced image formatted for a digital transmission. The same is true for greeting cards for memorable occasions.

There is a difference between building an iPhone application that plays “Happy Birthday” and sends a cute text message to your contact list on their birthday as opposed to building a business providing “unique” designs over a technology platform that gives the business provider a sustainable competitive advantage. Most novice tech users can already embed videos and pictures in their emails and many have already created their “free” Wordpress or Blogger websites. While I don’t doubt that technology providers can “sell” services to users interested in creating or selling their own greeting cards, I have yet to see how one can build a sustainable eGreeting business around the many “cool” apps that appear each day. Competing against “free” communication alternatives doesn’t seem to be a market that offers much promise.

Just did a Google search: there are 14.5 million web pages offering “free greeting cards.” Do you think it will be less competitive when the iPad hits the market in a few weeks? Again, if someone shows me a sustainable business model for eGreetings I will eat the digital printout of the business plan. Better yet, if you have figured it out, go for it! (I would love to be a shareholder).

I remain unconvinced that one can make money on a sustained basis with electronic greeting cards. Twitter and Facebook have essentially eliminated the need for them since the lives of its members are pretty much an open book.

Richard W. May
Thérèse Saint Clair

During this week’s Gift Show at the Javits Center in New York City, Sheila and I were kindly invited to Constance Kay’s lovely studio  in midtown Manhattan for champagne and hor’dourves.  For those unfamiliar with Constance Kay, suffice to say that she is the High Priestess of greeting cards (boy would she hate that title). 

Contrary to what is going on in the greeting card industry, Constance is a beacon of light by helping many talented artists apply their unique talents to create a stunning array of hand-made greeting cards.   Representing well over 70 artists, Constance - with the able support of her husband David – encourages these artists to use their talent to create unique greeting cards for important occasions in people’s lives.  Each artist has their own style or “look” and it is breath-taking to see what these remarkable artists can create on a folded piece of elegantly crafted paper  not much larger that 5″x 7″.

As a favor, we received a few samples of new artists that have recently joined the fold.   For instance, Maureen Triece Cole, whose beautiful card sample is displayed above has a Masters of Fine Arts degree from Texas Women’s University and is an accomplished artist whose work has appeared in numerous juried competitions, group exhibitions and individual shows.  Erica DiPaulo (see design below) lives in central Ohio with her husband, two children, two dogs and a rabbit.  This beautiful collage in orange and textured paper makes me yearn for spring when the birds will begin to sing again.

Sheila and I have been so moved by the great artists featured by Constance that we donated the Therese Saint Clair  greeting card collection of over 5,000 cards to charity many years ago.   There are greeting cards and greeting cards, but a Constance Kay greeting card is to be treasured.  The artist supplies the cover to your personalized greeting, but you must supply the message. 

If you are looking to break out of the cookie-cutter greeting card mold and discover an artist who captures the spirit of the occasion, Constance Kay may be just what the doctor ordered.  We thank Constance for exposing these artists to a wider public and we and our clients are greatly enriched by the experience. 

Richard W. May
Therese Saint Clair

Pam Danzinger of Unity Marketing reports that changing consumer communication behavior suggests bleak times ahead for the stationery and greeting card industry.  Ms. Danzinger, in a summary of her company’s report, argues that “the market for greeting cards is a tough one in today’s environment . . . as consumers turn to newer, faster and more user-friendly  communications alternatives.”   This should come as no surprise to anyone, but clearly it is already having a profound effect on manufacturers and distributors in this $41 billion industry. 

Excerpts of the Unity Marketing study printed on Newswire find young adults (age 25-to-34), are looking for alternatives to traditional paper cards and that, “Social Media” – notably Facebook, MySpace and Twitter – could be the future for this generation to send greetings.   Organizers of the National Stationery Show seem to be leading the way for this new adventure in digital correspondence. 

I have not read the report ($3,500 is a bit out of my league), but Ms. Danzinger segments her market into four “psychographic” groups with the “alternative seeker” comprising the largest segment.  I have no idea whether Ms. Danzinger coined these definitions or whether these are generally accepted academic terms describing social behavior.  In any event, I find the term “alternative seeker” rather vague and somewhat akin to “alpha female” or “Yuppie.”  Presumably, if you are marketing an “alternative seeker” you must have some idea where he or she is today. 

The compelling argument(s) for shifting from paper correspondence to digital communication is cost and efficiency.  It costs virtually nothing to send out “greetings” or “tweets” to your contacts and followers and this can be done so with a minimum of effort.  The question is:  If it costs nothing and is easy to do, does it have any value? 

In purely economic terms, if there is an unlimited supply of a product that costs nothing or virtually nothing to produce (i.e. air)  it has little perceived value to a buyer.  Why pay for something that is free?   Newpapers who give their content away for free online cannot be surprised that paid circulation and advertising revenue is declining rapidly. 

Without looking too hard into the crytal ball and trying to interpret what “alternative behavior” market segments will do, I believe that the end is in sight for companies that sell “paper stationery” online.   The justification is simple:  Why should I go online to purchase paper stationery when I can just as easily go online to send digital correspondence for free and with far less hassle?  In other words, once you are committed to the online experience, why go half-way?  Sure, some better known greeting card companies that provide digital stationery and invitations will survive simply collecting affilitate income and advertising revenue from those obnoxious ads that accompany most emails and “free” digital communication. 

Paper companies that continue to invest in quality products and designs may be forced to contract, but overtime they will become the value proposition to “alternative seekers” who eventually decide that “cheap” and “efficient” may send the wrong message for job interviews, getting married or annual holiday greeting cards.  I certainly hope so.

Richard W. May
Therese Saint Clair