CENTERING ON CARDS 2004-02-23 (1)

DAN ALAIMO / Additional reporting: Dara Boyko

In newer state-of-the art supermarkets, greeting card departments are positioned prominently, setting the tone for the store's nonfood offerings like a centerpiece at a dinner party.

Not only are these distinctive sections located in central, high-traffic locations, but they also serve as the hub for related categories such as party goods, floral, gift items, photo frames and albums, stationery and candles. Some retailers, like Giant Eagle, Pittsburgh, have even incorporated do-it-yourself teddy bear-stuffing stations in some of their newer stores.

Tie-ins, such as with party goods, and loyalty promotions offering a free or discounted gift item with the purchase of multiple cards help build interest, excitement and profits for all categories involved, especially greeting cards, said retailers and other sources interviewed by SN. Yet, the increasing trend to low-priced cards -- driven in large measure by the dollar stores -- as well as the rising popularity of e-mailed card images, are creating a challenging environment for the sales of greeting cards in supermarkets.

"Greeting cards are absolutely dependent on traffic," said Tony Pooler, director of GM/HBC, Save Mart Supermarkets, Modesto, Calif. "We place the department wherever we can make sure that people will pass by because it is such a highly impulsive decision to buy a card."

Once customers have decided to buy a card, "there are a lot of tie-in opportunities," such as gift items and picture frames, he said. "We try to boutique them a little bit." With the help of a direct-store-delivery vendor, Save Mart tries to merchandise unique items, Pooler said.

However, dollar stores are cutting into unit sales of greeting cards, he noted. "For a conventional market to combat that, we need to be a little bit smarter and make sure we've got the right product at the right time and that we are handling our customers correctly," Pooler said.

Roy White, vice president, education, General Merchandise Distributors Council Educational Foundation, New York, acknowledged the challenges retailers face in unit growth and pricing, but added, "It's a high-demand category which offers volume and good profits. It also has the benefit of being a tremendous identifier for your store." Because of the size and attractiveness of the department, "it identifies that you are in nonfoods and it identifies it very, very strongly," he said.

The greeting card category "certainly is one of the anchors as you move through the nonfood aisles," said Neil Stern, retail consultant, McMillan/Doolittle, Chicago. "The more progressive retailers are trying to create gift centers with greeting cards, floral and, in some cases, cosmetics. You are seeing more of the upscale guys start to morph into higher-end housewares, candle sections and true gift merchandising."

Not every retailer can do that, he admitted. "But certainly a basic adjacency is to put greeting cards and floral as close together as you can."

In spite of the challenges facing the category, he noted that mass merchants like Wal-Mart and Target do very well with greeting cards. "So I think it is going to emerge as a very strong category and perhaps be merchandised even more aggressively in the future," Stern said.

Central placement and outposting "reminders" are two strategies recommended for greeting cards by Hallmark Cards, Kansas City, Mo. "Many grocery retailers are enlarging and remodeling their stores. Moving greeting cards to the center of the store is a proven strategy to capitalize on store traffic," said Marc Woodward, vice president, supermarket sales.

Meanwhile, outposting in other appropriate areas of the store, such as floral, pet care and bakery, "helps to remind consumers of their need for cards and related products," he said.

Woodward identified three key strategies for building card sales:

The right sized department in the right location.

Effective promotions.

Category management to focus on the most productive mix in the right quantities.

"Capitalizing on traffic is integral to maximizing greeting card sales in supermarkets," Woodward said. "Retailers who target and reward loyal customers by leveraging technology through loyalty programs and 'shopper cards' also have produced significant results."

American Greetings, Cleveland, agreed with many of the points made by its chief competitor, but underscored the importance of having active reminder programs in related departments, as well as on shopping carts or the registers. "Our greatest competitor is forgetfulness," said Jaye Lewis, spokeswoman.

Cross merchandising helps to make the greeting card category more successful, she said. For example,

Placing candles, cards, crepe paper and party goods in the bakery department.

Adding an outpost to the floral department containing cards, seasonal products, candles and bags.

Merchandising bags throughout the store wherever gift items might be located.

Adding a side panel of stickers in the cereal aisle for kids.

Outposting seasonal to the front walk-in area, and other seasonal areas within the store.

Among the most effective promotions were plush premiums requiring the purchase of multiple cards; everyday and seasonal card reminder campaigns; and a semi-annual sale, such as 50% off in the summer, Lewis said.

Larry Schimpf, director of HBC/GM, Clemens Markets, Kulpsville, Pa., agreed that percent-off sales are the most effective for greeting cards, and that tie-ins with floral, wrapping paper and candles also work well. Meanwhile, the trend to 99-cent cards is a significant one.

"We continue to do well in spite of e-mail greeting cards. It continues to be a viable category with high profit and good sales," Schimpf said.

For the retailer customers of Associated Grocers, Baton Rouge, La., percent-off sales and offering a premium with the purchase of multiple cards have worked well, said Gerry Buckles, director of HBC/GM. The overall outlook for cards is "challenging," he said, because of the low-end cards now available. "It makes it less likely for people to spend $3 or $4. The Internet also poses a challenge, but I think there will remain a good market for something that's as personal as handing or sending someone a nice card."

Greeting card sales have been flat for the retailer customers of Associated Wholesalers, York, Pa., and that's good considering the competition and the maturity of the category, said Michael Welsh, director of marketing, general merchandise. "We're pretty happy with that," he said.

"We've tried to encourage our retailers to maintain the greeting cards as a profit center and to merchandise them in a traffic area," Welsh said. Because of the competition, retailers have had to rethink their pricing strategies, he noted. Some have adopted 99-cent cards, while others have gone to a program with three pricing tiers, such as 99 cents, $1.49 and $1.99. "Then you have some people who are just sticking with their regular card departments," he said.

"There's no question that greeting cards is an important category for a supermarket retailer," said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif. The everyday card program is their bread and butter, but alternative card suppliers, including those with 99-cent programs, address niches that are often appropriate for independent grocers, he said.