DEALING WITH CARDS

DALE BUSS

Sales of greeting cards at Surefine and Suresave supermarket chains have been flat overall this year, but the retailers aren't neglecting the category -- far from it. Cards and related merchandise are getting a lot of attention from store management these days, especially with the crucial Christmas holiday season coming up. One major promotion that will begin in November will include the giveaway of a free postage stamp with the customer's purchase of each greeting card.

"They'll never lose importance with us because of the profits that they bring to the picture," said Charles Yahn, vice president of the nonfoods division of Associated Wholesalers, the York, Pa.-based company that operates the two chains in Pennsylvania, Maryland and upstate New York. About 180 of the 1,200 total Surefine and Suresave stores sport greeting card departments. "We're also doing more outposting with greeting cards in other parts of the store, and where we're doing that, it seems to be working well."

Yahn's view is substantially echoed by other supermarket executives and by leaders of the greeting card industry's major suppliers: Unit sales are stagnant, but dollar volumes are up by the low single digits, generally estimated at about two to three percent industrywide. Business upticked significantly last fall in the wake of the Sept. 11 attacks, amid a resurgence of patriotism and a nationwide catharsis concerning relationships and other matters of the heart. Americans went out in droves to buy greeting cards to help them express what they were feeling at a very confusing, stressful time.

But much of that surge fell away this year. Some in the card industry believe that long-term negatives have begun to reassert themselves, such as the growing frequency of e-mail and the lesser card-buying tendencies of younger consumers. That has left the industry searching once again for that combination of new products, pricing and promotions that will provide new energy to a marketplace that has been lagging much of the last several years.

"What we've got now is a pretty varied picture out there," said Marianne McDermott, executive vice president of the Greeting Card Association, the Washington-based trade group. "Some members are saying business is flat, while others are having a better year."

The industry's general affliction actually may apply more to supermarkets than to other categories. After surging during the mid to late '90s, when many grocery chains were adding or significantly expanding their card sections, supermarket sales have been flat for most of the last two to three years, with the channel continuing to hold down about 15% of category sales overall, said Dan Moraczewski, vice president of sales for the supermarket channel of American Greetings, Cleveland. Dollar stores and mass merchandisers have been the category growth leaders recently, he said, especially supercenters.

Nevertheless, the commitment of supermarkets to the importance of the greeting card business hasn't wavered, nor has the enthusiasm of card suppliers for grocery stores as a primary channel. "It's going to remain an important category for us," said Jim Giacomelli, head of grocery operations for North State Grocery, in Cottonwood, Calif., which operates 24 supermarkets in Northern California under the Holiday Quality Markets banner. "These shoppers are impulse-type customers, and we need to do whatever we can to reach those people."

During the last few years, the typical supermarket has reached the point of dedicating about 1% of its valuable floor space to greeting cards and related wares, said Moraczewski. "For a single category, that's a lot of space," he said. "That's the equivalent in space of the entire cold-cereal section, basically -- except with cereals, there are multiple suppliers. With most card sections, supermarkets turn over their management to a single supplier, such as us or Hallmark."

Supermarket management ranks highly with card suppliers in part because they devote the necessary resources to "understanding their customer base, which may be quite different from region to region, neighborhood to neighborhood or even store to store," said Wayne Strickland, vice president of sales for certain lines distributed by Kansas City-based Hallmark.

What's more, said Moraczewski of American Greetings, the typical supermarket shopper is an almost complete overlap of the typical greeting card buyer. "Their best customers are our best customers," he said. "Their best customers are 50-plus in age, and they're also our best customers."

The focus on supermarket sales of new entrants to the greeting card business is another testimony to the importance of the outlet. Max & Lucy LLC, for example, began business four years ago by selling its cards -- largely simple designs featuring whimsical icons on the covers and concise messages on the inside -- to upper-end, independent stationery and book stores.

Then the Phoenix-based company managed to place its cards in a couple of natural foods chains, Nature's and Whole Foods Market, regionally in the Northwest. Last summer, Trader Joe's requested a test with the cards. "They didn't even have a card department yet," said Russ Haan, founder and managing partner of Max & Lucy. "But they've just been blowing through the things. They're known for low prices, so they move volume." Soon, H-E-B Group, headquartered in San Antonio, was looking for the Max & Lucy line to put in its 200-plus Central Markets stores in Texas.

"Our design sensibility being simple, sophisticated, a little tongue-in-cheek and wry, it made a good fit with those chains," Haan said. "We're fresher and nontraditional, but not so strange or offensive that we would turn off a lot of their customers, especially in the South, where they have that whole traditional thing going on."

That's certainly the case with Bashas', the Chandler, Ariz.-based chain that nearly 18 months ago began rolling out a new section it called Social Expressions. The section features greeting cards, broader candle selections, extra party goods, party-favor items and more high-end gift merchandise. The cards are stocked by American Greetings and by Chicago-based Recycled Paper Greetings.

"We are still showing strong double-digit, same-store growth" even in the project's original test stores, said George Fiscus, vice president of general merchandise for Bashas'. Greeting cards and wraps, he said, are outperforming the chain's expectations this year and have been "key to our success" with the Social Expressions sections. "Through new, more modern fixtures, improved demographic-specific product mix, wider and more appealing selections for younger customers and aggressive off-shelf activity, cards have been a driver for change and growth."

Similarly, Tampa-based Kash n' Karry has made a higher priority of greeting cards at the new stores it is opening in its Florida marketplace. Among other things, Kash n' Karry's newest stores feature areas near the deli-bakery called Celebration Street, with a subsection named Party Central, which feature greeting cards and party supplies, as well as wine and beer. "Cards in general are a high-profit section for us, and have been ever since we opened in 1999," said Margaret Regina, manager of general merchandise for Kash n' Karry's store in Clermont, Fla.

Especially with sales having lost some of last year's fizz, card companies and supermarkets alike are trying to rekindle consumer interest with special promotions for the holidays. Hallmark is promoting its "Creative Connections" line, which gives consumers an opportunity to personalize their holiday greetings by adding a photo, a message or a gift to each design. American Greetings is pushing a new religious line called "In His Name" and, tactically, the use of lane blockers as promotional islands throughout a store. And Max & Lucy is introducing a new type of card that produces a changing visual when a consumer opens it and pulls a plastic tab.

Among supermarkets, Associated, for example, is outposting cards throughout the store in support of its upcoming seasonal promotion with American Greetings, said Yahn. In another example, Harp's Food Stores, in Springdale, Ark., is using more seasonal outposts in its expanded floral departments. "When we do that, we see healthier seasonal card sales," said Bob Yehling, director of general merchandise at Harp's.