FUTURE IMPACT 1999-06-21

JOEL ELSON

Technology that advances rapid communications through the Internet, personal computers and various other telecommunication devices is affecting supermarkets' greeting-card departments and may change their makeup in the new century.

While retailers and manufacturers debate the extent and seriousness of this new competition, greeting-card sales remain stalled at just over the $7 billion mark.

"It's definitely more competitive than ever," said Bill Roatch, buyer-merchandiser for greeting cards at Raley's Supermarkets, West Sacramento, Calif. He sees people bypassing the greeting-card department to communicate "with e-mail, Internet greetings, voice mail, pagers, cellular telephones and facsimile machines," and sees this affecting greeting-card profitability and sales. These "more and faster ways to communicate," threaten supermarket greeting cards, he stated.

While greeting-card volume remains stable at Harris Teeter, Charlotte, N.C., Lamar Hardman, the retailer's director of nonfood, said his vendors tell him the Internet is affecting retail card sales. "We definitely think that may be a threat," he said.

Consequently, Harris Teeter will do everything it can to make sure its 60- to 220-foot departments are as productive as possible. "We're trying to determine what is the optimum footage needed to maximize sales per square foot of space for the entire [Gibson] line, from cards, partyware to gifts," explained Hardman. He added that with any adjustments to footage "product depth may change, but not its breadth."

Hardman maintains there are ways to simplify card shopping by improving or changing the presentation. "The way cards are presented hasn't changed in 30 years. We want to look at ways to speed up the selection process," he stated.

A nonfood manager at a Southern chain, who asked not to be named, said retailers must respond to any challenges to greeting cards, "whether it's from the Internet, drug stores, mass merchants and party stores."

To contend with competitive challenges, "the card selling space has to be more productive. It seems new lines are coming out from card manufacturers every five minutes. This requires resets," he commented.

Pete Malone, marketing manager at Expressions From Hallmark, Hallmark Cards, Kansas City, Mo., said "Technology, obviously, poses a challenge to everybody. We feel committed to maintain our position for high-quality product at a good value."

Five years ago, Hallmark didn't view the Internet as a threat to the category, he said. "Obviously, it's becoming more and more of a consideration. But it also is an opportunity to reach new consumers and reinforce our brands in a way that we haven't had before," Malone stated.

Leading card manufacturers like Hallmark "are going to really need to tap into their creativity to keep the consumer interested in buying greeting cards," Roatch of Raley's commented.

Hallmark, like others, through its Web site Hallmark.com, is dedicated to providing a myriad of products.

"We feel, however, there is still a need for personal communications in an impersonal world, and the need for the personal touch of a greeting card," said Malone. "The reason people drop out of the category today is due to price, and they view e-mail as a cheaper and easier way to communicate."

To win back price-conscious shoppers, Hallmark launched Warm Wishes value-priced greeting cards at 99 cents, which Malone sees as an important growth segment into the next century.

The manufacturers have made it a social science to study how people communicate. "We've identified those niche markets and consumer demographic needs that weren't previously addressed," said William Parsons, vice president of corporate development at American Greetings, Cleveland. The company redesigned its card lines by identifying consumer trends, changing attitudes and lifestyles. The supplier's redesigned All American Way 2000 cards include culturally diverse alternative cards for ethnic shoppers, including the Hispanic and African-American markets. Other important themes in the line include uniqueness, value, informal lifestyle, spirituality, and family dynamics and life's challenges.

George White, general manager of Bullseye Productions, the alternative-card division of Gibson Greetings, Cincinnati, said the growing aging population will have a favorable effect on greeting-card sales. "Baby boomers are aging into the prime card-buying demographic -- between 45 and 65 years," he said.

This is one reason for the dramatic growth of alternative cards, White said. National sales in this segment of the category, according to White, are up 25% to 30%. He added that the typical younger age Internet user "historically wouldn't be buying a lot of paper cards now anyway."

White believes the Internet will have a positive effect on the industry, "by getting people into that greeting-card framework." To ensure high visibility for the card department, retailers need "to make sure there is a greeting-card component on their Internet Web page."

Kristin Jolley, associate corporate marketing project manager at Associated Food Stores, Salt Lake City, doesn't view the Internet as a threat to supermarket card sales either. "A card sent over the Internet is a visual image and different from sending an actual card purchased in a supermarket," she said. "There is a very different impact when you have an actual, physical card."

David Renaldi, vice president of merchandising and marketing for Martin's Super Markets, South Bend, Ind., views competition from the Internet at the moment as small, but he expects that to change.

Martin's would try to counter any serious threat to sales and profit from either the Internet or greeting-card discount formats "by reducing margins before shrinking department size," Renaldi said.

Malone of Hallmark concludes: "The Internet is a way to help consumers communicate, and we need to make sure that we make it as complementary as possible, and not a substitute."