Roses Are Red, Card Sellers Blue

By Ron Stodghill II/Cleveland

Since Bill and Hillary swept into the White House six years ago, American Greetings has proudly trumpeted the First Family's annual holiday card as its greatest prize. Of late, though, some artists at the Cleveland-based company have been itching to lampoon their most famous customers, but worry about offending retailers. Sighs one illustrator: "We won't be doing any cigar gags, that's for sure."

They had better think of something. The big U.S. greeting-card companies are having a hard time tickling funny bones, warming hearts and sparking reflection. And they've got big demographic and cultural problems. Grandma's cohort, traditionally an easy audience and big card buyers, is dying off. Female boomers buy cards, but they're quite diverse in sensibility and ethnicity, so the one-size-fits-all approach isn't working. Boomer men, much like their fathers, avoid card racks for all but the most mandatory occasion, like birthdays and major relationship screwups. For Generations X and Y, paper cards may as well be stone tablets.

The result is an industry in flux. Although condolences are hardly in order--last year the industry sold $7.5 billion in cards--sales are flattening and earnings are lackluster despite a robust economy. The industry enjoyed double-digit growth from the late '70s through the '80s. Wall Street, about as sentimental as a dollar bill, issued its own greeting to the industry recently: "Get lost soon." In a single day's trading in February, American Greetings, the nation's largest publicly owned greeting-card company, with $2 billion in annual revenues, lost $800 million in market value, tumbling 33%, to $23.25, after warning investors that dumping excess inventory would hurt near-term profits. Gibson Greetings' stock is limping along below $9, down from above $29 last year. (Industry leader Hallmark, with $3.9 billion in sales, is private.) Says American Greetings CEO Morry Weiss: "When you disappoint people, confidence will take a while to come back."

Last month Hallmark delivered a different kind of greeting to its competitors: "You're toast." The company launched a new 99[cents] line, undercutting the basic price by a buck, and threw a $50 million ad campaign behind the new product. (Tag line: "Why not?") Hallmark too is trying to ignite sales in its 20,000 mass-market retail outlets and erase any notion consumers might have that it's a high-priced product. But the move--remember Marlboro Friday, when market leader Philip Morris cut the price of smokes?--will fall heavily on its struggling rivals, who can least afford it. "When the leading brand advertises so strongly on price, it's very disturbing," grumbles Frank O'Connell, CEO of Gibson. "They're going to pull pricing down for other companies by trying to compete on price rather than value."

Essentially, Hallmark is abandoning the high ground of prose and pictures for a frontal assault. Although the company still sells premium-priced (about $5) cards in its own shops and franchised outlets, the real battle has shifted to the mass-market stores, such as supermarkets and discounters. There the cardmakers are left slugging it out over exclusive contracts for coveted shelf space. The aggressive deals cut by retailers, combined with slowing sales volume, have put the squeeze on profits.

The content of greeting cards is changing along with the economics. Hallmark's new "Warm Wishes" line is a strong push to change buying patterns from the traditional occasion-driven purchase to an everyday-anytime buy. Through a piece of weighty-sounding company research called "The Deprivation and Inundation Study," Hallmark concluded, among other things, that folks who typically spurn cards can become converts for social expression, particularly when the cards are cheaper, more casual and punchier. "People want cards that say less," says Jay Dittmann, division vice president of business research.

American Greetings, meanwhile, is making an all-out effort to court men by tailoring its product to menspeak. The company views adult males, who traditionally purchase just 10% of all greeting cards for obligatory occasions like Valentine's Day or anniversaries, as a potential sales boon. Earlier this year, American Greetings launched Intuitions, a hip, quick-witted line of photo cards striving to capture a modern man's sensibility without being flowery. Been quarreling with your sweetheart? Rather than sweat an apology, why not slip her a card showing a pair of boxing gloves with the inside verse, "Are we fighting? Am I winning?" The company believes the conversational language will attract younger buyers too.

Perhaps more cynical in its corporate strategy, industry featherweight Gibson Greetings is abandoning the constrictive moniker of greeting-card company. The company says it's in the "relationship business." Gibson, based in Cincinnati, Ohio, is focusing on potentially lucrative licensing and distribution deals with everyone from celebrity photographer Anne Geddes and popular Far Side cartoonist Gary Larson to whatever character or artist becomes hot. The company has also gone virtual. It neither creates nor manufacturers cards, having closed its Cincinnati manufacturing plant last summer. Very '90s. O'Connell, a former Reebok executive, says Gibson's new focus on distribution will allow the company to keep up with rapidly changing consumer tastes, more so than his rivals. "They don't have people designing cards who intuitively understand their customers' wants and needs," he says. "We're providing what consumers want, not what we make."

The brass ring, though, is the new digital crowd, a paperless generation that may have never penned a letter but contributes to the estimated 3 trillion e-mails sent last year. Still in its infancy, the Web provides the avenue not only for kids but also for men--them again--who account for about 60% of all Internet users. The three big players are currently vying for e-card loyalty in cyberspace with a host of upstarts such as Blue Mountain Arts and Barking Cards, which allow users to add animation, pictures and sound tracks to their cards. For mainstream cardmakers, the trick is to dangle these Internet carrots to entice Web surfers to the card rack. "The Internet will be the catalyst for buying traditional greeting cards," says Ed Fruchtenbaum, president of American Greetings.

Indeed, whether greetings come on paper or flash on your computer screen, the real draw will always be content that can speak volumes in a phrase or two or untangle complex thoughts with simple illustration and verse. There's an industry study that gets bandied about that notes that the average greeting-card customer spends some 17 minutes agonizing over a $2 card purchase. That more than anything else is proof that people today are still consumed with saying just the right thing. The question is whether greeting-card companies will be the ones to say it.

--With reporting by Andrew Keith/Kansas City, Mo.

With reporting by Andrew Keith/Kansas City, Mo.