American Greetings Corporation: Market Analysis
MARKET ANALYSIS
Table of Contents Page
1.0 Company Overview 03
2.0 Business Segments and Company Products 03
3.0 Market Definition 04
3.1 Market Codes 04
3.2 Market Price and Greeting cards sales by category 04
3.3 Market Value 05
3.4 Market Forecast 06
3.5 Company Financials 07
3.6 Market Segmentation 07
3.7 Competitive Landscape & Market Share 09
4.0 Market Structure-Porter's Five Forces 10
4.1 Bargaining Power of Buyers 10
4.2 Power of Suppliers 11
4.3 Value Chain and Product Cycle 12
4.4 Threat of New Entrants 13
4.5 Threat of Substitutes 14
4.6 Competitor Rivalry 14
4.7 PEST 14
5.0 Market Demand Drivers 16 …show more content…
1.0 Company Overview
Founded in 1906, American Greetings Corporation and its subsidiaries operate predominantly in a single industry; the design, manufacture and sale of everyday and seasonal greeting card and other social expression products.
Greeting cards, gift wraps, party goods, candles, balloons, stationery and giftware are manufactured and sold by American Greetings and/or its subsidiaries in the United States and through out the world, primarily in Canada, the United Kingdom, Mexico, Australia, New Zealand and South Africa. American Greetings is headquartered in Cleveland, Ohio and employs approximately 26,900 employees worldwide.
The major domestic greeting card brands are Carlton, American Greetings and Gibson. American Greetings Corporation services approximately 70,000 retail stores in the United States and 125,000 worldwide.
As of February 28, 2005, the corporation also owned and operated 542 card and gift shops throughout North America. The corporation's fiscal year ends in …show more content…
February.
In addition, AG Interactive Inc., (89.9% owned by the corporation) markets e-mail greetings, personalized printable greeting cards and other social expression products through the corporation's website, www.americangreetings.com, www.bluemountain.com and www.egreetings.com. In 2005, AG Interactive launched its AG Mobile unit which specializes in distribution of ring tones for cellular telephones, graphics, games, alerts, and other social messaging products. The company also acquired K-Mobile in May, 2004 to bolster the mobile content business in the European Market.
American Greeting subsidiary, Learning Horizons, Inc. distributes supplemental educational products.
Design licensing and Character licensing are primarily done by another subsidiary AGC Inc. and Those Characters From Cleveland Inc. respectively.
The Hatchery, LLC, another subsidiary, also develops and produces original family and children's entertainment for all media.
Chairman Morry Weiss and his family control 25% of American Greetings' voting power. Weiss stepped down as CEO in 2003, but remains on the board. His sons, Zev and Jeff, have taken on the roles of CEO and president, respectively.
2.0 Business Segments and Company Products:
The main four Business Segments are Social Expressions Products, Retail Operations, AG Interactive and Non Reportable Operating Segments.
The main products are the following:
Everyday and Seasonal Greetings Cards (Brands: American Greeting, Carlton, Gibson, John Sands, Plus Mark)
Digital and Mobile Products (E-cards and Wireless content)
Specialty Products are:
AGI Schutz (retails display fixtures)
Balloon Zone - Balloons
Creatables - Paper-crafting products
DateWorks - Calendars
Designers' Collection - Stationery
DesignWare - Party goods
GuildHouse - Candles
Heirloom Collection - Ornaments
Learning Horizons - Educational products
Sticketey-Doo-Da Stickers
Licenses:
Care Bears
The Get Along Gang
Holly Hobbie
Mary Oku Yummy
My Pet Monster
Paintbox Studios
Popples
Strawberry Shortcake
Sugar Sonic
Twisted Whiskers
3.0 Market Definition
For this assignment, the US traditional greeting card market has been analyzed. The traditional (paper based) greeting cards contribute to more revenue than any other social expressions product created and marketed by American Greetings Corporation.
The US greeting cards market covers cards of all sizes sold for all manner of events including Christmas and Birthdays. The term social expression' refers to how individuals express emotions to each other under different circumstances and events that involve happiness, sadness, celebration, love, friendship, accomplishment or death.
3.1 Market Codes
The SIC Code (outdated) for Greeting cards is 2771
The NAICS Code for Greeting Card Publishers is 511191
3.2 Market Price and Greeting Card Sales by Category
According to Greeting Cards Association of America (GCA), greeting cards range in price from 50 cents to $10, although counter cards typically cost between $2 and $4. Cards featuring special techniques, intricate designs and new technologies are at the top of the price scale.
There are two categories of greeting cards -- Seasonal and Everyday. According to GCA, total US greeting card sales are split approximately 50-50 between the two types.
US Everyday Greeting Cards Sales
Occasion Percent Sales
Birthday 60%
Anniversary 8.0%
Get-Well 7.0%
Friendship 6.0%
Sympathy 6.0%
Others 14%
US Seasonal Greeting Cards Sales
Occasion Percent Sales
Christmas 60%
Valentine's Day 25 %
Mother's Day 4.0%
Easter 3.0%
Father's Day 3.0%
Others 5.0%
3.3 Market Value
U.S. consumers purchase approximately 7 billion greeting cards each year, generating nearly $7.5 billion in retail sales.
Data-monitor Corporation reports the following:
In 2004, Global Stationery market revenue was approximately $82.1 Billion
In 2004, US Stationery market (third in world) valued approximately $23 Billion (28%)
Compound Annual Growth Rate, CAGR for US, between 1999 & 2004 was 2.8%.
US Stationery Market 1999-2004 Courtesy-Data-monitor
Year $ Billion % Growth
1999 20.4
2000 21.4 5.1
2001 21.7 1.2
2002 22.0 1.6
2003 22.7 3.1
2004 23.3 2.7
CAGR-1999-2004-2.8%
Social Stationery and Greeting cards accounted for approximately 65% of the US Stationery market valued at $ 14.9 Billion
In 2004, US Greeting card sales was approximately $ 7.5 billion
3.4 Market Forecast
Stanford Marketing Group, in their analysis of US greeting cards market (in July, 2005) reports the following:
In 2008, the US stationery market is forecast to have a value of $27.3 billion
Compound Annual Growth Rate, CAGR for US Greeting Cards between 1999 & 2004 was 8.7%. Growth was highest between 1999 and 2001 and flat between 2002 & 2004
Internet/E-card sales will increase but will not significantly impact the traditional cards sales till 2006
Also, the CAGR for US greeting card sales is predicted to be flat between 2004 and 2008 especially due to the pressure to keep the pricing low
3.5 Company Financials
American Greeting Corp Sales-ending Feb 28, 2005 (by Product)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
Everyday Greeting Cards 690.937 36.3%
Seasonal Greeting Cards 370.519 19.4%
Gift wrapping and wrap accessories 331.217 17.4%
Other 510.127 26.9%
Total 1,902.7100
American Greeting Corp Sales-ending Feb 28, 2005 (by Geography)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
US 1432.6 75.2%
International (other countries) 470.125 24.8%
Total 1,902.7100
3.6 Market Segmentation-Geographic, Demographic and Psychographic
Geographic:
Unity Marketing from Stevens, Pennsylvania reports that majority of the greeting cards sales comes from Northeastern states of US constituting to approximately 34% of the total greeting card sales (in 2004). Greeting card sales by US geographic regions are reported as following:
North East-33.8%
West-19.9%
Midwest-16.6%
South East-13.8%
South West-9.6%
Others-7.3%
Demographic:
Gale Marketing group, as of May, 2005, reports that each year:
Women purchase more than 80 percent of all greeting cards
Women aged 35+, with women aged 45-65 buy the largest number of cards
An African American, Hispanic or Asian man or woman is 60% less likely to purchase a greeting card in comparison to a White American man or woman.
The Following surveys show the greeting card sales based on demographic profiles (age and sex):
Psychographic:
GCA (Greeting Cards Association of America) reports the following on the behavior of greeting card buyers:
Percent of U.S. households buying at least one greeting card is 90%
Percent buying at least one every-day card is 87%
Percent buying at least one seasonal card is 70%
Average number of cards purchased per household is 30
The average person receives more than 20 cards per year, about one-third of which are birthday cards
Although women are more likely than men to buy several cards at once, men generally spend more on a single card than women
Nine out of 10 Americans say they look forward to receiving personal letters and greeting cards because cards allow them to keep in touch with friends and family and make them feel they are important to someone else.
Although e-mail, text messaging and phone calls are valued by Americans to help them communicate with family and friends, the majority of Americans say they prefer the old-fashioned handwritten card or letter to make someone feel truly special.
The exchange of greeting cards is one of the most widely accepted customs in the U.S. There are cards for virtually any occasion or relationship, and they are widely available.
3.7 Competitive Landscape and Market Share
There are an estimated 3,000 greeting card publishers in the U.S. ranging from small family-run organizations to major corporations. GCA-member publisher companies account for approximately 95 percent of industry sales
According to 2005 Hoover's report, top competitors of American Greetings Corporation in the US Greetings Cards market are the following:
Hallmark (Privately owned)
Taylor Corporation (Privately owned)
CSS Industries (Public)
Competitive Analysis of Revenue/Employees
Courtesy-Hoover's On-line Report
Data American Greetings CSS Industries Hallmark Taylor Corporation
Annual sales ($ Million) 1902.70 536.40 4400.00 1400.00
Employees 26,900 3,800 18,000 14,220
Market Cap
($ Million) 1710.60 358.80 0.00 0.00
American Greetings Corporation is the largest publicly held corporation in the greeting card industry. USA Today reports as of June, 2005 that Hallmark and American Greetings control 85% of the US Greeting cards market.
Hallmark with 50% market share of the $7.5 Billion dollar industry and American Greetings Corporation with 35% share
4.0 Market Structure-Porters Five Forces
4.1 Bargaining Power of Buyers (and Ultimate Consumers)
Major Buyers for the paper greeting cards industry continue to be the mass retail giants comprising of the Mass Merchandisers, Chain Drug Stores and the Supermarket stores.
The mass retailers like Chain Stores and Dollar Stores are the fastest growing retail distribution channel for the greeting card industry. Smaller greeting card makers tend to develop a special relationship with the specialized retail stores.
The competition is cut throat in this industry as Mass Merchandisers emphasize huge bargain power to control product pricing.
American Greetings Corporation sells cards in 70,000 retail stores in US and 125,000 stores worldwide. It also owns 524 retail card and gift stores. The five largest greeting card buyers for the company are Walmart, Target, K Mart, CVS and Eckerd which accounted for 37% of Company Sales in 2004. Walmart alone accounted for 13% of total sales. Being the largest buyer, Walmart often dictates terms and conditions with the company. One example is that the sales are only recognized when Walmart sells the card to their customer. Moreover, the payment terms are flexible for 90 days for Walmart. Walmart has been using the bargaining power to push the profit margins down for the company.
Internationally, sales are weak for American Greetings Corporation and they have limited agreements with international Mass Merchandisers (See table in section 3.6).
The ultimate consumers for the company are women more than men. American Greetings Corporation Annual report of 2005 states that the Corporation believes that women purchase 89% of all greeting cards sold, and median age of the Corporation's consumers is approximately 54 and women above age of 35 accounts for 84% of all greeting cards sold. The Corporation also believes that the average American household purchases about 17 greeting cards per year, the average number of greeting cards purchased per transaction is approximately two and consumers make approximately seven card purchasing trips per year
4.2 Power of Suppliers
Suppliers for paper greeting card industries are vendors who supply ink, paper, ribbons, wax, plastics and other raw materials needed to print greeting cards. Greeting Cards Association of America lists the following group of industries to be the major suppliers for the paper greeting card industry:
Boxes
Die Makers
Displays & Fixtures
Embossing
Engravings
Envelopes
Equipment
Finishing
Foil Stamping
Foil Suppliers
Hand Bordering
Laser Cutting
New Product Development
Packaging
Paper
Pre-Press
Printing
Sound Chips/LED Lights
Trade Publications
Trade Show Management
American Greetings Corporation has an edge over most of their competitors as they own all their printing facilities and distribution networks. The company is extremely vertically integrated in depth and maintains good relationships with the suppliers. Bargaining Power of suppliers is very limited.
4.3 Value Chain and Product Cycle
American Greetings Corporation uses information systems for everything from repositories of card design to intelligent messaging to distribution warehouses and retail stores. The idea is to use the information to market cards more quickly, pull losers out faster and pick up on new trends before rivals do. The challenge for AG is to boost sales and paint a clearer portrait of retailers and consumers. By employing the latest in information technology, AG has managed to reduce the time it takes to develop and market a card from three years to one. It develops and markets approximately 20,000 cards per year.
4.3.1 Design- 1-60 days
The card is initially designed at the corporate office in Cleveland where 1200 artists, writers and editors toil each day. The designers scan the electronic archive which contains 100 years of designs and messages on IBM DB2 mainframe. Designers then use intranet to share concepts.
Ancept is web-based media server software which is built atop IBM's application server. The use of Ancept has saved design time of more than a month on each card. Layouts are created in multi-media Freehand, a graphic design tool at AG. The whole process is complete in two months.
4.3.2 Reviews/Approvals-61-160 days
The card moves from design to the creative department for modifications. This group employs focus groups, customer polls and psychologists. This department uses retail planning and analysis software called Market-Max which helps the managers to look at sales figures of each individual card or categories of cards. This whole process takes 10-12 weeks.
4.3.3 Manufacturing, Distribution & Shipping-161-242 days
After approval the card comes to the digital graphics department which prepares the card for manufacturing by specifying the color and alignment on the printing presses. Blaze-Expert software helps the company to reduce waste from print runs and efficiently use plant employees. Timing of the card is carefully planned for holidays. Cards are then shipped to the company Distribution Centers in AK, KY and TN. Then they are shipped to more than 100,000 retail outlets including 5200 Walmart, Target and K-Mart stores. $37 million were spent in 2004 as part of shipping expenses. Software called Logility is used to track and maintain shipments. The company has developed an automated system whereby it is able to replenish retailers shelves promptly following initiation of reorder. All the distribution facilities are located close to the manufacturing facilities.
4.3.4 Sales & Tracking-243-303 days
An army of company employees (part time) place the cards on retailer racks. There are approximately 1500 cards per retailer rack. Merchandisers do the rest. The company uses a common sales force to sell all social expression products to reduce expenses for the company.
4.3.5 Analysis & Evaluation 304-365 days
Analysis is done with Market Max and JDA. AG managers can view performance of the cards individually or by category or by store/region. This is the way the inventory is maintained in the warehouses. Most of the large customers of the company in 2005 have converted to a scan based trading model. For evaluation, 80-20 rule applies. If the card is outsold by other similar other cards by 80% then it is tossed out of production.
4.4 Threat of New Entrants
There is not much threat from new entrants in the US greeting cards market. The main barriers to new entrants are the following:
High Manufacturing and Marketing costs
Brand Recognition
Partnership with Retailers and Mass Merchandisers
Creative Infrastructure
Stiff Competition from the Market Leaders
4.5 Threat of Substitutes
There is considerable threat to the paper greeting card industry from the following substitutes:
Use of computer to select and print cards
E-cards
Flowers/Candies etc
Gift certificates
Wireless social expression products (SMS)
American Greetings Corporation has positioned itself well by buying egreetings.com and bluemountain.com to take majority share in the US online greeting card market. The company has 2.1 million online subscribers who pay $11.95 per year for an annual membership to send unlimited online greeting cards. The company has partnerships with major wireless providers like Cingular, Verizon & T-Mobil to market wireless social expression content. The company also plans to partner with FTD.com and other online flower companies to strengthen their market share in the online flower business.
4.6 Competitor Rivalry
Refer to Section 3.7 of this report which details the top competitors and their respective market share in the industry.
Out of the 3000 greeting cards publishers in US, American Greetings Corporation's principal competitor is Hallmark Corporation. The competitive factor includes quality, design, customer service and terms which may include payments and other concession to retail customers under long term agreements.
Competition between AG & Hallmark boils down to heavy advertising campaigns for brand name and ability of each to manufacture low cost cards. Unlike AG, Hallmark and Premier Greetings have a 99c/49c product line which is extremely popular among consumers.
Some others are targeting the younger market where online cards are more popular.
Rivalry between AG and Hallmark is very intense, especially when it relates to the retail chain market as the market does not like to deal with two different card vendors.
4.7 PEST (Political / Economic / Social / Technological factors)
Other factors affecting the greeting card industry are the following:
Political factors like war, taxes, government regulations etc. For example, greeting cards help friends and family connect during war time. Hence the greeting card sales increase during war time. Government regulations on export/import and taxes determine the sales and profitability of the greeting cards business.
Economic factors like inflation, unemployment, cost of living etc. contribute to the sale of greeting cards. People tend to buy more cards in a flourishing economy.
Socio-Cultural factors like relationships, heritage, cultural background and religion impacts the buying behavior of greeting cards. One third of American Greetings Corporation's sales are during the four major holidays. Mother's Day, Father's Day and Valentine's Day card sales are high as Americans value relationships.
Technological factors like internet and wireless use is slowly transforming the greeting card industry especially for the younger men and women. Also, technological advancement in Information Technology has helped improve the cost and quality of greeting cards. American Greetings Corporation has spent millions of dollars to acquire online greeting card companies and wireless content providers to keep up with technology and competition.
5.0 Market Demand Drivers
The demand drivers for the greeting card market are the following:
Emotions -Women tend to express more emotions than men. Most common demand drivers are love and friendship. Life Events like Retirement, Graduation, Birthdays, Anniversaries, Wedding, and Death drives the demand for greeting cards. Mother's Day, Father's Day and Valentine's Day drives tremendous greeting card sales.
Holidays-Christmas, Thanksgiving, New Years, Easter account for 33% of greeting card sales in United States. Internationally, other religious holidays and festive occasions trigger demand for buying greeting cards
Demographics (Sex, Age, Income etc)-Women buy 80% greeting cards. Women between 35 and 55 buy 62% of all greeting cards in US. Also, as people live longer, greeting card companies are in demand for more birthday wishes.
Basic need to communicate- Feelings, thoughts and expressions of things when people do not know how to say something necessitates demand for buying and sending greeting cards
Price-Lower the price, higher the demand. AG competitors, Paramount and Hallmark sell cards at 49 cents and 99 cents respectively. Hallmark introduced their $0.99 cards in 1999 with tremendous success in sales.
Change in Lifestyles-As more and more people look for better oppurtunities and travel away from friends and family, this triggers more demand to buy greeting cards to exchange feelings between them. The transformation from joint families to nuclear and sub-nuclear families also triggers more demand to buy more greeting cards to communicate with family members.
Political-War, Patriotism, Taxes, Government regulation impact demand for greeting cards.
Economic-Inflation, Unemployment and Cost of Living effect greeting cards sales.
Socio-cultural- Heritage, Culture, Religion and Relationships drive the greeting card market
Technological-Improvement in email and internet technology have grown the demand for sending online cards (e-cards). Also Innovative and creative technology advancements have helped greeting card companies to produce more cards for less cost.
Humor-Hallmark's successful "shoebox" line of cards is dedicated to humor. People love humor in cards and buy them to share joy and happiness with their loved ones.
Ambience of Retail and Gift shops drives customers to buy more cards
Licensing of specialized products/characters-increases visibility and market share of cards. In 2001, AG used on of it's Licensed product, Care Bears, to drive sales up for the kids birthday cards by 3% .
Brand- The top two brands in US Greeting Card industry, Hallmark and American Greetings, have a combined market share of 85%. Each year, the advertising campaigns pay millions of dollars to elevate greeting cards sales and people respond by buying their cards.
Language-In US, Greeting Card companies have partnered with Hispanic card manufacturers and other Non Profit Organizations like CARE to print cards in language other than english to drive demand in areas dominated by Hispanic or Asian population.
Value, 2003
Table 3: United States Stationery Market Segmentation II: % Share, by
Value, 2003
MARKET ANALYSIS
Table of Contents Page
1.0 Company Overview 03
2.0 Business Segments and Company Products 03
3.0 Market Definition 04
3.1 Market Codes 04
3.2 Market Price and Greeting cards sales by category 04
3.3 Market Value 05
3.4 Market Forecast 06
3.5 Company Financials 07
3.6 Market Segmentation 07
3.7 Competitive Landscape & Market Share 09
4.0 Market Structure-Porter's Five Forces 10
4.1 Bargaining Power of Buyers 10
4.2 Power of Suppliers 11
4.3 Value Chain and Product Cycle 12
4.4 Threat of New Entrants 13
4.5 Threat of Substitutes 14
4.6 Competitor Rivalry 14
4.7 PEST 14
5.0 Market Demand Drivers 16
1.0 Company Overview
Founded in 1906, American Greetings Corporation and its subsidiaries operate predominantly in a single industry; the design, manufacture and sale of everyday and seasonal greeting card and other social expression products. Greeting cards, gift wraps, party goods, candles, balloons, stationery and giftware are manufactured and sold by American Greetings and/or its subsidiaries in the United States and through out the world, primarily in Canada, the United Kingdom, Mexico, Australia, New Zealand and South Africa. American Greetings is headquartered in Cleveland, Ohio and employs approximately 26,900 employees worldwide.
The major domestic greeting card brands are Carlton, American Greetings and Gibson. American Greetings Corporation services approximately 70,000 retail stores in the United States and 125,000 worldwide.
As of February 28, 2005, the corporation also owned and operated 542 card and gift shops throughout North America. The corporation's fiscal year ends in February.
In addition, AG Interactive Inc., (89.9% owned by the corporation) markets e-mail greetings, personalized printable greeting cards and other social expression products through the corporation's website, www.americangreetings.com, www.bluemountain.com and www.egreetings.com. In 2005, AG Interactive launched its AG Mobile unit which specializes in distribution of ring tones for cellular telephones, graphics, games, alerts, and other social messaging products. The company also acquired K-Mobile in May, 2004 to bolster the mobile content business in the European Market.
American Greeting subsidiary, Learning Horizons, Inc.
distributes supplemental educational products.
Design licensing and Character licensing are primarily done by another subsidiary AGC Inc. and Those Characters From Cleveland Inc. respectively.
The Hatchery, LLC, another subsidiary, also develops and produces original family and children's entertainment for all media.
Chairman Morry Weiss and his family control 25% of American Greetings' voting power. Weiss stepped down as CEO in 2003, but remains on the board. His sons, Zev and Jeff, have taken on the roles of CEO and president, respectively.
2.0 Business Segments and Company Products:
The main four Business Segments are Social Expressions Products, Retail Operations, AG Interactive and Non Reportable Operating Segments.
The main products are the following:
Everyday and Seasonal Greetings Cards (Brands: American Greeting, Carlton, Gibson, John Sands, Plus Mark)
Digital and Mobile Products (E-cards and Wireless content)
Specialty Products
are:
AGI Schutz (retails display fixtures)
Balloon Zone - Balloons
Creatables - Paper-crafting products
DateWorks - Calendars
Designers' Collection - Stationery
DesignWare - Party goods
GuildHouse - Candles
Heirloom Collection - Ornaments
Learning Horizons - Educational products
Sticketey-Doo-Da Stickers
Licenses:
Care Bears
The Get Along Gang
Holly Hobbie
Mary Oku Yummy
My Pet Monster
Paintbox Studios
Popples
Strawberry Shortcake
Sugar Sonic
Twisted Whiskers
3.0 Market Definition
For this assignment, the US traditional greeting card market has been analyzed. The traditional (paper based) greeting cards contribute to more revenue than any other social expressions product created and marketed by American Greetings Corporation.
The US greeting cards market covers cards of all sizes sold for all manner of events including Christmas and Birthdays. The term social expression' refers to how individuals express emotions to each other under different circumstances and events that involve happiness, sadness, celebration, love, friendship, accomplishment or death.
3.1 Market Codes
The SIC Code (outdated) for Greeting cards is 2771
The NAICS Code for Greeting Card Publishers is 511191
3.2 Market Price and Greeting Card Sales by Category
According to Greeting Cards Association of America (GCA), greeting cards range in price from 50 cents to $10, although counter cards typically cost between $2 and $4. Cards featuring special techniques, intricate designs and new technologies are at the top of the price scale.
There are two categories of greeting cards -- Seasonal and Everyday. According to GCA, total US greeting card sales are split approximately 50-50 between the two types.
US Everyday Greeting Cards Sales
Occasion Percent Sales
Birthday 60%
Anniversary 8.0%
Get-Well 7.0%
Friendship 6.0%
Sympathy 6.0%
Others 14%
US Seasonal Greeting Cards Sales
Occasion Percent Sales
Christmas 60%
Valentine's Day 25 %
Mother's Day 4.0%
Easter 3.0%
Father's Day 3.0%
Others 5.0%
3.3 Market Value
U.S. consumers purchase approximately 7 billion greeting cards each year, generating nearly $7.5 billion in retail sales.
Data-monitor Corporation reports the following:
In 2004, Global Stationery market revenue was approximately $82.1 Billion
In 2004, US Stationery market (third in world) valued approximately $23 Billion (28%)
Compound Annual Growth Rate, CAGR for US, between 1999 & 2004 was 2.8%.
US Stationery Market 1999-2004 Courtesy-Data-monitor
Year $ Billion % Growth
1999 20.4
2000 21.4 5.1
2001 21.7 1.2
2002 22.0 1.6
2003 22.7 3.1
2004 23.3 2.7
CAGR-1999-2004-2.8%
Social Stationery and Greeting cards accounted for approximately 65% of the US Stationery market valued at $ 14.9 Billion
In 2004, US Greeting card sales was approximately $ 7.5 billion
3.4 Market Forecast
Stanford Marketing Group, in their analysis of US greeting cards market (in July, 2005) reports the following:
In 2008, the US stationery market is forecast to have a value of $27.3 billion
Compound Annual Growth Rate, CAGR for US Greeting Cards between 1999 & 2004 was 8.7%. Growth was highest between 1999 and 2001 and flat between 2002 & 2004
Internet/E-card sales will increase but will not significantly impact the traditional cards sales till 2006
Also, the CAGR for US greeting card sales is predicted to be flat between 2004 and 2008 especially due to the pressure to keep the pricing low
3.5 Company Financials
American Greeting Corp Sales-ending Feb 28, 2005 (by Product)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
Everyday Greeting Cards 690.937 36.3%
Seasonal Greeting Cards 370.519 19.4%
Gift wrapping and wrap accessories 331.217 17.4%
Other 510.127 26.9%
Total 1,902.7100
American Greeting Corp Sales-ending Feb 28, 2005 (by Geography)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
US 1432.6 75.2%
International (other countries) 470.125 24.8%
Total 1,902.7100
3.6 Market Segmentation-Geographic, Demographic and Psychographic
Geographic:
Unity Marketing from Stevens, Pennsylvania reports that majority of the greeting cards sales comes from Northeastern states of US constituting to approximately 34% of the total greeting card sales (in 2004). Greeting card sales by US geographic regions are reported as following:
North East-33.8%
West-19.9%
Midwest-16.6%
South East-13.8%
South West-9.6%
Others-7.3%
Demographic:
Gale Marketing group, as of May, 2005, reports that each year:
Women purchase more than 80 percent of all greeting cards
Women aged 35+, with women aged 45-65 buy the largest number of cards
An African American, Hispanic or Asian man or woman is 60% less likely to purchase a greeting card in comparison to a White American man or woman.
The Following surveys show the greeting card sales based on demographic profiles (age and sex):
Psychographic:
GCA (Greeting Cards Association of America) reports the following on the behavior of greeting card buyers:
Percent of U.S. households buying at least one greeting card is 90%
Percent buying at least one every-day card is 87%
Percent buying at least one seasonal card is 70%
Average number of cards purchased per household is 30
The average person receives more than 20 cards per year, about one-third of which are birthday cards
Although women are more likely than men to buy several cards at once, men generally spend more on a single card than women
Nine out of 10 Americans say they look forward to receiving personal letters and greeting cards because cards allow them to keep in touch with friends and family and make them feel they are important to someone else.
Although e-mail, text messaging and phone calls are valued by Americans to help them communicate with family and friends, the majority of Americans say they prefer the old-fashioned handwritten card or letter to make someone feel truly special.
The exchange of greeting cards is one of the most widely accepted customs in the U.S. There are cards for virtually any occasion or relationship, and they are widely available.
3.7 Competitive Landscape and Market Share
There are an estimated 3,000 greeting card publishers in the U.S. ranging from small family-run organizations to major corporations. GCA-member publisher companies account for approximately 95 percent of industry sales
According to 2005 Hoover's report, top competitors of American Greetings Corporation in the US Greetings Cards market are the following:
Hallmark (Privately owned)
Taylor Corporation (Privately owned)
CSS Industries (Public)
Competitive Analysis of Revenue/Employees
Courtesy-Hoover's On-line Report
Data American Greetings CSS Industries Hallmark Taylor Corporation
Annual sales ($ Million) 1902.70 536.40 4400.00 1400.00
Employees 26,900 3,800 18,000 14,220
Market Cap
($ Million) 1710.60 358.80 0.00 0.00
American Greetings Corporation is the largest publicly held corporation in the greeting card industry. USA Today reports as of June, 2005 that Hallmark and American Greetings control 85% of the US Greeting cards market.
Hallmark with 50% market share of the $7.5 Billion dollar industry and American Greetings Corporation with 35% share
4.0 Market Structure-Porters Five Forces
4.1 Bargaining Power of Buyers (and Ultimate Consumers)
Major Buyers for the paper greeting cards industry continue to be the mass retail giants comprising of the Mass Merchandisers, Chain Drug Stores and the Supermarket stores.
The mass retailers like Chain Stores and Dollar Stores are the fastest growing retail distribution channel for the greeting card industry. Smaller greeting card makers tend to develop a special relationship with the specialized retail stores.
The competition is cut throat in this industry as Mass Merchandisers emphasize huge bargain power to control product pricing.
American Greetings Corporation sells cards in 70,000 retail stores in US and 125,000 stores worldwide. It also owns 524 retail card and gift stores. The five largest greeting card buyers for the company are Walmart, Target, K Mart, CVS and Eckerd which accounted for 37% of Company Sales in 2004. Walmart alone accounted for 13% of total sales. Being the largest buyer, Walmart often dictates terms and conditions with the company. One example is that the sales are only recognized when Walmart sells the card to their customer. Moreover, the payment terms are flexible for 90 days for Walmart. Walmart has been using the bargaining power to push the profit margins down for the company.
Internationally, sales are weak for American Greetings Corporation and they have limited agreements with international Mass Merchandisers (See table in section 3.6).
The ultimate consumers for the company are women more than men. American Greetings Corporation Annual report of 2005 states that the Corporation believes that women purchase 89% of all greeting cards sold, and median age of the Corporation's consumers is approximately 54 and women above age of 35 accounts for 84% of all greeting cards sold. The Corporation also believes that the average American household purchases about 17 greeting cards per year, the average number of greeting cards purchased per transaction is approximately two and consumers make approximately seven card purchasing trips per year
4.2 Power of Suppliers
Suppliers for paper greeting card industries are vendors who supply ink, paper, ribbons, wax, plastics and other raw materials needed to print greeting cards. Greeting Cards Association of America lists the following group of industries to be the major suppliers for the paper greeting card industry:
Boxes
Die Makers
Displays & Fixtures
Embossing
Engravings
Envelopes
Equipment
Finishing
Foil Stamping
Foil Suppliers
Hand Bordering
Laser Cutting
New Product Development
Packaging
Paper
Pre-Press
Printing
Sound Chips/LED Lights
Trade Publications
Trade Show Management
American Greetings Corporation has an edge over most of their competitors as they own all their printing facilities and distribution networks. The company is extremely vertically integrated in depth and maintains good relationships with the suppliers. Bargaining Power of suppliers is very limited.
4.3 Value Chain and Product Cycle
American Greetings Corporation uses information systems for everything from repositories of card design to intelligent messaging to distribution warehouses and retail stores. The idea is to use the information to market cards more quickly, pull losers out faster and pick up on new trends before rivals do. The challenge for AG is to boost sales and paint a clearer portrait of retailers and consumers. By employing the latest in information technology, AG has managed to reduce the time it takes to develop and market a card from three years to one. It develops and markets approximately 20,000 cards per year.
4.3.1 Design- 1-60 days
The card is initially designed at the corporate office in Cleveland where 1200 artists, writers and editors toil each day. The designers scan the electronic archive which contains 100 years of designs and messages on IBM DB2 mainframe. Designers then use intranet to share concepts.
Ancept is web-based media server software which is built atop IBM's application server. The use of Ancept has saved design time of more than a month on each card. Layouts are created in multi-media Freehand, a graphic design tool at AG. The whole process is complete in two months.
4.3.2 Reviews/Approvals-61-160 days
The card moves from design to the creative department for modifications. This group employs focus groups, customer polls and psychologists. This department uses retail planning and analysis software called Market-Max which helps the managers to look at sales figures of each individual card or categories of cards. This whole process takes 10-12 weeks.
4.3.3 Manufacturing, Distribution & Shipping-161-242 days
After approval the card comes to the digital graphics department which prepares the card for manufacturing by specifying the color and alignment on the printing presses. Blaze-Expert software helps the company to reduce waste from print runs and efficiently use plant employees. Timing of the card is carefully planned for holidays. Cards are then shipped to the company Distribution Centers in AK, KY and TN. Then they are shipped to more than 100,000 retail outlets including 5200 Walmart, Target and K-Mart stores. $37 million were spent in 2004 as part of shipping expenses. Software called Logility is used to track and maintain shipments. The company has developed an automated system whereby it is able to replenish retailers shelves promptly following initiation of reorder. All the distribution facilities are located close to the manufacturing facilities.
4.3.4 Sales & Tracking-243-303 days
An army of company employees (part time) place the cards on retailer racks. There are approximately 1500 cards per retailer rack. Merchandisers do the rest. The company uses a common sales force to sell all social expression products to reduce expenses for the company.
4.3.5 Analysis & Evaluation 304-365 days
Analysis is done with Market Max and JDA. AG managers can view performance of the cards individually or by category or by store/region. This is the way the inventory is maintained in the warehouses. Most of the large customers of the company in 2005 have converted to a scan based trading model. For evaluation, 80-20 rule applies. If the card is outsold by other similar other cards by 80% then it is tossed out of production.
4.4 Threat of New Entrants
There is not much threat from new entrants in the US greeting cards market. The main barriers to new entrants are the following:
High Manufacturing and Marketing costs
Brand Recognition
Partnership with Retailers and Mass Merchandisers
Creative Infrastructure
Stiff Competition from the Market Leaders
4.5 Threat of Substitutes
There is considerable threat to the paper greeting card industry from the following substitutes:
Use of computer to select and print cards
E-cards
Flowers/Candies etc
Gift certificates
Wireless social expression products (SMS)
American Greetings Corporation has positioned itself well by buying egreetings.com and bluemountain.com to take majority share in the US online greeting card market. The company has 2.1 million online subscribers who pay $11.95 per year for an annual membership to send unlimited online greeting cards. The company has partnerships with major wireless providers like Cingular, Verizon & T-Mobil to market wireless social expression content. The company also plans to partner with FTD.com and other online flower companies to strengthen their market share in the online flower business.
4.6 Competitor Rivalry
Refer to Section 3.7 of this report which details the top competitors and their respective market share in the industry.
Out of the 3000 greeting cards publishers in US, American Greetings Corporation's principal competitor is Hallmark Corporation. The competitive factor includes quality, design, customer service and terms which may include payments and other concession to retail customers under long term agreements.
Competition between AG & Hallmark boils down to heavy advertising campaigns for brand name and ability of each to manufacture low cost cards. Unlike AG, Hallmark and Premier Greetings have a 99c/49c product line which is extremely popular among consumers.
Some others are targeting the younger market where online cards are more popular.
Rivalry between AG and Hallmark is very intense, especially when it relates to the retail chain market as the market does not like to deal with two different card vendors.
4.7 PEST (Political / Economic / Social / Technological factors)
Other factors affecting the greeting card industry are the following:
Political factors like war, taxes, government regulations etc. For example, greeting cards help friends and family connect during war time. Hence the greeting card sales increase during war time. Government regulations on export/import and taxes determine the sales and profitability of the greeting cards business.
Economic factors like inflation, unemployment, cost of living etc. contribute to the sale of greeting cards. People tend to buy more cards in a flourishing economy.
Socio-Cultural factors like relationships, heritage, cultural background and religion impacts the buying behavior of greeting cards. One third of American Greetings Corporation's sales are during the four major holidays. Mother's Day, Father's Day and Valentine's Day card sales are high as Americans value relationships.
Technological factors like internet and wireless use is slowly transforming the greeting card industry especially for the younger men and women. Also, technological advancement in Information Technology has helped improve the cost and quality of greeting cards. American Greetings Corporation has spent millions of dollars to acquire online greeting card companies and wireless content providers to keep up with technology and competition.
5.0 Market Demand Drivers
The demand drivers for the greeting card market are the following:
Emotions -Women tend to express more emotions than men. Most common demand drivers are love and friendship. Life Events like Retirement, Graduation, Birthdays, Anniversaries, Wedding, and Death drives the demand for greeting cards. Mother's Day, Father's Day and Valentine's Day drives tremendous greeting card sales.
Holidays-Christmas, Thanksgiving, New Years, Easter account for 33% of greeting card sales in United States. Internationally, other religious holidays and festive occasions trigger demand for buying greeting cards
Demographics (Sex, Age, Income etc)-Women buy 80% greeting cards. Women between 35 and 55 buy 62% of all greeting cards in US. Also, as people live longer, greeting card companies are in demand for more birthday wishes.
Basic need to communicate- Feelings, thoughts and expressions of things when people do not know how to say something necessitates demand for buying and sending greeting cards
Price-Lower the price, higher the demand. AG competitors, Paramount and Hallmark sell cards at 49 cents and 99 cents respectively. Hallmark introduced their $0.99 cards in 1999 with tremendous success in sales.
Change in Lifestyles-As more and more people look for better oppurtunities and travel away from friends and family, this triggers more demand to buy greeting cards to exchange feelings between them. The transformation from joint families to nuclear and sub-nuclear families also triggers more demand to buy more greeting cards to communicate with family members.
Political-War, Patriotism, Taxes, Government regulation impact demand for greeting cards.
Economic-Inflation, Unemployment and Cost of Living effect greeting cards sales.
Socio-cultural- Heritage, Culture, Religion and Relationships drive the greeting card market
Technological-Improvement in email and internet technology have grown the demand for sending online cards (e-cards). Also Innovative and creative technology advancements have helped greeting card companies to produce more cards for less cost.
Humor-Hallmark's successful "shoebox" line of cards is dedicated to humor. People love humor in cards and buy them to share joy and happiness with their loved ones.
Ambience of Retail and Gift shops drives customers to buy more cards
Licensing of specialized products/characters-increases visibility and market share of cards. In 2001, AG used on of it's Licensed product, Care Bears, to drive sales up for the kids birthday cards by 3% .
Brand- The top two brands in US Greeting Card industry, Hallmark and American Greetings, have a combined market share of 85%. Each year, the advertising campaigns pay millions of dollars to elevate greeting cards sales and people respond by buying their cards.
Language-In US, Greeting Card companies have partnered with Hispanic card manufacturers and other Non Profit Organizations like CARE to print cards in language other than english to drive demand in areas dominated by Hispanic or Asian population.
Value, 2003
Table 3: United States Stationery Market Segmentation II: % Share, by
Value, 2003
Table of Contents Page
1.0 Company Overview 03
2.0 Business Segments and Company Products 03
3.0 Market Definition 04
3.1 Market Codes 04
3.2 Market Price and Greeting cards sales by category 04
3.3 Market Value 05
3.4 Market Forecast 06
3.5 Company Financials 07
3.6 Market Segmentation 07
3.7 Competitive Landscape & Market Share 09
4.0 Market Structure-Porter's Five Forces 10
4.1 Bargaining Power of Buyers 10
4.2 Power of Suppliers 11
4.3 Value Chain and Product Cycle 12
4.4 Threat of New Entrants 13
4.5 Threat of Substitutes 14
4.6 Competitor Rivalry 14
4.7 PEST 14
5.0 Market Demand Drivers 16 …show more content…
1.0 Company Overview
Founded in 1906, American Greetings Corporation and its subsidiaries operate predominantly in a single industry; the design, manufacture and sale of everyday and seasonal greeting card and other social expression products.
Greeting cards, gift wraps, party goods, candles, balloons, stationery and giftware are manufactured and sold by American Greetings and/or its subsidiaries in the United States and through out the world, primarily in Canada, the United Kingdom, Mexico, Australia, New Zealand and South Africa. American Greetings is headquartered in Cleveland, Ohio and employs approximately 26,900 employees worldwide.
The major domestic greeting card brands are Carlton, American Greetings and Gibson. American Greetings Corporation services approximately 70,000 retail stores in the United States and 125,000 worldwide.
As of February 28, 2005, the corporation also owned and operated 542 card and gift shops throughout North America. The corporation's fiscal year ends in …show more content…
February.
In addition, AG Interactive Inc., (89.9% owned by the corporation) markets e-mail greetings, personalized printable greeting cards and other social expression products through the corporation's website, www.americangreetings.com, www.bluemountain.com and www.egreetings.com. In 2005, AG Interactive launched its AG Mobile unit which specializes in distribution of ring tones for cellular telephones, graphics, games, alerts, and other social messaging products. The company also acquired K-Mobile in May, 2004 to bolster the mobile content business in the European Market.
American Greeting subsidiary, Learning Horizons, Inc. distributes supplemental educational products.
Design licensing and Character licensing are primarily done by another subsidiary AGC Inc. and Those Characters From Cleveland Inc. respectively.
The Hatchery, LLC, another subsidiary, also develops and produces original family and children's entertainment for all media.
Chairman Morry Weiss and his family control 25% of American Greetings' voting power. Weiss stepped down as CEO in 2003, but remains on the board. His sons, Zev and Jeff, have taken on the roles of CEO and president, respectively.
2.0 Business Segments and Company Products:
The main four Business Segments are Social Expressions Products, Retail Operations, AG Interactive and Non Reportable Operating Segments.
The main products are the following:
Everyday and Seasonal Greetings Cards (Brands: American Greeting, Carlton, Gibson, John Sands, Plus Mark)
Digital and Mobile Products (E-cards and Wireless content)
Specialty Products are:
AGI Schutz (retails display fixtures)
Balloon Zone - Balloons
Creatables - Paper-crafting products
DateWorks - Calendars
Designers' Collection - Stationery
DesignWare - Party goods
GuildHouse - Candles
Heirloom Collection - Ornaments
Learning Horizons - Educational products
Sticketey-Doo-Da Stickers
Licenses:
Care Bears
The Get Along Gang
Holly Hobbie
Mary Oku Yummy
My Pet Monster
Paintbox Studios
Popples
Strawberry Shortcake
Sugar Sonic
Twisted Whiskers
3.0 Market Definition
For this assignment, the US traditional greeting card market has been analyzed. The traditional (paper based) greeting cards contribute to more revenue than any other social expressions product created and marketed by American Greetings Corporation.
The US greeting cards market covers cards of all sizes sold for all manner of events including Christmas and Birthdays. The term social expression' refers to how individuals express emotions to each other under different circumstances and events that involve happiness, sadness, celebration, love, friendship, accomplishment or death.
3.1 Market Codes
The SIC Code (outdated) for Greeting cards is 2771
The NAICS Code for Greeting Card Publishers is 511191
3.2 Market Price and Greeting Card Sales by Category
According to Greeting Cards Association of America (GCA), greeting cards range in price from 50 cents to $10, although counter cards typically cost between $2 and $4. Cards featuring special techniques, intricate designs and new technologies are at the top of the price scale.
There are two categories of greeting cards -- Seasonal and Everyday. According to GCA, total US greeting card sales are split approximately 50-50 between the two types.
US Everyday Greeting Cards Sales
Occasion Percent Sales
Birthday 60%
Anniversary 8.0%
Get-Well 7.0%
Friendship 6.0%
Sympathy 6.0%
Others 14%
US Seasonal Greeting Cards Sales
Occasion Percent Sales
Christmas 60%
Valentine's Day 25 %
Mother's Day 4.0%
Easter 3.0%
Father's Day 3.0%
Others 5.0%
3.3 Market Value
U.S. consumers purchase approximately 7 billion greeting cards each year, generating nearly $7.5 billion in retail sales.
Data-monitor Corporation reports the following:
In 2004, Global Stationery market revenue was approximately $82.1 Billion
In 2004, US Stationery market (third in world) valued approximately $23 Billion (28%)
Compound Annual Growth Rate, CAGR for US, between 1999 & 2004 was 2.8%.
US Stationery Market 1999-2004 Courtesy-Data-monitor
Year $ Billion % Growth
1999 20.4
2000 21.4 5.1
2001 21.7 1.2
2002 22.0 1.6
2003 22.7 3.1
2004 23.3 2.7
CAGR-1999-2004-2.8%
Social Stationery and Greeting cards accounted for approximately 65% of the US Stationery market valued at $ 14.9 Billion
In 2004, US Greeting card sales was approximately $ 7.5 billion
3.4 Market Forecast
Stanford Marketing Group, in their analysis of US greeting cards market (in July, 2005) reports the following:
In 2008, the US stationery market is forecast to have a value of $27.3 billion
Compound Annual Growth Rate, CAGR for US Greeting Cards between 1999 & 2004 was 8.7%. Growth was highest between 1999 and 2001 and flat between 2002 & 2004
Internet/E-card sales will increase but will not significantly impact the traditional cards sales till 2006
Also, the CAGR for US greeting card sales is predicted to be flat between 2004 and 2008 especially due to the pressure to keep the pricing low
3.5 Company Financials
American Greeting Corp Sales-ending Feb 28, 2005 (by Product)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
Everyday Greeting Cards 690.937 36.3%
Seasonal Greeting Cards 370.519 19.4%
Gift wrapping and wrap accessories 331.217 17.4%
Other 510.127 26.9%
Total 1,902.7100
American Greeting Corp Sales-ending Feb 28, 2005 (by Geography)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
US 1432.6 75.2%
International (other countries) 470.125 24.8%
Total 1,902.7100
3.6 Market Segmentation-Geographic, Demographic and Psychographic
Geographic:
Unity Marketing from Stevens, Pennsylvania reports that majority of the greeting cards sales comes from Northeastern states of US constituting to approximately 34% of the total greeting card sales (in 2004). Greeting card sales by US geographic regions are reported as following:
North East-33.8%
West-19.9%
Midwest-16.6%
South East-13.8%
South West-9.6%
Others-7.3%
Demographic:
Gale Marketing group, as of May, 2005, reports that each year:
Women purchase more than 80 percent of all greeting cards
Women aged 35+, with women aged 45-65 buy the largest number of cards
An African American, Hispanic or Asian man or woman is 60% less likely to purchase a greeting card in comparison to a White American man or woman.
The Following surveys show the greeting card sales based on demographic profiles (age and sex):
Psychographic:
GCA (Greeting Cards Association of America) reports the following on the behavior of greeting card buyers:
Percent of U.S. households buying at least one greeting card is 90%
Percent buying at least one every-day card is 87%
Percent buying at least one seasonal card is 70%
Average number of cards purchased per household is 30
The average person receives more than 20 cards per year, about one-third of which are birthday cards
Although women are more likely than men to buy several cards at once, men generally spend more on a single card than women
Nine out of 10 Americans say they look forward to receiving personal letters and greeting cards because cards allow them to keep in touch with friends and family and make them feel they are important to someone else.
Although e-mail, text messaging and phone calls are valued by Americans to help them communicate with family and friends, the majority of Americans say they prefer the old-fashioned handwritten card or letter to make someone feel truly special.
The exchange of greeting cards is one of the most widely accepted customs in the U.S. There are cards for virtually any occasion or relationship, and they are widely available.
3.7 Competitive Landscape and Market Share
There are an estimated 3,000 greeting card publishers in the U.S. ranging from small family-run organizations to major corporations. GCA-member publisher companies account for approximately 95 percent of industry sales
According to 2005 Hoover's report, top competitors of American Greetings Corporation in the US Greetings Cards market are the following:
Hallmark (Privately owned)
Taylor Corporation (Privately owned)
CSS Industries (Public)
Competitive Analysis of Revenue/Employees
Courtesy-Hoover's On-line Report
Data American Greetings CSS Industries Hallmark Taylor Corporation
Annual sales ($ Million) 1902.70 536.40 4400.00 1400.00
Employees 26,900 3,800 18,000 14,220
Market Cap
($ Million) 1710.60 358.80 0.00 0.00
American Greetings Corporation is the largest publicly held corporation in the greeting card industry. USA Today reports as of June, 2005 that Hallmark and American Greetings control 85% of the US Greeting cards market.
Hallmark with 50% market share of the $7.5 Billion dollar industry and American Greetings Corporation with 35% share
4.0 Market Structure-Porters Five Forces
4.1 Bargaining Power of Buyers (and Ultimate Consumers)
Major Buyers for the paper greeting cards industry continue to be the mass retail giants comprising of the Mass Merchandisers, Chain Drug Stores and the Supermarket stores.
The mass retailers like Chain Stores and Dollar Stores are the fastest growing retail distribution channel for the greeting card industry. Smaller greeting card makers tend to develop a special relationship with the specialized retail stores.
The competition is cut throat in this industry as Mass Merchandisers emphasize huge bargain power to control product pricing.
American Greetings Corporation sells cards in 70,000 retail stores in US and 125,000 stores worldwide. It also owns 524 retail card and gift stores. The five largest greeting card buyers for the company are Walmart, Target, K Mart, CVS and Eckerd which accounted for 37% of Company Sales in 2004. Walmart alone accounted for 13% of total sales. Being the largest buyer, Walmart often dictates terms and conditions with the company. One example is that the sales are only recognized when Walmart sells the card to their customer. Moreover, the payment terms are flexible for 90 days for Walmart. Walmart has been using the bargaining power to push the profit margins down for the company.
Internationally, sales are weak for American Greetings Corporation and they have limited agreements with international Mass Merchandisers (See table in section 3.6).
The ultimate consumers for the company are women more than men. American Greetings Corporation Annual report of 2005 states that the Corporation believes that women purchase 89% of all greeting cards sold, and median age of the Corporation's consumers is approximately 54 and women above age of 35 accounts for 84% of all greeting cards sold. The Corporation also believes that the average American household purchases about 17 greeting cards per year, the average number of greeting cards purchased per transaction is approximately two and consumers make approximately seven card purchasing trips per year
4.2 Power of Suppliers
Suppliers for paper greeting card industries are vendors who supply ink, paper, ribbons, wax, plastics and other raw materials needed to print greeting cards. Greeting Cards Association of America lists the following group of industries to be the major suppliers for the paper greeting card industry:
Boxes
Die Makers
Displays & Fixtures
Embossing
Engravings
Envelopes
Equipment
Finishing
Foil Stamping
Foil Suppliers
Hand Bordering
Laser Cutting
New Product Development
Packaging
Paper
Pre-Press
Printing
Sound Chips/LED Lights
Trade Publications
Trade Show Management
American Greetings Corporation has an edge over most of their competitors as they own all their printing facilities and distribution networks. The company is extremely vertically integrated in depth and maintains good relationships with the suppliers. Bargaining Power of suppliers is very limited.
4.3 Value Chain and Product Cycle
American Greetings Corporation uses information systems for everything from repositories of card design to intelligent messaging to distribution warehouses and retail stores. The idea is to use the information to market cards more quickly, pull losers out faster and pick up on new trends before rivals do. The challenge for AG is to boost sales and paint a clearer portrait of retailers and consumers. By employing the latest in information technology, AG has managed to reduce the time it takes to develop and market a card from three years to one. It develops and markets approximately 20,000 cards per year.
4.3.1 Design- 1-60 days
The card is initially designed at the corporate office in Cleveland where 1200 artists, writers and editors toil each day. The designers scan the electronic archive which contains 100 years of designs and messages on IBM DB2 mainframe. Designers then use intranet to share concepts.
Ancept is web-based media server software which is built atop IBM's application server. The use of Ancept has saved design time of more than a month on each card. Layouts are created in multi-media Freehand, a graphic design tool at AG. The whole process is complete in two months.
4.3.2 Reviews/Approvals-61-160 days
The card moves from design to the creative department for modifications. This group employs focus groups, customer polls and psychologists. This department uses retail planning and analysis software called Market-Max which helps the managers to look at sales figures of each individual card or categories of cards. This whole process takes 10-12 weeks.
4.3.3 Manufacturing, Distribution & Shipping-161-242 days
After approval the card comes to the digital graphics department which prepares the card for manufacturing by specifying the color and alignment on the printing presses. Blaze-Expert software helps the company to reduce waste from print runs and efficiently use plant employees. Timing of the card is carefully planned for holidays. Cards are then shipped to the company Distribution Centers in AK, KY and TN. Then they are shipped to more than 100,000 retail outlets including 5200 Walmart, Target and K-Mart stores. $37 million were spent in 2004 as part of shipping expenses. Software called Logility is used to track and maintain shipments. The company has developed an automated system whereby it is able to replenish retailers shelves promptly following initiation of reorder. All the distribution facilities are located close to the manufacturing facilities.
4.3.4 Sales & Tracking-243-303 days
An army of company employees (part time) place the cards on retailer racks. There are approximately 1500 cards per retailer rack. Merchandisers do the rest. The company uses a common sales force to sell all social expression products to reduce expenses for the company.
4.3.5 Analysis & Evaluation 304-365 days
Analysis is done with Market Max and JDA. AG managers can view performance of the cards individually or by category or by store/region. This is the way the inventory is maintained in the warehouses. Most of the large customers of the company in 2005 have converted to a scan based trading model. For evaluation, 80-20 rule applies. If the card is outsold by other similar other cards by 80% then it is tossed out of production.
4.4 Threat of New Entrants
There is not much threat from new entrants in the US greeting cards market. The main barriers to new entrants are the following:
High Manufacturing and Marketing costs
Brand Recognition
Partnership with Retailers and Mass Merchandisers
Creative Infrastructure
Stiff Competition from the Market Leaders
4.5 Threat of Substitutes
There is considerable threat to the paper greeting card industry from the following substitutes:
Use of computer to select and print cards
E-cards
Flowers/Candies etc
Gift certificates
Wireless social expression products (SMS)
American Greetings Corporation has positioned itself well by buying egreetings.com and bluemountain.com to take majority share in the US online greeting card market. The company has 2.1 million online subscribers who pay $11.95 per year for an annual membership to send unlimited online greeting cards. The company has partnerships with major wireless providers like Cingular, Verizon & T-Mobil to market wireless social expression content. The company also plans to partner with FTD.com and other online flower companies to strengthen their market share in the online flower business.
4.6 Competitor Rivalry
Refer to Section 3.7 of this report which details the top competitors and their respective market share in the industry.
Out of the 3000 greeting cards publishers in US, American Greetings Corporation's principal competitor is Hallmark Corporation. The competitive factor includes quality, design, customer service and terms which may include payments and other concession to retail customers under long term agreements.
Competition between AG & Hallmark boils down to heavy advertising campaigns for brand name and ability of each to manufacture low cost cards. Unlike AG, Hallmark and Premier Greetings have a 99c/49c product line which is extremely popular among consumers.
Some others are targeting the younger market where online cards are more popular.
Rivalry between AG and Hallmark is very intense, especially when it relates to the retail chain market as the market does not like to deal with two different card vendors.
4.7 PEST (Political / Economic / Social / Technological factors)
Other factors affecting the greeting card industry are the following:
Political factors like war, taxes, government regulations etc. For example, greeting cards help friends and family connect during war time. Hence the greeting card sales increase during war time. Government regulations on export/import and taxes determine the sales and profitability of the greeting cards business.
Economic factors like inflation, unemployment, cost of living etc. contribute to the sale of greeting cards. People tend to buy more cards in a flourishing economy.
Socio-Cultural factors like relationships, heritage, cultural background and religion impacts the buying behavior of greeting cards. One third of American Greetings Corporation's sales are during the four major holidays. Mother's Day, Father's Day and Valentine's Day card sales are high as Americans value relationships.
Technological factors like internet and wireless use is slowly transforming the greeting card industry especially for the younger men and women. Also, technological advancement in Information Technology has helped improve the cost and quality of greeting cards. American Greetings Corporation has spent millions of dollars to acquire online greeting card companies and wireless content providers to keep up with technology and competition.
5.0 Market Demand Drivers
The demand drivers for the greeting card market are the following:
Emotions -Women tend to express more emotions than men. Most common demand drivers are love and friendship. Life Events like Retirement, Graduation, Birthdays, Anniversaries, Wedding, and Death drives the demand for greeting cards. Mother's Day, Father's Day and Valentine's Day drives tremendous greeting card sales.
Holidays-Christmas, Thanksgiving, New Years, Easter account for 33% of greeting card sales in United States. Internationally, other religious holidays and festive occasions trigger demand for buying greeting cards
Demographics (Sex, Age, Income etc)-Women buy 80% greeting cards. Women between 35 and 55 buy 62% of all greeting cards in US. Also, as people live longer, greeting card companies are in demand for more birthday wishes.
Basic need to communicate- Feelings, thoughts and expressions of things when people do not know how to say something necessitates demand for buying and sending greeting cards
Price-Lower the price, higher the demand. AG competitors, Paramount and Hallmark sell cards at 49 cents and 99 cents respectively. Hallmark introduced their $0.99 cards in 1999 with tremendous success in sales.
Change in Lifestyles-As more and more people look for better oppurtunities and travel away from friends and family, this triggers more demand to buy greeting cards to exchange feelings between them. The transformation from joint families to nuclear and sub-nuclear families also triggers more demand to buy more greeting cards to communicate with family members.
Political-War, Patriotism, Taxes, Government regulation impact demand for greeting cards.
Economic-Inflation, Unemployment and Cost of Living effect greeting cards sales.
Socio-cultural- Heritage, Culture, Religion and Relationships drive the greeting card market
Technological-Improvement in email and internet technology have grown the demand for sending online cards (e-cards). Also Innovative and creative technology advancements have helped greeting card companies to produce more cards for less cost.
Humor-Hallmark's successful "shoebox" line of cards is dedicated to humor. People love humor in cards and buy them to share joy and happiness with their loved ones.
Ambience of Retail and Gift shops drives customers to buy more cards
Licensing of specialized products/characters-increases visibility and market share of cards. In 2001, AG used on of it's Licensed product, Care Bears, to drive sales up for the kids birthday cards by 3% .
Brand- The top two brands in US Greeting Card industry, Hallmark and American Greetings, have a combined market share of 85%. Each year, the advertising campaigns pay millions of dollars to elevate greeting cards sales and people respond by buying their cards.
Language-In US, Greeting Card companies have partnered with Hispanic card manufacturers and other Non Profit Organizations like CARE to print cards in language other than english to drive demand in areas dominated by Hispanic or Asian population.
Value, 2003
Table 3: United States Stationery Market Segmentation II: % Share, by
Value, 2003
MARKET ANALYSIS
Table of Contents Page
1.0 Company Overview 03
2.0 Business Segments and Company Products 03
3.0 Market Definition 04
3.1 Market Codes 04
3.2 Market Price and Greeting cards sales by category 04
3.3 Market Value 05
3.4 Market Forecast 06
3.5 Company Financials 07
3.6 Market Segmentation 07
3.7 Competitive Landscape & Market Share 09
4.0 Market Structure-Porter's Five Forces 10
4.1 Bargaining Power of Buyers 10
4.2 Power of Suppliers 11
4.3 Value Chain and Product Cycle 12
4.4 Threat of New Entrants 13
4.5 Threat of Substitutes 14
4.6 Competitor Rivalry 14
4.7 PEST 14
5.0 Market Demand Drivers 16
1.0 Company Overview
Founded in 1906, American Greetings Corporation and its subsidiaries operate predominantly in a single industry; the design, manufacture and sale of everyday and seasonal greeting card and other social expression products. Greeting cards, gift wraps, party goods, candles, balloons, stationery and giftware are manufactured and sold by American Greetings and/or its subsidiaries in the United States and through out the world, primarily in Canada, the United Kingdom, Mexico, Australia, New Zealand and South Africa. American Greetings is headquartered in Cleveland, Ohio and employs approximately 26,900 employees worldwide.
The major domestic greeting card brands are Carlton, American Greetings and Gibson. American Greetings Corporation services approximately 70,000 retail stores in the United States and 125,000 worldwide.
As of February 28, 2005, the corporation also owned and operated 542 card and gift shops throughout North America. The corporation's fiscal year ends in February.
In addition, AG Interactive Inc., (89.9% owned by the corporation) markets e-mail greetings, personalized printable greeting cards and other social expression products through the corporation's website, www.americangreetings.com, www.bluemountain.com and www.egreetings.com. In 2005, AG Interactive launched its AG Mobile unit which specializes in distribution of ring tones for cellular telephones, graphics, games, alerts, and other social messaging products. The company also acquired K-Mobile in May, 2004 to bolster the mobile content business in the European Market.
American Greeting subsidiary, Learning Horizons, Inc.
distributes supplemental educational products.
Design licensing and Character licensing are primarily done by another subsidiary AGC Inc. and Those Characters From Cleveland Inc. respectively.
The Hatchery, LLC, another subsidiary, also develops and produces original family and children's entertainment for all media.
Chairman Morry Weiss and his family control 25% of American Greetings' voting power. Weiss stepped down as CEO in 2003, but remains on the board. His sons, Zev and Jeff, have taken on the roles of CEO and president, respectively.
2.0 Business Segments and Company Products:
The main four Business Segments are Social Expressions Products, Retail Operations, AG Interactive and Non Reportable Operating Segments.
The main products are the following:
Everyday and Seasonal Greetings Cards (Brands: American Greeting, Carlton, Gibson, John Sands, Plus Mark)
Digital and Mobile Products (E-cards and Wireless content)
Specialty Products
are:
AGI Schutz (retails display fixtures)
Balloon Zone - Balloons
Creatables - Paper-crafting products
DateWorks - Calendars
Designers' Collection - Stationery
DesignWare - Party goods
GuildHouse - Candles
Heirloom Collection - Ornaments
Learning Horizons - Educational products
Sticketey-Doo-Da Stickers
Licenses:
Care Bears
The Get Along Gang
Holly Hobbie
Mary Oku Yummy
My Pet Monster
Paintbox Studios
Popples
Strawberry Shortcake
Sugar Sonic
Twisted Whiskers
3.0 Market Definition
For this assignment, the US traditional greeting card market has been analyzed. The traditional (paper based) greeting cards contribute to more revenue than any other social expressions product created and marketed by American Greetings Corporation.
The US greeting cards market covers cards of all sizes sold for all manner of events including Christmas and Birthdays. The term social expression' refers to how individuals express emotions to each other under different circumstances and events that involve happiness, sadness, celebration, love, friendship, accomplishment or death.
3.1 Market Codes
The SIC Code (outdated) for Greeting cards is 2771
The NAICS Code for Greeting Card Publishers is 511191
3.2 Market Price and Greeting Card Sales by Category
According to Greeting Cards Association of America (GCA), greeting cards range in price from 50 cents to $10, although counter cards typically cost between $2 and $4. Cards featuring special techniques, intricate designs and new technologies are at the top of the price scale.
There are two categories of greeting cards -- Seasonal and Everyday. According to GCA, total US greeting card sales are split approximately 50-50 between the two types.
US Everyday Greeting Cards Sales
Occasion Percent Sales
Birthday 60%
Anniversary 8.0%
Get-Well 7.0%
Friendship 6.0%
Sympathy 6.0%
Others 14%
US Seasonal Greeting Cards Sales
Occasion Percent Sales
Christmas 60%
Valentine's Day 25 %
Mother's Day 4.0%
Easter 3.0%
Father's Day 3.0%
Others 5.0%
3.3 Market Value
U.S. consumers purchase approximately 7 billion greeting cards each year, generating nearly $7.5 billion in retail sales.
Data-monitor Corporation reports the following:
In 2004, Global Stationery market revenue was approximately $82.1 Billion
In 2004, US Stationery market (third in world) valued approximately $23 Billion (28%)
Compound Annual Growth Rate, CAGR for US, between 1999 & 2004 was 2.8%.
US Stationery Market 1999-2004 Courtesy-Data-monitor
Year $ Billion % Growth
1999 20.4
2000 21.4 5.1
2001 21.7 1.2
2002 22.0 1.6
2003 22.7 3.1
2004 23.3 2.7
CAGR-1999-2004-2.8%
Social Stationery and Greeting cards accounted for approximately 65% of the US Stationery market valued at $ 14.9 Billion
In 2004, US Greeting card sales was approximately $ 7.5 billion
3.4 Market Forecast
Stanford Marketing Group, in their analysis of US greeting cards market (in July, 2005) reports the following:
In 2008, the US stationery market is forecast to have a value of $27.3 billion
Compound Annual Growth Rate, CAGR for US Greeting Cards between 1999 & 2004 was 8.7%. Growth was highest between 1999 and 2001 and flat between 2002 & 2004
Internet/E-card sales will increase but will not significantly impact the traditional cards sales till 2006
Also, the CAGR for US greeting card sales is predicted to be flat between 2004 and 2008 especially due to the pressure to keep the pricing low
3.5 Company Financials
American Greeting Corp Sales-ending Feb 28, 2005 (by Product)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
Everyday Greeting Cards 690.937 36.3%
Seasonal Greeting Cards 370.519 19.4%
Gift wrapping and wrap accessories 331.217 17.4%
Other 510.127 26.9%
Total 1,902.7100
American Greeting Corp Sales-ending Feb 28, 2005 (by Geography)
Courtesy-AG Annual Report
Social Expression Category Sales ($ millions) Percentage of Total
US 1432.6 75.2%
International (other countries) 470.125 24.8%
Total 1,902.7100
3.6 Market Segmentation-Geographic, Demographic and Psychographic
Geographic:
Unity Marketing from Stevens, Pennsylvania reports that majority of the greeting cards sales comes from Northeastern states of US constituting to approximately 34% of the total greeting card sales (in 2004). Greeting card sales by US geographic regions are reported as following:
North East-33.8%
West-19.9%
Midwest-16.6%
South East-13.8%
South West-9.6%
Others-7.3%
Demographic:
Gale Marketing group, as of May, 2005, reports that each year:
Women purchase more than 80 percent of all greeting cards
Women aged 35+, with women aged 45-65 buy the largest number of cards
An African American, Hispanic or Asian man or woman is 60% less likely to purchase a greeting card in comparison to a White American man or woman.
The Following surveys show the greeting card sales based on demographic profiles (age and sex):
Psychographic:
GCA (Greeting Cards Association of America) reports the following on the behavior of greeting card buyers:
Percent of U.S. households buying at least one greeting card is 90%
Percent buying at least one every-day card is 87%
Percent buying at least one seasonal card is 70%
Average number of cards purchased per household is 30
The average person receives more than 20 cards per year, about one-third of which are birthday cards
Although women are more likely than men to buy several cards at once, men generally spend more on a single card than women
Nine out of 10 Americans say they look forward to receiving personal letters and greeting cards because cards allow them to keep in touch with friends and family and make them feel they are important to someone else.
Although e-mail, text messaging and phone calls are valued by Americans to help them communicate with family and friends, the majority of Americans say they prefer the old-fashioned handwritten card or letter to make someone feel truly special.
The exchange of greeting cards is one of the most widely accepted customs in the U.S. There are cards for virtually any occasion or relationship, and they are widely available.
3.7 Competitive Landscape and Market Share
There are an estimated 3,000 greeting card publishers in the U.S. ranging from small family-run organizations to major corporations. GCA-member publisher companies account for approximately 95 percent of industry sales
According to 2005 Hoover's report, top competitors of American Greetings Corporation in the US Greetings Cards market are the following:
Hallmark (Privately owned)
Taylor Corporation (Privately owned)
CSS Industries (Public)
Competitive Analysis of Revenue/Employees
Courtesy-Hoover's On-line Report
Data American Greetings CSS Industries Hallmark Taylor Corporation
Annual sales ($ Million) 1902.70 536.40 4400.00 1400.00
Employees 26,900 3,800 18,000 14,220
Market Cap
($ Million) 1710.60 358.80 0.00 0.00
American Greetings Corporation is the largest publicly held corporation in the greeting card industry. USA Today reports as of June, 2005 that Hallmark and American Greetings control 85% of the US Greeting cards market.
Hallmark with 50% market share of the $7.5 Billion dollar industry and American Greetings Corporation with 35% share
4.0 Market Structure-Porters Five Forces
4.1 Bargaining Power of Buyers (and Ultimate Consumers)
Major Buyers for the paper greeting cards industry continue to be the mass retail giants comprising of the Mass Merchandisers, Chain Drug Stores and the Supermarket stores.
The mass retailers like Chain Stores and Dollar Stores are the fastest growing retail distribution channel for the greeting card industry. Smaller greeting card makers tend to develop a special relationship with the specialized retail stores.
The competition is cut throat in this industry as Mass Merchandisers emphasize huge bargain power to control product pricing.
American Greetings Corporation sells cards in 70,000 retail stores in US and 125,000 stores worldwide. It also owns 524 retail card and gift stores. The five largest greeting card buyers for the company are Walmart, Target, K Mart, CVS and Eckerd which accounted for 37% of Company Sales in 2004. Walmart alone accounted for 13% of total sales. Being the largest buyer, Walmart often dictates terms and conditions with the company. One example is that the sales are only recognized when Walmart sells the card to their customer. Moreover, the payment terms are flexible for 90 days for Walmart. Walmart has been using the bargaining power to push the profit margins down for the company.
Internationally, sales are weak for American Greetings Corporation and they have limited agreements with international Mass Merchandisers (See table in section 3.6).
The ultimate consumers for the company are women more than men. American Greetings Corporation Annual report of 2005 states that the Corporation believes that women purchase 89% of all greeting cards sold, and median age of the Corporation's consumers is approximately 54 and women above age of 35 accounts for 84% of all greeting cards sold. The Corporation also believes that the average American household purchases about 17 greeting cards per year, the average number of greeting cards purchased per transaction is approximately two and consumers make approximately seven card purchasing trips per year
4.2 Power of Suppliers
Suppliers for paper greeting card industries are vendors who supply ink, paper, ribbons, wax, plastics and other raw materials needed to print greeting cards. Greeting Cards Association of America lists the following group of industries to be the major suppliers for the paper greeting card industry:
Boxes
Die Makers
Displays & Fixtures
Embossing
Engravings
Envelopes
Equipment
Finishing
Foil Stamping
Foil Suppliers
Hand Bordering
Laser Cutting
New Product Development
Packaging
Paper
Pre-Press
Printing
Sound Chips/LED Lights
Trade Publications
Trade Show Management
American Greetings Corporation has an edge over most of their competitors as they own all their printing facilities and distribution networks. The company is extremely vertically integrated in depth and maintains good relationships with the suppliers. Bargaining Power of suppliers is very limited.
4.3 Value Chain and Product Cycle
American Greetings Corporation uses information systems for everything from repositories of card design to intelligent messaging to distribution warehouses and retail stores. The idea is to use the information to market cards more quickly, pull losers out faster and pick up on new trends before rivals do. The challenge for AG is to boost sales and paint a clearer portrait of retailers and consumers. By employing the latest in information technology, AG has managed to reduce the time it takes to develop and market a card from three years to one. It develops and markets approximately 20,000 cards per year.
4.3.1 Design- 1-60 days
The card is initially designed at the corporate office in Cleveland where 1200 artists, writers and editors toil each day. The designers scan the electronic archive which contains 100 years of designs and messages on IBM DB2 mainframe. Designers then use intranet to share concepts.
Ancept is web-based media server software which is built atop IBM's application server. The use of Ancept has saved design time of more than a month on each card. Layouts are created in multi-media Freehand, a graphic design tool at AG. The whole process is complete in two months.
4.3.2 Reviews/Approvals-61-160 days
The card moves from design to the creative department for modifications. This group employs focus groups, customer polls and psychologists. This department uses retail planning and analysis software called Market-Max which helps the managers to look at sales figures of each individual card or categories of cards. This whole process takes 10-12 weeks.
4.3.3 Manufacturing, Distribution & Shipping-161-242 days
After approval the card comes to the digital graphics department which prepares the card for manufacturing by specifying the color and alignment on the printing presses. Blaze-Expert software helps the company to reduce waste from print runs and efficiently use plant employees. Timing of the card is carefully planned for holidays. Cards are then shipped to the company Distribution Centers in AK, KY and TN. Then they are shipped to more than 100,000 retail outlets including 5200 Walmart, Target and K-Mart stores. $37 million were spent in 2004 as part of shipping expenses. Software called Logility is used to track and maintain shipments. The company has developed an automated system whereby it is able to replenish retailers shelves promptly following initiation of reorder. All the distribution facilities are located close to the manufacturing facilities.
4.3.4 Sales & Tracking-243-303 days
An army of company employees (part time) place the cards on retailer racks. There are approximately 1500 cards per retailer rack. Merchandisers do the rest. The company uses a common sales force to sell all social expression products to reduce expenses for the company.
4.3.5 Analysis & Evaluation 304-365 days
Analysis is done with Market Max and JDA. AG managers can view performance of the cards individually or by category or by store/region. This is the way the inventory is maintained in the warehouses. Most of the large customers of the company in 2005 have converted to a scan based trading model. For evaluation, 80-20 rule applies. If the card is outsold by other similar other cards by 80% then it is tossed out of production.
4.4 Threat of New Entrants
There is not much threat from new entrants in the US greeting cards market. The main barriers to new entrants are the following:
High Manufacturing and Marketing costs
Brand Recognition
Partnership with Retailers and Mass Merchandisers
Creative Infrastructure
Stiff Competition from the Market Leaders
4.5 Threat of Substitutes
There is considerable threat to the paper greeting card industry from the following substitutes:
Use of computer to select and print cards
E-cards
Flowers/Candies etc
Gift certificates
Wireless social expression products (SMS)
American Greetings Corporation has positioned itself well by buying egreetings.com and bluemountain.com to take majority share in the US online greeting card market. The company has 2.1 million online subscribers who pay $11.95 per year for an annual membership to send unlimited online greeting cards. The company has partnerships with major wireless providers like Cingular, Verizon & T-Mobil to market wireless social expression content. The company also plans to partner with FTD.com and other online flower companies to strengthen their market share in the online flower business.
4.6 Competitor Rivalry
Refer to Section 3.7 of this report which details the top competitors and their respective market share in the industry.
Out of the 3000 greeting cards publishers in US, American Greetings Corporation's principal competitor is Hallmark Corporation. The competitive factor includes quality, design, customer service and terms which may include payments and other concession to retail customers under long term agreements.
Competition between AG & Hallmark boils down to heavy advertising campaigns for brand name and ability of each to manufacture low cost cards. Unlike AG, Hallmark and Premier Greetings have a 99c/49c product line which is extremely popular among consumers.
Some others are targeting the younger market where online cards are more popular.
Rivalry between AG and Hallmark is very intense, especially when it relates to the retail chain market as the market does not like to deal with two different card vendors.
4.7 PEST (Political / Economic / Social / Technological factors)
Other factors affecting the greeting card industry are the following:
Political factors like war, taxes, government regulations etc. For example, greeting cards help friends and family connect during war time. Hence the greeting card sales increase during war time. Government regulations on export/import and taxes determine the sales and profitability of the greeting cards business.
Economic factors like inflation, unemployment, cost of living etc. contribute to the sale of greeting cards. People tend to buy more cards in a flourishing economy.
Socio-Cultural factors like relationships, heritage, cultural background and religion impacts the buying behavior of greeting cards. One third of American Greetings Corporation's sales are during the four major holidays. Mother's Day, Father's Day and Valentine's Day card sales are high as Americans value relationships.
Technological factors like internet and wireless use is slowly transforming the greeting card industry especially for the younger men and women. Also, technological advancement in Information Technology has helped improve the cost and quality of greeting cards. American Greetings Corporation has spent millions of dollars to acquire online greeting card companies and wireless content providers to keep up with technology and competition.
5.0 Market Demand Drivers
The demand drivers for the greeting card market are the following:
Emotions -Women tend to express more emotions than men. Most common demand drivers are love and friendship. Life Events like Retirement, Graduation, Birthdays, Anniversaries, Wedding, and Death drives the demand for greeting cards. Mother's Day, Father's Day and Valentine's Day drives tremendous greeting card sales.
Holidays-Christmas, Thanksgiving, New Years, Easter account for 33% of greeting card sales in United States. Internationally, other religious holidays and festive occasions trigger demand for buying greeting cards
Demographics (Sex, Age, Income etc)-Women buy 80% greeting cards. Women between 35 and 55 buy 62% of all greeting cards in US. Also, as people live longer, greeting card companies are in demand for more birthday wishes.
Basic need to communicate- Feelings, thoughts and expressions of things when people do not know how to say something necessitates demand for buying and sending greeting cards
Price-Lower the price, higher the demand. AG competitors, Paramount and Hallmark sell cards at 49 cents and 99 cents respectively. Hallmark introduced their $0.99 cards in 1999 with tremendous success in sales.
Change in Lifestyles-As more and more people look for better oppurtunities and travel away from friends and family, this triggers more demand to buy greeting cards to exchange feelings between them. The transformation from joint families to nuclear and sub-nuclear families also triggers more demand to buy more greeting cards to communicate with family members.
Political-War, Patriotism, Taxes, Government regulation impact demand for greeting cards.
Economic-Inflation, Unemployment and Cost of Living effect greeting cards sales.
Socio-cultural- Heritage, Culture, Religion and Relationships drive the greeting card market
Technological-Improvement in email and internet technology have grown the demand for sending online cards (e-cards). Also Innovative and creative technology advancements have helped greeting card companies to produce more cards for less cost.
Humor-Hallmark's successful "shoebox" line of cards is dedicated to humor. People love humor in cards and buy them to share joy and happiness with their loved ones.
Ambience of Retail and Gift shops drives customers to buy more cards
Licensing of specialized products/characters-increases visibility and market share of cards. In 2001, AG used on of it's Licensed product, Care Bears, to drive sales up for the kids birthday cards by 3% .
Brand- The top two brands in US Greeting Card industry, Hallmark and American Greetings, have a combined market share of 85%. Each year, the advertising campaigns pay millions of dollars to elevate greeting cards sales and people respond by buying their cards.
Language-In US, Greeting Card companies have partnered with Hispanic card manufacturers and other Non Profit Organizations like CARE to print cards in language other than english to drive demand in areas dominated by Hispanic or Asian population.
Value, 2003
Table 3: United States Stationery Market Segmentation II: % Share, by
Value, 2003