Greetings cards
Does making cards for grandparents’ day and budgies’ funerals provide many happy returns? Elizabeth Donevan examines the real bottom line...
According to the 2009 market report produced by the Greetings Card Association (GCA) – the trade body for card publishers in the UK – the greetings card industry in the UK is worth over £1.7bn annually. Around 800 publishers produce over 1.5 billion greeting cards per year for the British public – with each of us, apparently, sending an average of 31 cards per year at an average cost of £1.17 per card.
Most card producers sell direct to retail, the others wholesale and bar a handful of big players – Hallmark and UKG are the biggest by far – most have a turnover of less than £20 million.
Sharon Little, chief executive for the GCA explains, “Compared to other industries, even the large ones are small businesses. With a couple of notable exceptions – Phoenix Trading operates its own model in terms of direct selling (a bit like Avon) – even the medium-to-large publishers are quite small. But the beauty of this industry is that the barriers to entry are low.”
Colette Cofi e-Cudjoe is founder and director of Something for the Girls – a small independent card maker set up in 2004 that specilaises in “boudoir-inspired” hand-made products. She says her start-up costs were low but building up a customer base took time and for three years she had to work freelance in her previous job in retail forecasting to supplement her income.
Something for the Girls turns over around £50,000 and profit, she says, “isn’t great” although she believes her margins are better than those that can normally be achieved in the industry. The average trade price for one of her cards is £1.65. Each one costs around 50p to make after taking into account the hand finishing – for which she often hires a couple of freelancers – and the packaging. It doesn’t, however, consider her design time.
While the biggest players in the industry employ their own sales forces, SMEs in the sector wishing to break into retailers outside of their local area use independent sales agents who sell on a commission basis and take between 15 and 20 per cent of the trade price of the cards sold.
Using a distributor, rather than agents, is another option for new publishers. A distributor,using its own warehousing facility and network of sales agents across the UK, will take responsibility for the sales, marketing and distribution of card ranges leaving the publisher to concentrate on developing and producing its ranges. A distributor (usually) houses publishers’ stock in its warehouse and sells it on a consignment basis. The distributor pays the publisher for what has been sold saving them money on warehousing, agents’ commission and postage.
The UK’s major grocers will operate deals with two or three of the major publishers to supply their greetings card stock. But that doesn’t mean that smaller publishers don’t get a look in. Most major publishers will operate a broking system with some of their smaller counterparts to supply their major customers with a variety of stock.
Lisa Palillo, communications marketing controller for Hallmark UK explains, “We might manage around 30 per cent of the share of that retail space and another major publisher might manage 25 or 30 per cent – the rest is split between brokerage stocks.
“The grocer would come to us and say, ‘We like this range of cards but we don’t want to do business directly with them because we don’t want the hassle of setting up new accounts and going through the admin process for another supplier.’ So we will do the deal with the smaller publisher, we buy the cards from them and integrate them into our product. That smaller publisher would treat Hallmark as a normal customer in terms of trade prices.”
Palillo says this arrangement makes up a “fairly small” percentage of Hallmark’s business.
Cofi e-Cudjoe admits she could have grown her business a lot quicker if she had gone for a broking arrangement with a big fi rm but it would have meant a sacrifi ce of her creative freedom: “I’m in it for the long run. It’s allowed me time to develop my collection as I want, rather than work to pressure from big retailers.”
And most in the industry agree that a creative mind is a prerequisite for success. Palillo says, “There is money to be made in it, for sure. But we talk about being in the emotionally connecting space – people give cards for positive and usually emotional reasons – so if you don’t get that emotional attachment I think you would struggle to make good judgements in terms of editorial content. If you wanted to make a quick buck there are plenty of other industries for you to go to.”
Trade shows are a major source of business for card makers of every size – Cofi e- Cudjoe says attending her fi rst trade show turned her business around – but a stand at a fair will cost a minimum of £1,000 without accounting for accommodation and travel expenses.
Little says, “That’s really the only way to reach the wider market. It’s not just for reaching buyers but also for reaching sales agents too. The industry collects there.”
Christmas cards account for a signifi cant volume of cards sold each year (around 43 per cent) but make up only around 19 per cent (£324 million) of the total value. Everyday cards are the biggest earner by far. They account for around 70 per cent (£1,200 million) of the value and 51 per cent (768.1 million cards) of the volume of all cards bought.
The spring season is important for publishers with a total of almost 84 million cards being sent for Valentine’s Day, Mother’s Day, Easter and Father’s Day.
Palillo says, “We have to respond fundamentally to social and demographic changes that are happening. One is the increase in divorces and another is the decrease in the traditional nuclear family so phrases like ‘you’re like a mother to me’ on Mother’s Day are necessary and, of course, there are civil partnerships, immigration and religious events that were once incredibly niche and are now becoming more and more prolifi c with the changing demographic of our nation. These are all demographic and societal changes that we need to respond to.
“You think you have most areas covered and then something else will come up – I think they have recently invented grandparents day.” Although the greetings card industry on the whole remains dominated by traditional businesses using mass distribution techniques, the number of companies operating a streamlined online print-ondemand model – that currently make up around 1.5 per cent of the greetings card market – are growing.
John Bickley has spent 12 months building his e-commerce business – Whamoosh – after rejecting offers from rival Moonpig to license its patented facial recognition technology. Officially launched at the end of November this year, Whamoosh currently employs four people full-time and outsources all printing and distribution to a Wirral-based firm.
“The model we’ve adoptedis totally different to and much simpler than that of the traditional publisher,” he says. “Being an internet business, we don’t do anything until the card is bought and paid for which means, cashflow wise, the cash is in our bankfrom the customer within a few days so we don’t have to worry about guessing how many to print, then paying to have them distributed to the shops, then giving the shops a margin.
“With traditional publishers, all the stock is on sale and return and they don’t get paid for three months.”
The average price of a Whamoosh card is £2.99 and Bickley says the business operates on a gross profit margin of around 55 per cent.
He says, “There are very good profit margins in this space because you are selling directly to the end user. It’s a much more profitable business model once it is up and running but we will have to make an investment in acquiring and building our customer base.”
Bickley says his predicted turnover of £20 million within four years is “a reserved estimate”.
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