CVS, Walmart set to cut back on greeting card shelf space

Greeting card companies need a sympathy note.

Many people are giving up cards in favor of digital alternatives or are simply sending fewer cards between major holidays like Christmas and Valentine’s Day.

Now, major retailers, including CVS and Walmart, are poised to cut back on cards, and greeting card companies have closed hundreds of standalone locations.

To be sure, there are encouraging signs in some parts of the business, including premium cards that cost more than $10, budget cards that cost less than $1 and personalized options.

But Kevin Hourican, president of CVS Pharmacy, told USA TODAY in an interview that the company has too much aisle space devoted to greeting cards. He said the retailer, which has some 9,600 locations, is shifting more space to health care products after determining that greeting cards are not selling well, using an internal analytics tool.

“More and more people are using text and email and e-cards, and fewer people are buying cards, so that would be one area” where the company expects to cut back, Hourican said.

Walmart is “reimagining what we’re putting” in stores, said the company’s U.S. CEO, Gregory Foran. “Do we really need the amount of lineal footage that we’ve got in greeting cards?” he said on a conference call earlier this month.

Americans are still buying more than 6 billion cards per year, according to the Greeting Card Association, which did not provide more detailed statistics on trends in the industry.

But greeting card industry sales are declining at an annualized rate of 3 percent through 2023, according to market-research firm IBISWorld.

And retail space occupied by greeting card stores declined by more than 27 percent from 2013 to 2018, according to real estate data firm CoStar Group.

“One of the huge factors impacting that is technology and social media and the ability to contact people for special occasions through these platforms,” said IBISWorld analyst Tanvi Kumar, who has studied the industry. “There is a huge surge in e-cards.”

The disruption is rippling through the traditional greeting card industry.

The industry’s second-largest maker, American Greetings Corp., sold a majority share of itself in April to private equity firm Clayton, Dubilier & Rice. And the company replaced CEO John Beeder in February after only about a year on the job.

IBISWorld estimated that American Greetings’ revenue declined by about 16 percent over the last four years. The Cleveland-based company declined to comment for this story.

Industry sales leader Hallmark Cards has cut more than 1,000 jobs in the U.S. over the last five years due to a decline in profits, according to IBISWorld. The company also cut about 28 percent of its retail square footage from 2013 to 2018, according to CoStar.

Lindsey Roy, chief marketing officer and vice president of the Hallmark Greetings business, said the company has “experienced some of the same overall market dynamics” but that cards are “pretty flat” overall.

“Our Hallmark Specialty stores have declined over the years. There are fewer,” she said. But “we are definitely at the point where we really feel like we can stabilize that trend.”

Millennials are still buying cards

It’s not all bad news for greeting cards.

For example, it’s a myth that young people aren’t buying them.

As a millennial steeped in social media, Elizabeth Flake doesn’t want to give up the tactile and personal experience of giving and receiving cards.

“I grew up in a greeting card family – my dad is an avid Hallmark shopper, and my grandma has always been known on holidays and birthdays to display all her cards on the kitchen table,” said Flake, a wedding and event planner in Chapel Hill, North Carolina.

Hallmark’s Roy said that counter to conventional wisdom, millennials like greeting cards as a meaningful alternative to social media interactions.

“In a world that’s highly digital and fleeting and fast, to have something that’s that unique really stands out,” she said.

Entrepreneurs, niche card sellers and specialty players are also taking advantage of interest among millennials in cards.

“The biggest thing that everyone is trying to do is tailor their greeting cards toward the younger crowd,” IBISWorld’s Kumar said. “They take a more casual tone. They’re ironic, more comical.”

Boston-based start-up Lovepop has sold more than 5 million of its handmade luxury pop-up cards since launching in 2014.

Having secured funding from “Shark Tank” host Kevin O’Leary after appearing on the reality TV show, Lovepop is selling 90 percent of its cards directly to consumers online.

And the company is also selling cards through 3,000 retail locations, including its first-ever stand-alone shop at New York City’s Hudson Yards development.

The typical drugstore greeting card has fallen out of favor for a reason, but that doesn’t mean cards are going away, said Lovepop CEO Wombi Rose.

“Consumers are slowly becoming tired of that offering, and we bring a very different customer experience,” he said. “Every single Lovepop is laser-cut and put together by hand.”

The cards typically cost more than $10, but recipients often view them as a keepsake to show off, he said.

Hallmark, Papyrus, Paper Source and mom-and-pop online entrepreneurs on Etsy are also benefiting from interest in premium cards.

Paper Source, which gets about 15 percent of its revenue from greeting cards, has opened about 50 stores in the last five years for a total of 128. The growth stems from careful selection of products instead of selling mass-produced items, CEO Winnie Park said. For example, the company has about 500 suppliers of greeting cards.

“Part of the magic of what we bring to market is a selection that has been curated that is totally unique,” Park said. “I would say that actually nearly half our customer base is millennials, and they definitively buy greeting cards.”

On the flip side, some cash-strapped young people and other price-conscious consumers have been turned off by the increasing cost of cards, which IBISWorld blamed on rising paper costs and card companies trying to make up for lost profits.

“The problem I’ve run into the last several years is the price of greeting cards has gone way up,” Flake said. “I’m paying $6 for a glitter card.”

A backlash to expensive cards has helped some retailers.

Hallmark began selling budget-oriented cards at Dollar Tree stores in June, including a 2-for-$1 deal. The move led to a double-digit increase in year-over-year quarterly sales of cards, Dollar Tree CEO Gary Philbin told investors in November.

Philbin said the company is “extremely pleased” with the partnership.

Seeking connection in a digital age

Still, the industry remains challenged in appealing to digitally oriented consumers.

Engaged couples, for example, are increasingly sending digital save-the-date cards and asking invitees to RSVP online to wedding invitations instead of sending cards through the mail, Flake said.

“There are way less cards and gifts brought to weddings,” she said. “The card and gift table has gotten smaller and smaller because people are opting to send something through an online gift registry.”

IBISWorld’s Kumar said that customers are also sending fewer cards between the three major card holidays: Christmas, Valentine’s Day and Mother’s Day. Birthday card sales, for example, are still the most popular non-holiday cards, but they’re falling out of favor among some consumers as they send greetings through Facebook and other digital means.

That’s led Hallmark, for example, to respond by introducing a new lineup of cards under a brand called Just Because. The hope is to encourage people to think of each other with a paper card instead of just sending a text or Facebook message.

“We’re seeing some great growth out of these because people are just needing a little bit of good in their lives,” Hallmark’s Roy said.

People will pay for a personal touch, Lovepop’s Rose said. That’s why the start-up gives customers the option to customize a message when they buy Lovepop cards online.

“The underlying human need to connect is as strong as it’s ever been,” he said.

Nathan Bomey, USA TODAY

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