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| KN22099 |
| KEY NOTE GREETINGS CARDS : AUGUST 1999 |
| Overview |
ISBN 1-85765-839-6
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Retail sales of greetings cards were valued at
£1.05bn in 1998. In this market, value growth consistently exceeds that
of volume, as many consumers are willing to trade up to more expensive,
higher-quality cards.
Manufacturing continues to prove more profitable than
wholesale and retail distribution. Schober Direct Marketing's Business Ratio
Plus 1999 report on the industry found that, in the 60-plus companies studied,
publishers' pre-tax profit margins were almost three times those of
distributors. The fact that distributors achieved a compound sales growth of
20 percent indicates their concentration on increasing market share, rather than
profit margins.
Although publishing may be more profitable, the supply
structure is extremely fragmented, with only a handful of publishers claiming a
significant share of the market. The share of these leading companies grew in
1998, after a flurry of acquisitions in what was described as a predatory
atmosphere. The activity culminated in the two US market leaders, American
Greetings and Hallmark Cards, strengthening their hold on the UK market.
Consolidation has also been seen on the retail side, with Clinton Cards --
already the leading retail specialist and much revered for its financial
performance -- augmenting its position with the acquisition of the Greetings
Store Group. Nevertheless, continuing pressure is exerted on such specialist
retailers and High Street multiples by the growing participation in the market
of the grocery chains. This pressure is extending to wholesale publishers and
distributors as direct-to-retail sales become more common.
The market is
thus one of maturity, in which considerable rationalisation has taken place and
any domestic growth occurs largely at the expense of competitors. Furthermore,
it is being threatened by imports and alternative methods of communication.
The industry is nothing but innovative, however, and is pursuing opportunities
wherever it can. Noticeable success, for example, has been made in tapping into
the youth market, with brands such as Bubblegum, Dr Glitter and South Park.
Many new messages have been introduced, ranging from those relevant to ethnic
minorities to the completely nonsensical, and publishers and retailers
persevere with their attempts to have new occasions recognised. There is a
wealth of talent designing products that are acclaimed worldwide and there
certainly still remains considerable potential in some overseas markets where
the industry is in its infancy.
Key Note forecasts that the retail market
for greetings cards will grow at a moderate rate in the medium term, to reach a
value of £1.25bn by 2003. Value growth will continue to exceed that of
volume, although the increase is expected to be much lower than that seen
previously.
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Text © 1999 Key Note
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