Hallmark Cards (Hallmark) sells greeting cards and related personal expression
products all over the world. The company markets its products under the brand names
Hallmark, Expressions From Hallmark and Ambassador. The company has strong
leadership position. The company’s market leadership gives it a competitive
advantage and drives revenue growth. However, increased competition from discount
card retailers such as Cardsmart could result in loss of market share.
The company has a strong leadership position. Hallmark is the largest greeting cards company in the US with over 50% market share. It is ranked 80th on the Forbes list of largest private companies in 2007. Hallmark’s personal expression products are found in more than 43,000 retail outlets in the US. About 5,000 are specialty stores of which nearly 3,700 are certified Hallmark Gold Crown stores; another 30,000 are mass merchandise retailers, including discount, food and drug stores. The firm provides ecards and custom greeting cards for businesses and organizations through its Hallmark Business Expressions division.Hallmark publishes products in more than 30 languages and distributes them in more than 100 countries. The company’s market leadership gives it a competitive advantage and enhances the company’s bargaining power.
Wide product portfolio
The company offers a wide product portfolio. The company’s offerings include greeting cards, gifts, gift wrap, ornaments, memory keeping products, magazines, holiday cards, holiday gifts, holiday gift wrap, party products, stationery and special collections. The company offers these products under different brands such as Crayola, Portfolio Series, Crayola FACTORY, Silly Putty, Hallmark, Shoebox, Expressions, Sunrise
Greetings, Weiner Dog and Ambassador. A wide product portfolio provides the company with a competitive advantage and enhances its visibility.
Strong creative team
Hallmark has a strong creative team consisting of around 800 artists, designers, stylists, writers, editors, and photographers. Together they generate more than 19,000 new and redesigned greeting cards and related products per year. The company offers more than 48,000 products in its model line at any one time. For a company, whose success depends to a large extent on new and creative ideas, the support of a
strong creative team gives it a clear advantage in the market.
Dependence on mass merchandisers in the US
Hallmark depends on a large extent on mass merchandisers and large retailers for distributing its products in the US. Out of the 43,000 retail outlets which sell Hallmark’s products, 30,000 are mass merchandisers, including discount and food stores. Large buyers have more leverage with vendors like Hallmark and negotiate orders at lower prices, thereby increasing pressures on the margins.
Popularity of broadband and Internet
The Internet has emerged as a major medium for distribution of products, advertising and displaying product information. Recently, broadband is also beginning to gain popularity and allows users to stay connected to the Internet 24 hours a day at a fixed monthly charge. Popularity of broadband facilitates buying and selling over the Internet and encourages e-commerce. Online consumer spending worldwide is forecast to rise from $136.6 billion in 2004 to $227.7 billion in 2007. Online shopping is steadily growing in popularity in the US.
During the second quarter of 2005, e-commerce sales grew 26% as compared with the same period of the previous year. The US online retail sales have been estimated to have grown from $104 billion in 2005 to $130 billion in 2006. The US online retail sales are expected to grow annually by 17% in 2007-2008. The online retail sales in the US are expected to reach $329 billion in 2010. Significant growth in online sales is forecasted for all categories of consumer goods.Hallmark sells many of its products over the internet through its website and thereforehas an opportunity to strengthen its distribution by promoting its e-commerce
New product launches
The company introduced new products in the recent past. NXT, a provider of sound
solutions, launched the first range of NXT-equipped sound cards from Hallmark Cards
in August 2007. Hallmark launches HallmarkPark.com, a new interactive web site and greeting card
collection in March 2008. In the same month, Hallmark introduced Adhesive Gift
Wrap. The first-of-its-kind product is coated on one side with a low-tack adhesive
invented by Hallmark, which sticks firmly to packages, creating a beautifully-wrapped
gift without a lot of extra work. It is being sold exclusively at Hallmark Gold Crown
stores. Hallmark Cards introduced greeting cards produced on paper made from sugar cane
pulp and recycled fiber for the Connections from Hallmark brand. The cards were
made available for in 3,600 Wal-Mart stores across the US in April 2008. By launching
new products, the company could attract new customers and boost its market share
and revenue growth.
Competition among greeting card publishers is intense, with both large and small companies investing to take a bigger share of the market. There are an estimated 3,000 greeting card publishers in the US ranging from small family-run organizations to major corporations. In an effort to compete with leading players such as Hallmark and American Greetings, some retailers are offering a growing selection of $0.99
cards. For example, value-priced greeting card retailer Cardsmart Retail (Cardsmart), a chain owned by Rhode Island-based Paramount Cards, is selling its cards and products at 50% off list price. Cardsmart is a national chain of franchised and company-owned stores that has posted strong growth in recent years. Increased competition from discount card retailers such as Cardsmart could result in loss of market share.
Popularity of SMS and MMS for personal expression
In the past few years there has been strong growth in usage of short messaging
service (SMS) and multimedia messaging service (MMS). The US and Europe have
seen strong increase in SMS and MMS usage for personal expression. Consumers
are increasingly inclined to substitute sending greetings and gifts by using advancedand easy-to-use messaging services. Increasing popularity of SMS and MMS would
threaten growth of greeting card companies such as Hallmark.
Rising labor wages
Labor wages are rising in the US. In recent times, tight labor markets, increased
overtime, government mandated increases in minimum wages and a higher
proportion of full-time employees are resulting in an increase in labor costs, which
could materially impact the company’s results of operation. The federal minimum
wage rate in the US, which had remained at $5.15 per hour since 1997, has increased
to $5.85 per hour from July 2007. The federal minimum wage rate is further expected
to rise to $6.55 an hour in July 2008 and then to $7.25 an hour effective July 2009.
Hallmark employs around 9,300 associates in the US out of which 4,200 work fulltime.
The company also employs 800 artists, designers, stylists, writers, editors and
photographers in the US. The company’s success depends on its ability to attract and
retain efficient employees in all segments of its business. Increased labor costs in the
US could increase overall costs, resulting in a decline in its profitability