November 28, 2008 / 4:44 PM / in 9 years

Shoppers bring Holiday cheer to card makers

BANGALORE (Reuters) - This holiday season, Santa and Rudolph are likely to face unusually stiff competition from the U.S. Postal Service. As costs balloon and unemployment rises, many more shoppers are planning to send out greeting cards in lieu of gifts, minimizing the hit the card industry will take in a down economy.

Gift buying is expected to be limited to immediate family, children and close friends only, market research firm IBISWorld said in a recent report.

The firm expects around 20 billion mail items to be delivered by the U.S. Postal Service between Thanksgiving and Christmas Day.

“Card companies may not see the same decline that retailers in general might see,” Britt Beemer, chairman of American Research Group, said, given “the probability that if you do not visit your family this time, you would send out more greeting cards than you would normally do.”

Visits home are expected to be down during the Holidays as cash-strapped consumers cut down on travel plans.

The net effect of the positive trend is, however, expected to just about offset recent downward trends, including increased use of online cards and pricing pressures.

“I see the greeting card business to be flat to down 1 percent,” Beemer said.

“However, where other (retailing) sectors might be down almost 4 percent or more, being flat to down 1 percent is not bad at all.”

Greeting-card market leader Hallmark Cards expects industry-wide Christmas card sales to be down marginally to 2.1 billion cards from 2.2 billion last year.

American Greetings Inc, the No. 2 U.S. card company, believes that evidence of the trend can be seen at greeting card aisles -- where it has stocked cards carrying messages of “hope and appreciation,” to go with current sentiments.

MORE CARDS IN STOCKINGS

From what shoppers have to say, the companies are reading their customers well.

“My gifts to friends this year for Hanukkah, Christmas and Thanksgiving are going to be cards and chocolates - to me that is a pretty smart way to negotiate the recessing economy without disappointing friends and family,” Pallavi Banerjee, a PhD student at the University of Chicago, said.

Boston-based Ajita Perera, who lost her job as marketing head of an IT services company in a recent downsizing, concurs.

“I will definitely send out cards, internationally and locally, but on gifts, I will have to cut down this year,” she said.

Responding to the demand, privately held Hallmark has geared up with new offerings, including recordable cards that allow customers to send personalized voice messages.

“We have had a lot of feedback from consumers this year saying recordable cards enable personal connections when travel isn’t a possibility,” Cindy Mahoney, Vice President of Season Cards, Hallmark, said.

NOT JINGLE ALL THE WAY

However, greater consumer interest this season and a better industry position vis-a-vis other retailers do not provide absolute insulation to card makers.

Analyst Bentley Offutt of Offutt Securities Inc said it being a very price-competitive market; companies are facing pressure on revenues and cost of goods sold.

“Though business will be flat, there are other pressures -- the biggest being that they are not able to get much of a price increase.”

Besides, rising commodity prices, the wider economic malaise, and the rising popularity of e-cards also make growth difficult, American Research’s Beemer said.

Greeting cards were a more pronounced tradition among people who are now in their 60s and 70s, who would send them out in bunches, Beemer said.

“People now might send out more greeting cards as they cut back on gifts, but that will only make up for that generation who used to send out 75 to 80 greeting cards, (and) who might not now be sending any at all.”

(Editing by Anthony Kurian)

nivedita.bh@thomsonreuters.com ; within U.S. +1 646223 8780; Outside U.S. +91 804135 5800; Reuters messaging: nivedita.bh.reuters.com@reuters.net

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