The Retired Investor: The let-me-know-you-care industry of greeting cards

Birthdays, anniversaries, holidays, deaths, Valentine's Day, Mother's and Father's Day, graduations, the list goes on and on. The greeting card industry remains a global institution in the gift-giving world despite experiencing slumping sales.

 

Greeting cards have been around for more than 180 years. First inspired by the Japanese art form called "origami," an English artist, Sir Henry Cole, created the first hand-pressed Christmas cards in 1843. These cards were initially used as invitations to his dinner party. The trend caught on, and throughout the nineteenth century, consumers sent greeting cards to friends, family members, and acquaintances for every kind of special occasion. The first American card was produced in 1874. These cards were made with thick paper and printed and colored by hand and were easily affordable for most people. Times have changed.

 

My question is why cards are so expensive. The average cost of a greeting card from the Geeting Card Association is about $4.50. I will believe that when I see it. This weekend, I went shopping for a 25th anniversary card for my wife and paid more than $8. I mean, really. A flashy gold embossed drawing on the front. A mildly sweet but heartfelt message about how much she means to me. A bit of ribbon like a bookmark on the second page, and that's it.

 

As a couple, we must easily spend at least $150 a year if I count the cards we give to friends and relatives. Why do we do it? In this digital era, where most communication lacks depth, taking the time and effort to pick out a card and write something endearing at the bottom, as I often do on a physical card, is a gesture we think is worth it.

 

Somehow, writing with a pen creates a genuine connection, and for us, when displayed over the mantel, it brings a sense of love, happiness, and celebration. And if you are like my wife, a greeting card can be kept forever, becoming a treasured item that holds sentimental value and evokes lasting memories. Evidently, we are not alone in those emotions. 

 

Nine out of ten households buy greeting cards. The average American sends and receives approximately 30 greeting cards or more per year, according to Greeting Card Market Research. U.S. consumers purchase about 6.5 billion cards every year, with retail sales between $6 billion and $8 billion. Worldwide, the industry generates over $16 billion annually, down from $23 billion in 2020. Sales are expected to decline further, with some analysts predicting the industry will shrink to $20.9 billion by 2026.

 

Obtaining data on this industry is challenging since most companies are privately held. There are a handful of large companies, such as Hallmark and American Greetings, which together account for 82% of the market. It is estimated that the profit margin for the entire sector averages about 11%. This lack of competition partially explains the continued high prices for cards. It is a mystery to me why there are not more entrepreneurs entering this market.

 

Anyone with photo editing software can design a greeting card, and there are no barriers to entry for selling cards, such as a license to create and sell them. You can't copyright a quote or saying, so the contents of the card can easily be copied. And it can't be just the convenience at the point of sale because cards sold online are just as expensive.

 

One reason may be that selling items is more expensive than producing them. Getting your product into retail stores, such as grocery, drugstore, or supermarket chain, is extremely difficult. You need to have a variety of designs in multiple categories; simply offering a line of birthday cards won't suffice.

 

 All these outlets have similar overhead costs. Greeting cards occupy a significant amount of display space and often remain on the shelf for an extended period. As such, the rate of turnover is low. "Congratulations on your college degree" card to your grandson comes around infrequently. In the meantime, cards are thumbed through and damaged, and many of the categories may not be high on the shoppers' list of cards.

 

Retailers offer cards to generate incremental revenue. They have found that most customers seldom buy cards because of the lower price, so discounting your card price is not going to siphon customers from elsewhere. Shoppers buy for the convenience, so stores mark the price up to what customers are willing to bear. The retail mark-up is between 50-100 percent.

 

To many, it might seem like Baby Boomers are the last holdouts when it comes to sending Christmas cards or $10 bills in birthday cards, but that is not entirely true. It is true the young do not bother with greeting cards, but neither did I when I was young. Yes, the internet, text messages, and the like are immediate, far cheaper, and less hassle overall — no picking out cards, licking stamps, writing addresses, etc. Facebook walls, for example, are an easy way to keep up with birthdays, but that's about it.

 

However, according to the annual U.S. mail survey, the greeting card category has been increasing for the last three years. Additionally, estimates suggest that 40 percent of greeting cards are not sent through the mail but are instead hand-delivered or tucked into a gift’s wrapping. Social media may actually help the industry since it notifies us of birthdays, deaths, new jobs, and other events that people tend to share on their profiles.

 

 And it is millennials who are the main drivers. They have also contributed to the higher pricing levels of greeting cards, because they are buying the more expensive, embellished, and heavier paper missives with lots of glitter and ribbons. A high-quality greeting card is often crafted by hand, which requires time and effort.

 

Inflation is hitting every industry, and greeting cards are no exception. Prices for paper, especially thicker cardstock, are climbing. The labor to design more intricate cards and add foil, letterpress, and video is also increasing. Yes, cards are much more expensive.   And I will complain, as is my right, but neither my wife nor I will end our love affair with the greeting card anytime soon.