ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 5, 1996 TAG: 9605030086
SECTION: BUSINESS PAGE: 1 EDITION: METRO
DATELINE: KANSAS CITY, MO.
SOURCE: CHARLES R.T. CRUMPLEY KANSAS CITY STAR
For the first time since Hallmark Cards Inc. created its unusual network of independently owned card shops in the 1950s, the rock-solid relationship appears to be forming cracks.
Several hundred card shops are expected to drop their affiliation with Hallmark's top-line Gold Crown status - a few dropped their affiliation with Hallmark altogether - in the wake of new Hallmark-imposed rules that make the card shop business more difficult and expensive.
And last month's announcement that the Kansas City greeting card company will sell new greeting cards with the Hallmark name to big discount chains such as Wal-Mart Stores is akin to selling rifles to the enemy, say some card-shop owners.
Roanoke area Hallmark shop owners and managers said they thought the new arrangement wouldn't hurt their business.
"Here, some people are already going to Wal-Mart, already getting them at Kroger, so I don't think it will affect us," said Nancy Altice, manager of Pat's Hallmark on the Roanoke City Market. "I don't like it, though."
"Nobody wants to increase their competition; but if you feel that it will hurt you, it will," said Timothy Bailey, president of a Roanoke company operating several Hallmark shops in Virginia and North Carolina under several names. His shops include Jaclyn's Hallmark at Tanglewood and Valley View malls.
For its part, Hallmark says it is paying attention and is running hard to help the card shops.
Notably, Hallmark last week began a $100 million advertising and marketing campaign to boost awareness of the top-line Hallmark Gold Crown card shops, said Amy Wulfemeyer, Hallmark's vice president in charge of card shops.
And Hallmark has explained that the new card line is being created because card buyers want the Hallmark name wherever else they shop. Even so, when mass merchants get the new line of cards early next year, they will be a somewhat-diluted ``Expressions from Hallmark.'' The Hallmark card shops will continue to get the exclusive Hallmark greeting cards. |n n| The notion of establishing a network of greeting card shops was perfected by Hallmark. Most of the 7,700 shops - including 5,000 Gold Crown shops - are neither owned nor franchised by Hallmark. They have a license agreement that basically lets them use ``Hallmark'' in their name and sell Hallmark-branded and Hallmark-approved items. Many shops are the exclusive seller of Hallmark greeting cards in their neighborhood.
But the card shops are watching their share of the $5.5 billion-a-year market dwindle as more shoppers migrate to discounters, said E. Gray Glass III, a greeting card industry analyst for Wheat First Butcher Singer in Richmond. About 40 percent of cards were purchased in card shops 15 years ago, he said. That's now down to the mid-20 percent, he estimated, and still headed down. Americans buy 7.5 billion cards a year, he said.
``With some of the moves Hallmark has made lately, it will have the effect of flushing out some of the weaker card shop owners,'' Glass said.
"It's harder to survive," Altice said. "I've been doing this for some time, and it gets harder. People can go to Wal-Mart; they don't have to 'drag' themselves downtown. But they won't get the service they get here."
It's difficult to do a meaningful survey of card shops because they are independently owned and well-scattered. A sampling of card shop owners across the country revealed that at least some are quite happy with Hallmark and its recent decisions. However, some shop owners say their relationship with the giant company is strained.
The most common misgiving: Card shops may lose their exclusivity next year to the discount stores.
Diane Oren, the manager of what was PJ's Hallmark in suburban Washington, D.C., said she already has seen what happens when Hallmark cards go in a mass merchandiser. A couple of years ago, Hallmark cards started appearing in the CVS drug store chain in the Washington area.
``We weren't making it,'' Oren said. Her husband closed one of their Hallmark shops and converted the other to a non-Hallmark shop. Called the Belle Store, it sells rival cards for as little as 49 cents.
Yet, several begrudgingly accept Hallmark's decision. With more card shoppers flocking to mass merchants, Hallmark was more or less forced to reshuffle its deck of cards and put its powerful Hallmark name where today's shoppers shop. After all, one Hallmark study showed that nine of 10 greeting card shoppers think of the Hallmark name first.
``I'm angry that it happened, but I understand it happening,'' said Joe Shuman, who has owned card shops in Washington for 40 years. ``If I were in their shoes, I probably would be doing the same thing.''
And many believe the complainers should turn down the volume.
``No, they don't have a gripe,'' said Jim Van Iseghem, an owner of two Hallmark shops in the St. Louis area.
A Hallmark card shop was once synonymous with easy money, he said. But with today's wintry retailing climate, card-shop owners must learn to be sharper business operators and stop pointing fingers at Hallmark.
Perhaps the most dissident Hallmark card shop owners are in western states where about 450 of them are expected to attend meetings in California May 22 and 23, perhaps to organize them into a confederation.
Part of what has angered some Hallmark shop owners is the belief that the mass merchants - the enemy - apparently will get a better deal from Hallmark than the card shops enjoy.
Gold Crown stores now must pay Hallmark at least $3,000 a year, up from $1,500; new Gold Crown stores usually must buy card racks and other fixtures from Hallmark that cost $80,000 to $120,000 for a typical card shop; and card shops must pay the freight bills when Hallmark sends products to them.
The mass merchants who'll get the new Expressions from Hallmark cards won't have to pay those costs, some shop owners said.
But, said Wulfemeyer of Hallmark, card shops get benefits that the mass channel retailers don't.
``Our card specialty retailers get tremendous financial assistance from Hallmark,'' she said. ``They get it in different ways.''
The card shop owners get a special credit arrangement and their regular customers get a Hallmark-sponsored discount card that encourages them to keep returning to the card shops.
Moreover, Wulfemeyer said, ``We do not spend $100 million of advertising directed to mass channel retailers.''
Not only will Hallmark buy ads to boost awareness of Gold Crown stores, but Hallmark is rolling out a new initiative for the card shops. Hallmark will be more vigorous with database marketing. For example, top customers will be mailed newsletters. Up to 10 million customers will get new Gold Crown gift catalogs.
Moreover, Hallmark is introducing new red-and-gold logos and signs. Buyers will be given sticky foil-embossed crowns to seal their card envelopes.
In return for this initiative, Gold Crown shops are expected to generally improve. Return policies will be uniform, for example.
In fact, it was the retailers who asked Hallmark to raise the bar for card shop owners.
``Some looked a little tired,'' said Wynn Ferrel, who is president of nine Kansas City area Ferrel's Hallmark Gold Crown card shops and a supporter of Hallmark. ``Speaking for the other retailers, we want to see them raise their standards because they reflect on all of us. A rising tide floats all boats.''
Perhaps ironically, the higher standards ended up angering some retailers as they were introduced in recent months.
"They're making us like a chain store, which is not what we used to be," Altice said. "I heard that my peers set this up, which I can't believe, because I don't need someone to tell me to wear my name tag and speak to my customers.
"They want us to put these new logo stickers on our windows. When do I have time to do that, when there's so much else to do? For the big stores, this doesn't faze them. But I still have to deal with the standards."
Marsha Marino, who owns Marsha's Hallmark in Pharr, Texas, said she tried the new standards but dropped her Gold Crown status about two weeks ago.
``I felt I was losing control of my store,'' she said. ``They were coming in and telling me what I had to buy, where I had to place it.''
But Adrienne Lallo, a Hallmark spokeswoman, said about 5,000 of the 5,200 Gold Crown stores - or roughly 95 percent - are expected to re-enlist in that program, even though new Gold Crown standards are more stringent and expensive than ever. If anything, that's evidence of widespread satisfaction.
Meanwhile, several card shop owners view the changes philosophically.
"Anything worth doing is worth doing right," Bailey said. "They want to create uniformity and a good image in the stores, so when a customer comes in he isn't confused. There's safety in numbers. For the people who aren't first class, you have to tell them what to do.
"I welcome any suggestions Hallmark or anyone has to make."
``It's kind of like a big circle to me,'' said Joe Alldredge, who owns 10 Gold Crown shops in Tennessee, Alabama and Mississippi.
He said Hallmark needs the mass merchandisers to earn big profits, and then plow the profits back into the card shops, which Hallmark needs to keep its brand name polished.
``I want Hallmark to be there forever so I'll be here forever.''
- Staff writer Elliott Smith contributed to this story.
LENGTH: Long : 163 lines ILLUSTRATION: PHOTO: STEPHANIE KLEIN-DAVIS/Staff. 1. The display window andby CNBcard racks at Pat's Hallmark on the Roanoke City Market are
decorated with Hallmark Mother's Day items in keeping with
Hallmark's Gold Crown program. 2. In addition to new rules about
qualifying for Gold Crown status, Hallmark plans to allow big-chain
stores to sell its products. color.