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Subject: Exective Update
Date: Mon, 9 Nov 92 12:21:57 EST
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11/9/92


TITLE Exective Update Greetings! (Fill In Blank) - From Card In-
dustry

Major Players See Personalized Cards As Way To Win New Customers
Marilyn Much In New York

For decades, greeting card companies have used their creative
wizardry to artistically relay consumers' thoughts, emotions,
hopes and dreams.  Now, they are putting the consumer in the
driver's seat. At a time when value-oriented shoppers are looking
for individuality and personalization in the products they buy,
the major card makers are giving them a chance to Marketing

create their own greeting cards.  Both American Greetings Corp.,
a $1.6 billion-in-sales publicly traded company, and privately
held Hallmark Cards Inc. are clamoring for share in the burgeon-
ing market for personalized card systems - in-store computer
kiosks that consumers can use to make their own cards. Competi-
tion between the two industry giants has heated up in the last
month as both companies have started to take their systems na-
tionally.  There's good reason for the big push. American Greet-
ings' entry - called CreataCard - could generate about 5% of to-
tal sales, or $25 million to $35 million, during its first full
year of nationwide operation, the 12 months ending Feb. 28, 1994,
figures Henry Lowenthal, senior vice president and chief finan-
cial officer of the Cleveland-based company. American Greetings
holds the No. 2 spot in the $4.5 billion greeting card market,
with a 35% share.  Rollout will reduce the company's earnings by
$3 million, or five cents to 10 cents a share, in the year ending
in February 1993, Lowenthal calculates. Earnings came to $97.5
million, or $2.80 a share, in fiscal 1992.  But hopes are high
for the technology. Lowenthal estimates that CreataCard revenue
could soar to $500 million annually within the next decade.

Market Research Findings

Though more subdued, management of Hallmark, the greeting card
industry leader with an estimated 45% share of the market, shares
in the enthusiasm.  "Our Personalize it#m#cq#m# card business
represents a meaningful source of revenue," said a spokeswoman
for the Kansas City, Mo.-based company.  Market research reveals
other interesting findings. Unlike the market for regular greet-
ing cards - which is about 90% females between 35 and 65 years
old - the audience for CreataCard is skewed more toward men and
customers between 15 and 35 years old, Lowenthal notes. Men
represent about 30% of buyers.  "This is good news for expanding
American Greetings' customer base, and one of the reasons why the
tests showed no cannibalization of sales of traditional cards,"
said Judith G. Scott, analyst with Robert W. Baird & Co. in
Milwaukee. "If you can establish younger people as card buyers,
you can bring in incremental business." Though most analysts see
big potential for the card companies, some experts say personal-
ized cards may prove a passing fancy.  Others say the new systems
reduce capital and labor costs and could open the door to new
competition.  Market entry in the near term, however, might be
complicated by disputes over patents on the systems. The two
leaders are already fighting each other. Hallmark has filed an
interference claim with the U.S. Patent Office, which has made an
initial determination that the technology used in American Greet-
ings' system interferes with Hallmark's patent rights. American
Greetings has filed several motions in response.  It could take
as long as seven years before the case is resolved in the court
system.

Entering Major Retailers


"At this point, we have our patent locked up, so I don't see the
opportunity for additional major players to come into the mark-
et," said American Greetings' Lowenthal. "We are proceeding with
our plans." American Greetings moved in a big way last month,
when it began the national rollout. When the launch is completed
in February, 2,000 CreataCard machines will be installed in
mass-merchandise stores such as Wal-Mart Stores Inc. and Kmart
Corp. throughout the U.S. and Canada.  Since American Greetings
installs and maintains its units, retail outlets incur no over-
head, and they get to share in a business that generates excep-
tionally high margins. As an incentive, American Greetings allows
mass merchandisers to retain 30% of the sales for the cards,
which retail for $3.50 each.  The CreataCard system works this
way: Users select a card category -birthdays, for example - from
a touch-screen menu. They then scroll through about 1,000 choices
of basic card designs, make a selection and use a keyboard to
answer questions to write their own message. In just over three
minutes, a plotter printer will draw the card in a variety of
colors.

Testing More Systems

American Greetings will begin testing more systems with a
credit-card acceptance feature within the next six weeks. These
systems could be placed as stand-alone units in such venues as
office buildings, hospitals and airports.  "Wherever there is
sufficient consumer traffic, we see opportunity for CreataCard,"
said John M. Klipfell, president of American Greetings' Creata-
Card unit.  Hallmark is fighting to keep up. It accelerated the
national rollout of its Personalize it computer- generated cards
after American Greetings announced in July that it was taking its
system national.  Hallmark initially tested its concept in 1990
and launched it in Western states last year. But it wasn't until
last month that it began to expand it to more than 900 of its
Gold Crown stores in 26 states. It will expand distribution to a
total 1,900 stores by next July.  Personalize it is a collection
of more than 200 Hallmark greeting cards for all occasions that
customers can personalize by using an in-store computer to add
nicknames, inside jokes or special messages to pre-written
verses. They also have the choice of writing their own messages.
One thing Personalize it and CreataCard have in common is that
they reduce the problem of ensuring that all the products consu-
mers want are on the shelves when they want to buy them. Since
the consumer creates his or her own product, the store is never
out of the item and never has excess inventory.

This article is copyright 1992 Investors Business Daily. Redis-
tribution to other sites is not permitted except by arrangement
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