Jane's Hallmark Shop

Jane Blare's, owner of a local Hallmark card shop, had just read a newspaper article announcing the closing of yet another location in a neighboring county. She had met the owner at a stationery& gift trade show a few years ago & he seemed to run a successful business. His shop was located downtown on the courthouse square &had been open for thirty years. The newspaper article contained several customer statements that lamented how disappointed they were in the closing. Yet, the customers also acknowledged that their fellow card shoppers were all older, & felt that younger folks just used their smart phone for everything.

As the Christmas shopping season approached, Jane wondered if she too would join a growing list of twenty-four Hallmark stores in Indiana that had ceased operation in 2014. News of the closings had evoked a range of emotions from Jane. She was not surprised, but rather disappointed and saddened that the trend seemed to continue at an unabated pace. Hallmark shops had been shutting their doors by the dozens over the last ten years, but the recent closings in Indiana had hit too close to home for her..

Reading about the various closings, several common themes had emerged and resonated with Jane. Shop owners cited many reasons for their declining sales: the downturn in the economy, increased competition from other retail formats, changes in consumers buying habits and preferences, unappealing lease agreements, and lack of support from Hallmark corporate. As a result many owners voiced that it was simply time to retire. Jane's shop was located in a popular shopping center that included several national retailers such as Walmart and a soon to open Kohl's. The property management company for the center had recently indicated rents would rise in 2016. Her shop had operated at its current location for twenty years and the lease was up for renewal next spring.

Changing Channels at Hallmark

On her drive to work that morning, Jane thought back to several turning points in her relationship with Hallmark over the years. She recalled that in the mid-1990s, like most other retailers in Hallmark's traditional channels, she had hit a wall in terms of sales growth. Hallmark's retail presence across the United States was largely represented by corporate stores, independently-owned Hallmark card shops, and placement in several drug store chains. Overall, Hallmark continued to lose market share to its major competitors, American Greeting Corporation and Gibson Greeting, Inc. Neither competitor depended on the specialty store card shop retail format, but rather focused instead on mass merchandising and supermarket channels.

The Hallmark brand was virtually absent from the growing mass merchandiser (i.e., discount) retail format. For the industry, more than half of all greeting cards sold in the 1970s were in specialty stores like Jane's, but by the 1990s, this channel was down to about thirty percent. Greeting card sales at Walmart, the largest retailer in the U.S., were predicted to account for twenty percent of the overall market by the year 2000. Hallmark did own a second product line, Ambassador, which was sold in discount retailers. Although the Ambassador brand provided solid sales growth, profit margins were on the decline, and Hallmark did not see the Ambassador brand as the answer to its retailing woes.

As the traditional channels struggled with maturity in terms of their life cycle, executives within Hallmark choose to follow the course prescribed by most marketing experts: 1) they found a new way to help existing shops compete, and 2) changed the channel structure by including new retail formats. The

Hallmark Gold Crown program was introduced to the independently-owned Hallmark card shops. Additionally, in 1997, Expressions from Hallmark was launched through mass merchandisers and supermarkets allowing Hallmark to reach the much coveted growth segment of time-starved consumers who craved one-stop shopping experiences.

Hallmark's decision to sell down market was unpopular among many of the owners of the independent Hallmark shops although Hallmark claimed the impact on the independent shops was minimal. Though Jane was quite impressed with the Gold Crown program, she remembered that she too was angered to find herself suddenly competing against her own brand. The independently-owned Hallmark shops had played a vital role in building the Hallmark brand. Even though she and fellow owners felt betrayed, there was little they could do to stop the inclusion of the mass channel. With the implementation of the Gold Crown program and the change in the channel structure, Hallmark did in-fact see a market share increase of four percent.

For Jane, the introduction of the digital age was more disruptive to her shop than the one-stop shoppers. E-greeting cards, Facebook posts, tweets, as well as text messages from cell phones now competed with traditional greeting cards. The digital age not only represented a technological shift, but also a generational shift in terms of consumer behavior. Replaced by social media, sending traditional greeting cards was no longer the norm. Price increases for traditional cards, as well as increased postage prices hastened the decline. She also found herself competing directly with Hallmark corporate when it expanded its online presence by offering more E-greeting cards, as well as online sales via Shop.Hallmark.com in the gifts, traditional cards, and decorative ornaments categories for consumers who chose not to visit a brick-and-mortar location.

Overall, the digital age was not advantageous for Hallmark. In the past five years, Hallmark slashed its worldwide workforce in half. Corporate and independently-owned Hallmark cards shops continued to close with only 2,250 operating in 2015 down from a peak of over 10,000 in the early 1990s. Hallmark continued its expansion away from traditional channels by adding department stores such as Kohl's with J.C. Penney predicted to follow in 2015.

Jane Blare's Decision

Jane Blare knew that she needed to make a decision about her shop in the next six months. Clearly, the current business environment for specialty stores such as greeting card shops was not conducive to continued success with many experts proclaiming the industry was dying. Yet, she enjoyed her work, loved her customers, and knew of other Hallmark shops that seemed to keep up with the changing business climate. Jane realized that she could not rely primarily on Hallmark greeting card sales to drive traffic and profits in her shop. She needed to focus more on specialty gifts, along with decorative and accessory items. However, she had invested heavily in the fixtures Hallmark required independent shop owners to purchase...fixtures that can only be used to display and hold Hallmark products. Jane had always felt she was a loyal and dedicated partner to Hallmark, but as she gazed across the parking lot from the front window of her shop, she wondered if Hallmark felt the same about her today. She knew it was time to revisit her old business plan. In light of Jane's current situation, complete a case analysis for her to consider.

Read the case and answer the following questions.

What are the main problems and opportunities Jane faces? List in order of importance.

Complete a SWOT analysis from the information in question 1. What conclusions can you draw from this data?

Develop 3 distinct solutions for Jane based on the conclusions you were able to make. Which one would you most highly recommend and why?