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Brought to you by Retail Insider and K3 Retail

Retail Insider and K3 Retail bring you a monthly column taking a look at some of the most pertinent and interesting topics of the day in the big wide world of retail.

For something as simple as a bit of folded card with an image on the front and some words inside, greetings cards have looked like an increasingly tough commodity to sell profitably – with rampant competition inevitable.

As such, the market is pretty well crammed with the likes of Poundland, B&M, Wilko, the supermarkets, and Card Factory.

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Lots of competition

For something as post-able – and therefore ideally suited to home delivery – and the possibility of consumers creating personalised versions, the humble greetings card has also looked like yet another category where purchases would transfer from physical stores to online and so new pure plays would add to the competition.

Yes, this has happened, with the likes of Moonpig (that was bought by Photobox) and Funky Pigeon (that is part of WH Smith) making some headway with their personalised online card offers. But they’ve not exactly set the market alight.

Combined virtual sales of greetings cards still only account for 6% of the market’s overall value and a mere 2% of UK volumes (that hit a total of 900 million units annually).

Indicative of how the category persists in being chiefly physical – i.e. bought through shops – was the launch by WH Smith in October of Cardmarket. It has 20 locations where cards are sold at rock-bottom prices.

This is exactly the end of the market where Card Factory plays. The reality is consumers resented paying £2-plus for a card at the traditional players but are more than willing to pay less than a quid at the likes of Card Factory. The average physical card sells for £1.44 versus £2.66 for an online personalised version in the UK.

Such reduced margins for Card Factory are workable because it operates a vertically operated model – whereby it designs, prints, distributes and sells the cards. Such is the confidence in the model that the group has a 10-year roll-out plan in the UK and Ireland where it intends to open 50 outlets per year to add to its existing 750.

This is one business that highlights particularly well that where the retail model involves both keen pricing and convenience (from being located on pretty much every half-decent high street) then a stores-based business has distinct advantages over the online competition.

Glynn Davis, editor, Retail Insider 

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.