March 28, 2002, 12:00 AM

To Pay or Not to Pay

(Page 2 of 2)

Analysts say Hallmark does a great job of using the web for what its customers need as well as encouraging web visitors to go to the stores. “Online is not where the heart of Hallmark’s multi-channel strategy is but they are encouraging use of the web site to increase the value of the loyalty points program,” Calvin says. “Consumers get extra points for buying paper cards and the web site promotes seasonal coupons good only at the stores. Hallmark does an excellent job of taking the consumer’s experience in the brick-and-mortar stores and tying it back into the web site.”

Furthermore, Hallmark is adding sales of items to its web site, such as Hallmark Stories, a product in which consumers download digital photos and create a custom photo album for $55. “Hallmark has a very clear idea of who their customers are,” Calvin says. “They know for example that people put a lot of time into picking out photo albums because they represent about 20% of the offline store products. So this is something they can do on the web that they can’t do in the stores.”

Hallmark also is using the web to broaden its product offerings to items it would have more difficulty selling in stores, analysts say. “The web site extends Hallmark’s offerings with the extra things it sells online like cookies and flowers,” Calvin says.

Although Hallmark did not comment for this story, analysts believe its web strategy is producing additional foot traffic. For one thing, they say, use of web coupons in stores appears to be a successful tactic.

Hallmark is not likely to add a subscription-based service to its site because it is able to draw visitors with free e-cards, observers says. Then, with an array of gift products, it can encourage card-shoppers to buy something at the site or entice them into a store with a coupon or loyalty points, analysts say.

No. 3 in the greeting card race is Yahoo Greetings. While it has card deals with such well-known characters and brands as Ziggy, Garfield, Dilbert and Hello Kitty, it relies on traffic to its well known site to drive card traffic. Its cards are free.

Analysts agree that the battle for e-greeting dominance is not over yet and that consumers could adjust to the fees just as they have to ATM fees. A million consumers paying $11.95 a year to AmericanGreetings says something about the market. Yet, analysts say, the market must pay attention to how many renew their subscriptions at the end of this year. “The industry is still waiting to see if consumers will pay for e-cards or if it should remain free content,” Yeh says. “Because the switch in strategies is recent, the greeting card market bears watching.”

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