As retailing changes, Hallmark stores adjust

Used to be, you could walk into Candy's Hallmark Shoppe in Roxborough and, at first glance, see Christmas cards everywhere, displayed in a giant "U" around the store's three walls.

These days, standing at the front, you have to look awfully hard before finally spotting, in a corner to the left, the one product that virtually rolls off the tongue when you say Hallmark: cards. They are no longer center stage.

The same forces that have replaced hand-signed holiday cards on fireplace mantels with snap-and-send photo greetings have changed the way neighborhood Hallmark stores do business.

Gone are the days when chocolates, paper cards, and ornaments could keep a Hallmark shop in the black. Nowadays, if a store does not look like Candy's - brimming with dolls, decorative martini glasses, musical snowmen, and stocking stuffers - the lucrative holidays will be lost.

"Between my five stores," said Candy's owner, Howard Dall, whose others are in Exton, Wayne, Aldan, and Montgomeryville, "I've ordered 1,100 of these."

He was pointing to a table near the front door loaded with recordable storybooks. The digital product was launched a year ago by Hallmark Cards Inc. as part of ongoing efforts to diversify its offerings. The books are still hot, Dall said, and at $29.99 apiece, they have been good for business.

Candy's is one of about 3,200 Hallmark Gold Crown stores in the country. All but 400 of the specialty gift shops are independently owned and operated through an agreement between Hallmark, a privately held company, and entrepreneurs such as Dall.

In return for the right to hang a Hallmark Gold Crown sign outside and receive certain highly sought after Hallmark merchandise, owners agree - through a licensing arrangement that is less formal than a franchise agreement - to carry certain products being sold by Hallmark at a given time.

Dall has owned the Roxborough Hallmark store since 1980, lured into greeting-card retailing because he owned local pharmacies that carried cards. In 2004, he pleaded guilty in a federal fraud case stemming from the sale of pharmaceutical samples, forfeited his license, and expanded his Hallmark holdings as he eased out of the drugstore business.

Hallmark, based in Kansas City, Mo., celebrated its 100th anniversary this year, but it did so with 300 fewer Gold Crown stores than the 3,500 it had in mid-2008, spokeswoman Linda Odell said. In 1992, there were 5,000.

For the small-business owners who run the Gold Crown shops, text-messaging and online photo developing with card-making services have been particularly painful to the profit margin.

Hallmark, with $4 billion in annual sales, says greeting cards are still bought and sold in huge numbers. "People continue to exchange 6 billion greeting cards a year," Odell said, citing in-house estimates. "I would say about 10 years ago it was 7 billion or 61/2 billion."

To adjust to declining customer numbers, Dall said, he and other Hallmark retailers have had to be even more inventive in deciding which Hallmark and non-Hallmark merchandise to put into their stores.

The front third of his Roxborough shop offers a smorgasbord for browsers, with everything from a Hallmark "Dancing Frosty the Snowman" ($14.95 with a purchase), to a bounty of Byers' Choice collectible dolls, made by a Chalfont company and sold only at a limited number of stores.

Dall said his strategy was to invite customers to sample merchandise on their way to the ornament or card displays farther back.

"You buy, you try, you listen, you get a smile on your face - you come back," Dall said.

Store manager Laura Doyle said the storybooks were immediately popular when Hallmark launched them with a big national advertising campaign in 2009. The company rolls out various new products that way, first selling them only in Gold Crown stores like Candy's, then later distributing some to drugstores, supermarkets, or big-box retailers such as Wal-Mart.

Hallmark store owners pay a monthly fee to contribute to the national ad campaigns and other promotions.

That paid off one day last week for Dall. A $5-off coupon in a magazine lured an unlikely customer, Zoeann Campbell, 41, to Candy's, a store she seldom visits.

Campbell is a mother who crams her buying into targeted stops at drugstores, dollar stores, and supermarkets. But the coupon seemed too good to pass up.

She came for gift bags but instead picked up a $12.95 ornament. That was all she planned to buy, she said.

"That's the younger consumer," Dall lamented.

Several minutes later, Campbell walked away from the checkout counter with a paper bag too large for just an ornament. And she was beaming.

On her way to the register - past the handpainted martini glasses she ruled out owing to price - she had found something else: A gift sampler she saw nowhere else while Christmas shopping.

She bought it, plus the ornament. It would be perfect for gift bags she was assembling (the contents of which we will withhold, for fear of spoiling her Christmas surprises).

"I came in for my $5 off," she said, "so that worked. But I also bought this!"

She pulled out the $14.99 sampler. "It's, like, little doodads!"

And then, music to a merchant's ears:

"The coupon got me in," Campbell said, "and I'm so excited about this!

"I leave with a smile," she said. "I will come back."

And she hopped out the door.