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ITC to cash on human emotions

By Venkatachari Jagannathan | 12 Jun 2001

Even as cigarette giant, ITC Ltd is opening its lifestyle retail outlets in major cities, it is going slow on flagship stores for its Expressions greeting cards. "It will take a year or two to have few of our own greeting card outlets," says Mr. Chand Das, chief executive, cards business division of the company.

While such stores offers the company an opportunity to showcase its entire product offering and also receive early warning signals as to market trends, Mr. Das’ current plan is to penetrate the market much deeper. "Our first goal is to service as many independent multi-brand outlets. Today we have a presence in 7,000 outlets in 250 towns," he explains. By this September end he plans to add another 100 outlets to the distribution network.

But this doesn't mean that flagship stores for its Expressions cards are not on the company's vision. "In the next five year period we will be having around 100 exclusive outlets both company owned and franchised," he adds.

Meanwhile as a part of his market penetration drive Mr. Das is busy signing up outlets like Qwiky's, Foodworld, Bharat Petroleum's petrol bunks, Satyam Infoway's browsing centres wherein only Expressions greeting cards will be stocked.

For those who wonder why ITC got into greeting card business, where Archies Gifts and Greetings and Vintage Cards and Creations dominate the organised sector and several hundreds are spread out in the unorganised sector, the answer is simple.

Firstly, the Rs. 150 crore greeting card industry is registering a robust growth of 15-20 per cent per annum. Enthused by this growth rate and the attractive margins the company decided to leverage the its vast 8,000 strong tobacco distribution network. In this effort its speciality papers division Tribeni Tissues and another group company, ITC Bhadrachalam, for the supply of paper and card, helped the company. ITC's own printing division will take care of printing the cards.

Leveraging its existing infrastructure apart, the company has signed a design sourcing deal with Simon Elvin, UK. "We will be paying a royalty of 5 per cent on card sales," says Mr. Das. Competitors Vintage Cards and Archies Greetings too have foreign tie-ups as it reduces the design cost. While the former sources the card designs from Hallmark, USA, the latter has tie-ups with Gibson Greetings Inc., and American Greetings Corporation. In addition ITC has contracted with around 25 designers - Indians as well as foreigners- for its design needs.

Broadly the greeting card market can be divided into three categories viz., institutional sales segment largely comprising charity cards; premium segment with cards priced above Rs. 12 and the economy segment with cards priced below Rs. 12.

The market can also be segmented based on the end user like community affiliates, new romantics, new enthusiasts, young machos and practical value seekers. The first two categories are high card users and are not price sensitive while others are touchy with price.

Of the total market, approximately 25 per cent is dominated by charitable institutions like Child Relief and Youth/CRY cards, Unicef cards – targeting corporates- and another 25 per cent by the unorganised sector consisting over 200 manufacturers producing low priced and low quality cards. It is for the balance 50 per cent of the market companies like Vintage Cards, Archies Greetings and, now, ITC fight for.

With corporate sector of late favouring cards that has charity tags, it is but natural for greeting cards companies to try tapping that by associating themselves with some charity organisation. For instance Vintage Cards has tied up with Cancer Patients Aids Association to design, manufacture and market greeting cards to aid the latter’s fund raising efforts.

"We are also planning to do something like that soon," responds Mr. Das.

Success in this business hinges on the number of situations one creates for people to buy cards; the design and the crafting of the message to express a particular sentiment or emotion.

But it is huge retailer margin around 45 per cent, which stunt the industry’s growth. Agreeing with that Mr. Das justifies the margins on the grounds that manufacturers do not take back-unsold cards from retailers. "Though no returns has been the industry's practice till day, we may even change that at a later date," he adds.  High card costs coupled with the advent of Internet and e-greetings Mr. Das agrees that card sales has come down in the recent past.

Queried about his e-initiatives Mr. Das says that it is meaningless to pay some web site and provide free e-greeting facilities. However he does have a B2B initiative whereby the card distributors could see the designs on the web and place the required cards.

After stabilising the card sales and setting up of few flagship stores ITC will get into the complimentary business of fancy stationery items, party goods like bags, cups, plates, gifts, mugs, posters etc. etc. (see related story Greeting card companies turn to gifts)

Expressions available in the price band of Rs.5 and Rs 50 is expected to net an average price realisation of Rs. 13 for ITC that target a sales of 20 million cards this year. According to Mr. Das the division would break even in three years time and touch a whopping turnover of Rs. 200 crore in five years down the line. Towards that the company is soon to come out with ad blitz at an outlay of Rs. 4 crore.

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