U.S. Greeting Cards and Postcards Chrystal Szeto (Pitney Bowes) Background Paper No. 20, November 21, 2005 This is one of several background papers that are being prepared as part of the Pitney Bowes research project entitled, “Electronic Substitution for Mail: Models and Results; Myth and Reality”. Please submit comments to: email@example.com U.S. Greetings Cards and Postcards Page 1 U.S. Greeting Cards and Postcards Chrystal Szeto1 Pitney Bowes November 2005 The introduction of electronic greeting and postcards created yet another potential form of electronic substitution for mail. Many observers quickly predicted that this innovation would signal the end of the traditional card industries. What has been the actual evolution of electronic greeting cards and what lessons does it offer about electronic substitutes to mail? The public’s increased use and acceptance of new technologies has facilitated the growth of new forms of personal and business communications. At the post’s inception, the mail volume was dominated by personal correspondence and limited to traditional letters, followed by postcards and greeting cards. Over time, the mailed applications broadened to include transactional mail, such as bills and statements, and direct marketing. However, the “future of the mail” has often remained associated in the public’s mind with the volume of personal correspondence we send and receive. The reality is that, for decades now, personal correspondence has been a very small part of the mailstream – typically under five percent – in all advanced economies. The advent of the telephone ushered in an era of new technologies being applied to personal communications and was directly responsible for the further decline of mailed personal correspondence due to falling phone rates. More recently, personal messaging has expanded to include voicemail, emails, mobile text messaging (SMS), and audio and video-enabled electronic greeting cards. These various media continue to evolve, albeit in more limited ways. Postcards, once reserved for personal correspondence, are increasingly being utilized by businesses to advertise products and services, and electronic postcard terminals or kiosks can be found at many tourist sights that offer consumers the option of sending a personal picture and greeting electronically. In this paper we examine how the traditional paper greetings and postcard industries in the U.S. have fared and changed over time in the face of competing technology, and give a prognosis for its future. We also draw lessons for the electronic substitution for personal communications. Summary Findings and Conclusions Correspondence mail – in the form of personal letters, greeting cards, invitations and announcements – is facing increased competition from new digital correspondence media such as voicemail and email. 1 Chrystal Szeto is Analyst, Corporate Strategy Group, Pitney Bowes. The author welcomes comments and input from industry players and researchers in the mailing industry. Please direct comments to firstname.lastname@example.org. U.S. Greetings Cards and Postcards Page 2 Since 1987, annual household-to-household First-Class Mail volumes (mostly correspondence and greeting/holiday cards) have fluctuated, and volume has declined from 7.1 billion total pieces per year to 6.6 billion pieces per year. At the household level, volume dropped from 1.6 per household per week in 1987 to 1.2 in 2004. Since 1987, total annual holiday and non-holiday greeting card mail volume received by households has increased from 3.9 billion pieces to slightly over 4.0 billion pieces. However, although net greeting card receipt has increased since 1987, more recent total holiday and non-holiday greeting card mail volumes have actually decreased from 4.4 billion pieces in 2002 to 4 billion pieces in 2004. Unit sales of greeting cards have dropped from 7.3 billion in 1989 to 7 billion in 2003. At the same time, the use in businesses of some of the traditional forms is shifting. Postcards, once associated only with personal correspondence, are increasingly being used as direct mail vehicles. USPS studies show that they are more likely than other forms of mail to be “viewed” by their recipients. Automation presort (bar coded) postcards have experienced a total increase in usage since 1998 of over 260 million cards. Greeting cards and mailed announcements (e.g., for executive appointments in consulting or legal partnerships) are now common among businesses because of the formality and status they convey. The mailed proportion of the roughly 7 billion holiday and nonholiday greeting cards sold each year in the U.S. contribute to over half of all of the mailed personal correspondence volume and generate $7.5 billion dollars of annual revenue for the greeting card industry. Technology-enabled communications channels have in the past disrupted and reduced some forms of personal correspondence mail volume. For example, falling long-distance telephone rates took away a significant portion of handwritten correspondence. More recently, email has eroded telephone calls significantly more than it has affected the little remaining person-to-person mailed correspondence. Short messaging services (SMS or text messaging) conveys urgent, spontaneous and intimate messages in real time and is not seen by its users as an alternative or substitute for the formality, rigor and delayed delivery that characterize mailed correspondence. Thus, SMS is thought to largely reduce person-to-person email and telephone calls. In the UK, however, increased use of SMS may have contributed to the 5 million-unit total decrease in postcard volume between 1998 and 2003, especially since instant pictures can be sent from advanced camera phones in lieu of postcards. However, many of these same new alternatives have generated entirely new demand that could not have been served by prior traditional mail products2. Once thought to be the death of the paper greeting card industry, electronic greeting cards today make up just 0.7 percent of the overall greeting card market in the U.S. Analysts estimate that electronic cards will generate just $79 million of revenue in 2007 in the U.S. Other new forms including mobile telephones and Instant Messaging have been assimilated by consumers over time as part of their overall use of the communications media mix and have similarly failed to eliminate the old methods of communication. 2 See Nader and Jimenez (2005) for the evolution of substitution patterns across physical and electronic media. U.S. Greetings Cards and Postcards Page 3 Since 2003, total personal correspondence volume in the U.S. has declined roughly one percent, although several subcategories of personal correspondence have gained in popularity, including non-holiday greetings, invitations and announcements. Available literature provides much anecdotal evidence to support the notion that the decline of personal postcard sales and mailed postcards can be attributed to the availability of color camera phones and ubiquitous ability to text message. However, the use of postcards as a direct mail and business correspondence piece seems to have gained in popularity in the past several years. 1. Personal Correspondence Trends The United States Postal Service (USPS) segments personal correspondence (mail sent between households) into six categories: personal letters, holiday greeting cards, non-holiday greeting cards, invitations, announcements, and ‘other’ personal mail, all of which is First-Class mail, a category that the 2004 annual USPS Revenue, Pieces and Weight (RPW) reported to experience a ~1 percent decline4 since 2003. However, household-to-household mail has remained around 6 billion pieces since 1987 (Figure 1), suggesting that much of the First-Class Mail decline in recent years is due to volume drops in the business-to-business stream. Even so, annual household-to-household First-Class Mail volumes (mostly correspondence and greeting/holiday cards) have fluctuated, and volume has declined at the household level since 1987 (from 1.6 per household per week in 1987 to 1.2 in 2004). One-time events, such as year 2000 holiday/greeting cards commemorating the turn of the century, tend to cause temporary jumps (shown in Figure 1) in consumer mail but do not affect the long-term trend of slowly declining average pieces sent from one household to another. Figure 1. Annual First-Class Household to Household Correspondence Volume 8 Annual Volume (B) 4 6 4 2 0 1985 1990 1995 2000 2001 2002 2003 Source: PB analysis of USPS Household Diary and RPW reports. Minor variations may be due to small sample sizes. First-Class Mail volumes fell from 99 billion in fiscal year 2003 to just under 98 billion pieces in fiscal year 2004, USPS RPW (1990-2003). The decline averages –1.4 percent a year since 2000, when First-Class Mail reached 104 billion pieces its highest level in recent years. U.S. Greetings Cards and Postcards Page 4 Of the six types of correspondence, personal letters and other personal correspondence are the categories that have consistently declined in recent years (Table 1). PFY5 2004 greeting cards (holiday and non-holiday combined) and invitations mail volume increased over that of 2003 but were still down from 2002 numbers. Despite increasing overall volume, correspondence mail volume has not kept up with population growth. The number of U.S. households grew roughly 1.2 percent (CAGR) between 2002 and 2004, a figure not proportionately reflected in the 8.6 percent (CAGR) decrease in holiday greeting card volume, the 1.1 percent (CAGR) increase in non-holiday greeting card volume (U.S. Census Bureau, 2005). The only segment to outpace population growth was invitations. Table 1. Weekly First-Class Personal Household Correspondence Volume Correspondence Type Personal Letters Holiday Greeting Cards Non-Holiday Greeting Cards Invitations Announcements Other Personal Total Internet Cards 2002 Volume (millions) 1,629 2,892 1,564 593 144 333 7,154 1,752 2003 Volume (millions) 1,468 2,196 1,620 665 183 326 6,434 1,541 2004 Volume (millions) 1,385 2,417 1,597 728 136 298 6,561 1,654 Source: U.S. Postal Service Household Diary Studies. Minor variations may be due to small sample sizes. Between 1990 and 2000, average spending on stationery and postage decreased by 23 percent, and among consumers under 25 years of age though, stationery and postage spending dropped 49 percent (American Demographics, 2002). Much of this change may have been due to enrollment in electronic bill payment programs and services, as the drop in postage spending was not proportionately reflected in a decrease in correspondence mail. As a general rule, households with Internet access send and receive more traditional correspondence mail than homes without Internet6. 2. Greeting Card Trends Greeting cards, both of the holiday and non-holiday variety, make up over half of all of personal correspondence. According to the Greeting Card Association, an industry trade group, the $7.5 billion dollar greeting card industry generated sales of roughly 7 billion cards in 2003. Unfortunately, it is nearly impossible to determine the proportion of greeting cards purchased that are ultimately mailed. The Greeting Card Association acknowledges that its estimate of 7 billion cards sold annually is only a (majority) portion of all greeting cards that consumers ultimately receive, either in person as stand-alone gifts, enclosed within packages or by mail. 5 A Postal Fiscal Year is defined by the United States Postal Service (USPS) as a consecutive 52-week period beginning in September. 6 See Jimenez (2004 and 2005), and Wright (2003). U.S. Greetings Cards and Postcards Page 5 Further, the Association’s tally only includes greeting cards sold via traditional outlets, including drug stores, grocery markets, gift shops, mail order, etc. Their tally does not include greeting cards printed in-house for private distribution, popular photo-cards created (even in bulk) at photography labs, in grocery markets or via the Internet, the exception being photo cards that are printed on pre-purchased greeting cardstock. Greeting cards that are created with popular personal software programs and printed onto cardstock are also not included in the Association’s tally, even though many of these cards are later sent to their recipients via postal mail. Included in the Association’s official tally are the 30 individual greeting cards that the average U.S. household purchases each year, with the mean cost of each card falling somewhere between $2 and $47. While the industry has grown from a 43 million dollar industry in 1941 to an over 7.5 billion dollar industry in 2004 (Figure 2 below) with a 20 percent growth in just the past 10 years, those numbers hide a significant decline in sales volume (Cards Remembered, 2005). Figure 2. Relative Greeting Card Dollar and Unit Sales Source: Drug Store News (1989), GCA (2004) While dollar sales have increased, unit sales of greeting cards have dropped by 4.3 percent since 1989, from 7.3 billion to 7 billion in 2003 (Drug Store News, 1989). This decline has occurred in spite of the introduction of several new card segments (discount, large print, Braille and Spanish language) (Greeting Card Association). Seasonal cards, which account for roughly half of total sales, have experienced a 24 percent drop in mail volume, from 2.9 billion in the 2001 holiday season to 2.2 billion in the 2002 season (Greeting Card Association). Even though industry-wide dollar sales were up 3 percent in 2002, American Greetings reported flat unit sales in drug stores, one of their largest distribution channels (Parks, 2002). Even in the UK, where greeting card usage is more popular than in the U.S. (the average Briton sends 55 greeting cards per year, compared to the 20 cards per year the average American Based on the 108.4 households reported by the U.S. Census in 2003, and Greeting Card Association and data reveals that roughly 3.5 million individual greeting cards were purchased in 2003. Nearly half of the greeting cards sold in the United States are purchased in discounted multi-card packages, many of which may be similar to the ones purchased by grade-schoolers to distribute to their classmates on holidays, making it difficult to determine the average price of a mailed card. 7 U.S. Greetings Cards and Postcards Page 6 receives, or the 30 individual cards purchased by the average household) greeting card usage has declined (Greeting Card Association U.S., UK). The number of greeting cards sent has fallen by one million every year for the past five years. These numbers lend support to the European greeting card industry’s claim that sales have also been falling or stagnant since 1999 (Grocery Headquarters, 2003). A study conducted by the UK Greeting Card Association shown in Figure 3 indicates that while sales revenues have steadily increased since 2001, sales volume has fallen slightly. Figure 3. UK Greeting Card Sales and Volume 3000 2500 2000 1500 1000 500 0 2001 Source: Greeting Card Association UK Sales (million £) Volume (millions) 2002 2003 3. Electronic Greeting Cards The rapid growth of consumer Internet of the mid- to late 1990’s and consequent growth of Internet greetings sites facilitated the explosion of electronic greeting card use. The number of families that sent electronic greeting cards in 1998 grew 35 percent to reach 27 million (Drug Store News, 1999). Well past the novelty stage, consumers are spending, and are projected to spend, more money than ever on electronic greeting cards. With fewer free and trustworthy8 electronic greeting cards sites to peruse, consumers inclined to send electronic greetings are choosing to pay for annual online subscriptions to American Greetings, which owns several electronic greetings sites. Jupiter Research estimates that the $52 million in electronic cards sold in 2003 will increase to $79 million in 2007. Still, electronic cards make up just 0.7 percent of the overall greeting card market (iMedia, 2004). However, despite increasing dollar sales, electronic greeting cards are experiencing a gradual decline in popularity less than a decade since their inception. Consumers inclined to send electronic greeting cards might be more willing to spend money to send them, but are not sending them at the rate that they once did. As shown in Table 2, the 2004 Household Diary Study reports that the number of Internet greeting cards received per household has fluctuated in the past several years, concurrent with the downward fluctuation of total personal correspondence mail. Increased incidents of nefarious spyware linked to free download sites are causing consumers to be more weary of websites offering free content including greeting cards, song lyrics and software downloads. 8 U.S. Greetings Cards and Postcards Table 2. Personal Correspondence Patterns, PFY 1987-2004 Correspondence Type Personal Letters Holiday Greeting Cards Non-Holiday Greeting Cards Invitations Announcements Other Personal Total Internet Cards Volume (millions) 2002 2003 1,629 1,468 2,892 2,196 1,564 1,620 593 665 144 183 333 326 7,155 6,458 1,752 1,541 Page 7 19879 2,140 2,559 1,349 558 140 419 7,165 N/A 2004 1,385 2,417 1,597 728 136 298 6,561 1,654 Source: U.S. Postal Service Household Diary Study, Postal Fiscal Years 2002-2004. Since 1987, before the advent of electronic greeting cards, traditional correspondence received per household has steadily decreased 8 percent, from almost 7.2 billion pieces a year to 6.6 billion. Similarly, the total number of Internet greeting cards received by households in 2004 dropped nearly 6 percent to 1.65 billion from 1.75 billion in 2002. Interestingly, in the new millennium, electronic greeting card usage has fallen in line with the decrease in traditional correspondence. 4. Correspondence Postcards First-Class postcard usage has experienced similar trends. USPS Revenues, Pieces and Weight (RPW) studies show a gradual but steady decrease in consumer postcard volume. Figure 4 illustrates the slight downward trend of personal postcard10 use. The story is the same in the UK where Royal Mail delivered 30 million postcards in 1998, compared to 25 million in 2003 (Newsquest Media Group Newspapers, 2003). Figure 4. First-Class, Single Piece Card Volume 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: U.S. Postal Service RPW Study, Government Fiscal Years 1990-2003. Figures for 1987 are calculated from 2002 USPS household diary study mail volumes per household per week, assuming 89,479 US households (US Census). 10 The term ‘personal postcard’ refers to items identified as First-Class Single Piece Card by the USPS since 1997, and as items identified as either First-Class Postal or Private Mailing Cards before 1997. 9 U.S. Greetings Cards and Postcards Page 8 These trends are not likely to be the result of a decrease in postcard-generating leisure and business travel or general mailing caused by the events of September 11, 2001. In fact, the year 2002 actually witnessed an increase in personal postcard volume. Further, the downturn in personal postcard usage began years before the event. 5. Business Originated Postcards Unlike traditional greeting card usage, postcard usage in the United States is governed by business-driven factors in addition to consumer volume. Total postcard usage has actually increased since 1989 despite a pair of notable usage decreases in 1994 and 1999, so even as personal postcard usage declines, business related postcard usage categories are experiencing an increase in usage. Because postcards have found a non-consumer initiated application, their usage is less subject to the decreases and increases in popularity of electronic media than traditional greeting cards. Automation (bar-coded) presorted postcards, generally used for business communication, have experienced a gradual increase in usage since 1998. As evidenced in Figure 5, businesses operating in the United States are utilizing some postcard classifications with increasing frequency while drastically decreasing usage of others. For example, during the same five-year span that witnessed an increase in automation presort postcards, non-automation presort postcard usage declined. This resulted in a small but significant net increase in total presort (business) postcard usage. One advantage of presort postcard usage is discounted postage rates from the USPS. Figure 5. First -Class Postcard Usage: Total and Presorted 6 5 Total Cards Total Presort Cards Volume (B) 4 3 2 1 0 Single-Piece Cards Automation Presort Cards Nonautomation Presort Cards Automation Carrier Route Presort Cards 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Source: U.S. Postal Service Household Diary Study, Postal Fiscal Years 2002 and 2003, USPS RPW Study, 19902003 Per household receipt of Standard Mail postcards has almost tripled in the past 15 years, from roughly 2 percent in 1987 to almost 7 percent of total Standard Mail received by households (EMA, 2004). Merchants (48.6 percent) and financial institutions (26.3 percent) dominate Standard Mail usage, and for good reason. As shown in Figure 6, in comparison to other sized letters and postcards, standard sized postcards consistently enjoy a higher rate of viewership by 2003 U.S. Greetings Cards and Postcards Page 9 at least one member of a household (EMA, 2004). The average American is exposed to some 3,000 advertisements per day, and postcards may be regarded as a relatively inexpensive and effective form of direct mail advertising (Anderson, 2001). Figure 6. Reading Treatment of First and Standard Class Mail (as a percentage of received mail) 60 50 40 30 20 10 0 1987 2001 2002 1987 2001 2002 1987 2001 2002 1987 2001 2002 Letter size envelope Larger than Letter size envelope Detached Label Postcard Standard Postcard Read by member of household Read by > 1 member of household * Mail viewed Mail discarded Mail Set aside Don't know/no answer * Data not available in 1987 Source: U.S. Postal Service Household Diary Study, Postal fiscal year 2003 via EMA 6. International Effects of Technology In Europe, mobile technology is both creating a new channel for, and occasionally replacing some forms of communication. Part of the reason for this replacement may be that users of mobile camera phones are often opting to send pictures taken on camera phones and text messages instead of purchasing and sending postcards. In the UK, where SMS use is more widely used than in the U.S., Royal Mail delivered 30 million postcards in 1998, compared to 25 million in 2003 (Newsquest Media Group Newspapers, 2003). Studies have already established the fact that that greeting card usage has declined (Newsquest Media Group Newspapers, 2003). Businesses are also increasing their use of SMS services too, perhaps at the expense of other established forms of business communications and advertising (Parish, 2004). In 2001, marketers expected to allocate 7 percent of the 2003 advertising budget to SMS advertising (Forrester, 2001). A separate study by Forrester showed that 140 million Europeans were expected to receive an SMS advertisement. (Forrester, 2004). 7. Consumer Preferences One of the main attractions of electronic greeting cards for consumers is ease of use for the sender. It takes very little time to select, personalize and send an electronic greeting card, and cards can be prepared in advance and delivered to the recipient at a pre-selected future date. However, recipients of greeting cards still prefer to receive traditional greeting cards (GCA, U.S. Greetings Cards and Postcards Page 10 2005). A 2003 InfoTrends/CAP Ventures study (Figure 7) revealed that a significant portion of consumers prefer to receive personal correspondence (greeting cards, letters, photographs) in both paper-only and paper-and-electronic forms (InfoTrends/CAP Ventures, 2003). Figure 7. Consumers' Document Receipt Preferences Bills / statements Books Magazines Newspaper Phone and Other directories Catalogs Instructions, manuals Other direct mail Photos Greeting cards Personal letters / notes 0% 20% 40% 60% 80% 100% Paper Both Electronic Percentage of Respondents Preferring this Media Source: InfoTrends/ CAP Ventures, “The Future of Paper,” 2003 In response to these consumer preferences, the major greeting card companies, Hallmark and American Greetings, which combined hold 85 percent of market share, have both increased their online presences that make sending paper cards as easy as newer alternatives. Hallmark aggressively promoted its online personalization service that allows customers to choose traditional greeting cards online, printed with personalized messages, and addressed, stamped and mailed by Hallmark (Hallmark, 2004). American Greetings offers a similar service, but also promotes its fee-based electronic greeting card subscription services, Americangreetings.com, Bluemountain,com, Egreetings.com and Beatgreet.com. Both companies also offer cards that can be downloaded and printed on a home printer as well as free and subscription-based electronic greeting cards. The introduction and acquisition of electronic greeting card services by the major players11 in the greeting card industry strongly suggests that traditional greeting card producers see a value in electronic greetings that ultimately complement traditional card sales. The Greeting Card Association views electronic greeting cards as a complement, and not a threat to, traditional greeting cards (Cooper, 2004). Regardless of available technology, consumers have expressed a preference for personal correspondence through traditional channels. A Greeting Card Association study revealed that 64 percent of Americans prefer receiving hand written personal communications to electronic 11 Some major discount card retailers such as CardSmart, a division of Paramount Cards, view increased retail offerings, and not online- subscriptions, to be more promising sources of growth for their business model (Smith, 2005). U.S. Greetings Cards and Postcards communications. Ninety percent say they “look forward to receiving greeting cards and personal letters” (GCA, 2005)12. Page 11 Further, projected growth of the greeting card industry’s most attractive and loyal customer populations, women aged 45 to 54 and 55 to 64, is expected to increase 10 percent for 45-to-54year-olds and 27 percent for 55-to-64-year-olds between 2000 and 2007 (American Demographics, 1997). It will be important to monitor how this population begins to celebrate the major life stage events of its technology savvy offspring, and especially of their grandchildren who likely do not know a world without Internet and email. For many important events such as birthdays and holidays, most consumers deem electronic greetings insufficient, and even inappropriate. 8. Conclusions The greeting card and postcard industries are certainly changing in the face of new technologies as consumers and businesses are faced with more communications media choices; the availability of these choices has occurred concurrently with a slow decline in personal correspondence, both electronic and postal. Short-term trends indicate that greeting card usage is decreasing at roughly the –4.5% CAGR of personal correspondence, but this is not true for all forms of correspondence. The changing face of the greeting card and postcard industries is also not uniformly resulting in decreased mail volumes. Businesses are increasing their usage of postcards for direct mail and notification even as consumers are sending less of them; since 1989, total postcard volume has increased by 1 billion units. Similarly, invitations mail volumes are increasing even as several segments of personal correspondence have witnessed decreasing volumes. If history is any indicator, it will be difficult to forecast the direction mail staples such as the greeting and postcard will take. However, it is clear that consumers and businesses are constantly finding new ways to utilize traditional and nontraditional media and that traditional postcards and greeting cards will not simply disappear any time soon. If anything, the large and loose social networks of the younger generations will stimulate personal communication and correspondence, an area with which the greeting card market is inextricably linked. 12 For a fuller discussion of consumer preferences regarding paper and electronic media see Szeto and Jimenez (2005). U.S. Greetings Cards and Postcards References13: Page 12 American Demographics (1997): Dortch, Shannon. “Greetings, America - aging baby boomers expected to boost greeting card volumes.” Feb 1997 accessed at http://www.findarticles.com/p/articles/mi_m4021/is_n2_v19/ai_19115334 on 3/15/05. American Demographics (1997): “In so many words: how technology reshapes the reading habit.” Rebecca Piirto Heath, March 1997. American Demographics (2002): “Inconspicuous Consumption - The Consumer Expenditure Survey of the Bureau of Labor Statistics - Statistical Data Included,” by Michael J. 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U.S. Greetings Cards and Postcards United States Postal Service (USPS) (2004): Household Diary Study, 2004. Wright, H. (2003): “Drivers of change in the UK Communications Market”, mimeo, Royal Mail Group. Page 14 Zanthus (2003): “Consumer Technology Spending to Rise in 2004,” accessed at http://www.zanthus.com/company/press_room/press_releases/pr_consumer_technology_spending_rise_2004.asp on 3/15/05.