Paramount Cards: Frisky BusinessBy David F. Carr | Posted 2004-10-01 Print
Paramount Cards has hidden claws. Mimicking bigger rivals is a hallmark of its success. So is helping its retailers with new systems.
Paramount Cards 400 Pine St., Pawtucket, RI 02860
Business Makes greeting cards.
Key Business Executive CEO Hamilton Davison
Key Technology Executive CIO Bruce Conforto
Project Streamline inventory and distribution processes.
Objectives Lower inventory costs for the card maker, its CardSmart retail franchisees and other retailers.
Technology Used Homegrown software, mostly created with Microsoft development tools, in combination with manufacturing systems on IBM's iSeries platform, plus the iSeries version of WebSphere.
How it gave edge over bigger companies Allows cards to be sold at a steep discount, while remaining profitable.
In the small Rhode Island town of Johnston, the CardSmart store sits in a strip mall, adjacent to a well-trafficked Super Stop & Shop grocery, a hairdresser and a woman's clothier called Fashion Bug Plus.
With a "$" in its logo, "Card$mart" calls out to the bargain-minded shopper. Every card is promoted as "50% off"compared to Hallmark, the industry giant, or its rival, American Greetings. The messages, selection and artwork of the cards, and even the layout of the store, may seem familiar. But this is creative mimicry from Paramount Cards, now the third-largest maker of greeting cards in the United States and creator of the CardSmart chain.
Paramount grew by about a third in 2000 when it bought Canadian card maker Image Craft. But the rest of its growth has come from pursuing a "value" strategy, whether promoting a half-price campaign at CardSmart stores or 99-cent cards at grocery outlets.
The premise: A shopper who has just spent $50 on a gift doesn't want to spend another $5 on a card. Yet that shopper still wants a card that looks like the $5 item he might buy elsewhere.
"Nobody wants to compromise an important relationship by sending a cheap card," says Paramount CEO Hamilton Davison.
To remain profitable at lower prices, Paramount has used information technology, lean manufacturing and supply chain improvements to get more efficient. "You don't cut the cost in half, do everything else the same and stay in business," Davison says.
Even at half-price, the guerrilla attack, through both business and technology strategies, is paying off.
Hallmark and American Greetings control 85% to 90% of the market, although solid numbers are hard to come by in this industry. Hallmark is a private company that doesn't release sales totals, and so is Paramount.
But market research estimates by The Leading Edge Group put Paramount's 2003 card sales at $130 million to $140 million, compared with $4 billion for Hallmark. In an earlier study, the same research firm pegged Paramount's 1996 sales at $20 million. According to Davison, the 1996 estimate is "a little low" while the 2003 one is the "right order of magnitude," putting Paramount at about 3% of Hallmark's size.
"In some ways, it's not a David versus Goliath story," he says. "We try to not get in a fight with Goliath. We try to find market niches where we can rewrite the rules and be dominant."
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