Cardsharp

cardsharp A Renaissance Era?

Is our passion for online buying diminishing and does that mean an opportunity for a renaissance for bricks and mortar?

Quite rightly, noted Cardsharp, the media has been full of the cost-ofliving crisis and the rampant inflation threatening us. We, in the greeting card industry, saw this coming over a year ago, when extortionate increases in container costs, paper price and Chinese factory prices, were already having a huge impact on the cost of producing the product that rocks our sector.

But could some good come out of all of this?

Cardsharp will not dwell on the cost-ofliving crisis in too much detail as the main points are covered by comments in this month’s Viewpoints section, but the cost rises are obviously a major concern for publishers, retailers (whether clicks or bricks) and indeed the UK consumer. But Cardsharp just wanted to highlight what he feels might be a trend developing underneath all the apocalyptic headlines. Whisper it very quietly, but is footfall to bricks and mortar making a comeback at the expense of online platforms?

Two years ago, when Covid and lockdowns hit, we all still wanted to eat, buy clothes, gadgets and greeting cards. And initially our main option was online. The specialist shops stayed closed longer than we ever imagined and the real fear of catching Covid depressed footfall, even in shops that were allowed to stay open. This was obviously gold dust to ecommerce businesses. The gulf between online and a struggling high street had never been greater as online sales boomed.

In the fashion world, the once seemingly invincible Topshop went bust. Department store chain Debenhams, the cornerstone of so many town centres, also hit the wall. In our own industry, the wellregarded and well-run, Cards Galore group

of stores, was forced into administration by the almost complete lack of commuters and workers in London, while Paperchase went into administration again, only to rise Phoenix-like out the ashes with plenty of stock in store, that had never been fully paid for. Even our biggest high street specialist greeting card chain, Card Factory, saw its share price plummet and had to renegotiate its funding requirements.

Meanwhile, Moonpig and the other main online card operators boomed. Moonpig’s sales alone went from £173 million pre-Covid to £368 million during the pandemic and underwent a public flotation where its share price rose to 340 pence a share at one point. This was while Card Factory’s share price was hovering around the 30p mark. Yet Card Factory had a long history of making significant profits, far higher than Moonpig. One can’t help feeling that Moonpig’s ridiculously high valuation was based, in Cardsharp’s view, on the fact that it was valued by the City as a tech company and not a greeting card retailer.

Cardsharp believes that although Covid is still with us, the crisis period has only been over for around four months now. On

Top: Renaissance painter Michelangelo recognised the importance of the physical over the virtual! Above right: The greeting card industry benefits from healthier high streets. Below: What percentage can bricks win back over clicks?

the Underground on a sunny day recently, Cardsharp noticed how very few masks are now being worn. Things are returning to normal, and not even a so-called ‘New Normal’ but one broadly similar to the old.

Whisper it very quietly, but shoppers do seem to be returning to stores, not in droves but incrementally, and the online retailers who budgeted for continued growth are finding things far from plain sailing. So, have we fallen out of love with online shopping? Have many of us decided that there is more to life than endlessly scrolling through websites?

Two of the big pandemic fashion winners, ASOS and Boohoo have seen their share price drop by 75% recently amid profit warnings. Amazon remarkably reported its first quarterly loss since 2015

and its slowest retail sales growth in two decades. Moonpig’s own (and in Cardsharp’s view rather optimistic) forecast is for its sales this year to be £100 million less than the pandemic year. The assumption that online sales would just keep rising and rising across the board are having to be revised.

Even in the grocery sector, supermarkets are reporting something of a return to the weekly physical trolley shop. Before the pandemic, the online food grocery market accounted for 7% and it doubled in size to a peak of 15.4 %, but recent industry figures suggest that the online sales chunk has now slipped back to 11% of the overall grocery market.

On top of that, online retailers have come under increasing scrutiny about the rising costs (both financially and environmentally) of transport while the huge cost of handling returns is starting to become apparent.

It would have been an outrageous thought a year or so ago, but some ecommerce players are close to collapse due to poor trading. And many of those who have been reliant on the magic money tree of investors’ dosh, are now finding that tree bare.

Also, ponders Cardsharp, are many of us becoming bored of unravelling the increasing complexity of many websites and fed up making our way through endless online reviews? It has all become a little exhausting.

The return to normality has led people to get out and about; to focus more on leisure activities like shopping and eating out. Rising living costs have also made people a lot more conservative about how much they are buying online. And Cardsharp is sensing we will see a return to more city centre activity. Civil servants are being dragged back to their offices, albeit kicking and screaming. PM Boris Johnson has publicly stated that productivity suffers when working from home. London, Manchester and many other big cities are starting to buzz again

As Cardsharp reflected, we humans are, in the main, social creatures. We want/ need to get back to spending time together, whether that’s socialising or shopping.

There are also a few elements running in bricks and mortar’s favour too. Although business rates are far too high, rents are supposedly coming down as landlords are taking a more realistic approach. And less competition on the high street means there is more to go around for those who are still left.

So, on top of this overall prettier picture, there are positive signs for our greeting card industry. WHSmith, who admittedly largely avoided the horrors of lockdown, but did not benefit much because of it (due to its travel locations being something of a desert), has reported really healthy greeting card sales recently. And apocryphally suppliers to Clintons are reporting a good increase in greeting card sales there. The gallant Shahs, who have endured so much financial pain during the pandemic, are seemingly bouncing back with many Cards Galore sites reopening again in some London hubs.

And Card Factory is also doing some sedate bouncing as befitting of a PLC. Recently its shares jumped 33% as it completed its refinancing and reduced its net debt as cash poured into the company.

CF’s CEO Darcy Willson-Rymer must feel confident as evidenced by him recently buying nearly 100,000 shares in the company!

Cardsharp does not want to get too carried away. We all know about the nasty headwinds on the horizon. Inflation and the cost-of-living crisis will bring plenty of problems. And ecommerce will undoubtedly continue to be a force to be reckoned with across all sectors. But to Cardsharp’s mind, news of bricks and mortar’s fatal demise, and clicks’ inevitable victory is somewhat premature.

Perhaps the UK consumer is starting to ‘play away’ a bit more from online and spreading their love a bit more equally. Cardsharp hopes so anyway. Here’s to more living and loving!

Top: Once a bastion of fast fashion with the youth, Top Shop’s demise shocked many. Above left: ASOS has downgraded its profits forecast. Above right: Retailers need more happy feet through their doors. Below: We are sociable beings which should bode well for retail.