Viewpoints

Inset: Publishers, suppliers and retailers are all weighing up how to best deal with the cost rises.

Weighing Up The Costs

Daniel Prince

managing director of Danilo

“Danilo, along with many others within the industry, has experienced a number of cost rises over the last year. This includes shipping container costs which have gone up by 550% since 2020, paper costs which have increased between 10-20% and additional material costs rising by 5%.

The impact of this has been that we have had to review our cost prices and having investigated different approaches, evaluated that that the best route has been via small percentage cost rises on certain products. We have tried to keep these rises to a minimum, have made considerable effort to inform our customers as soon as possible and have asked retailers to support an increase.”

Resilience factor: “From a consumer perspective, I feel that the category is quite resilient, as shown by the continual purchase of cards over the past few years, even during lockdowns. However, consumers are coming under increased pressure from rising living costs and with cards and wrap often regarded as discretionary items, further category price rises are likely to result in reduced volume and spend this year.”

Timeframe: “The hope has been that things would have settled down by the end of last year, but now it looks increasingly apparent that these raised costs will continue for a while yet.”

Above: Daniel Prince is braced for cost rises to hang around for a while. Left: Shipping container costs have risen over 500% over the last two years.

At a time when UK inflation hits a 30 year high, sparking real concerns over those already living on bread line, cost rises (and raw material shortages) are hitting the greeting card industry from all angles.

PG canvassed opinions from those all along the supply chain - printer, envelope company, publishers, agent and retailer - as to how they are feeling about the price rises and when they predict the situation abating.

Independent sales agent Richard Pass of STL agency

(who represents Alljoy, Dandelion Stationery, Giftwrap UK, Redback Cards, Two Little Monkeys) in North of England

“Virtually all my agencies have had to announce a price increase, fortunately this is industrywide and as such it hasn’t impacted negatively on the business.

Card and gift companies are all facing a triple whammy - increases in costs of raw materials, cost of shipping plus cost of production so it was inevitable that the prices would increase. They may need to increase again this year. Thankfully all the retailers are experienced in their business and understand this. The beauty of the card industry is that it isn’t really a price conscious market and the consumer seems to have accepted the price increases. The reality is that this industry is very strong, especially in the independent sector and what may have been seen as a negative has been embraced

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as a positive. Simply put, if everyone makes the same percentage margin, a price increase means a better cash return for everyone.”

Surcharge v price

rises? “I have two agencies that have approached this differently to a straight price rise. Alljoy Design elected to increase carriage paid order values, but it is still only £150. This ensured they didn’t have to impose a price increase. Whereas Flame Tree Publishing has maintained its RRP on journals etc while reducing the discounts offered on spinner deals. This means the RRP is at the magic £9.99 for its A5 journals. It has had to increase the calendar RRP but this is still very competitive in the market.”

Resilience factor: “This is a sector that can live with price increases relatively easily, of course every product has a price ceiling but over the last few years we have seen a remarkable growth in the £5.00+ greeting card. Giftwrap will also fair well although it may be that the 2m role is slowly replaced with a 1.5m version. New technology, as evidenced in Giftwrap UK’s exciting products in its Christmas launch bring benefits. Equally, companies like Redback Cards, Two Little Monkeys and Dandelion Stationery are working very hard to help the retailer, bringing in cellofree options, producing in the UK and launching new ranges. Overall, I am very positive about the future.”

Timeframe: “I think we are in this situation for the long haul, without question. Having said that it’s a very positive place to be. Consumers are continuing to shop local, the domestic tourist market is very buoyant and the international tourist will begin to come back. 2022 will be an interesting year, but we should all look forward to better and better business as time goes on.”

Above: A 3D card from Alljoy, one of the companies represented by Richard, increased its carriage paid amount to help absorb some cost increases.

Seth Woodmansterne

managing director of Woodmansterne Publications

“In reality, independent greeting card publishers who also supply some of the larger retail chains get only one chance to review their prices each year. By November 2021, it was obvious to us that year-on-year costs were escalating at rates unseen this century. We at Woodmansterne bit the bullet then and published our February 2022 price list with a modest average increase of 6.5%.

However, when you add together board increases of 16-20% (ignoring paper shortages and delays), the massive fuel hikes and transportation levies, UK manual labour shortages from Covid and Brexit pushing wage inflation, uncapped commercial energy bills (up 25-100% depending on your luck)…6.5% looks modest indeed and now hardly scratches the surface!”

Timeframe: “Sadly, it doesn’t look like things are going to calm down very soon as global supply chains take time to adjust, both on supply shortages and costs (and a war with Russia is the last thing we need)! Watching those incredible pilots land planes at Heathrow during Storm Eunice, we’ll just have to hope we too can navigate these unpredictable winds!”

Above: Seth Woodmansterne on the recent BBC Inside the Factory programme. Left: Jerry Dyer’s Big Jet TV was a big draw during the recent big stoms.

Sally Matson

owner of Red Card, Petworth

Left: Red Card’s Sally Matson, a fair-minded champion, with some of the localised cards she stocks.

“Such challenging times. The cost rises have been filtering through from suppliers more frequently since the start of the year. We have received many emails along the lines of ‘we will hold the current prices until the end of February but…’We are not able to absorb all of these increases and I think they will have a real impact on all businesses. With the cost of living rising and more importantly the media saturating the news with it there is a risk that we, the independent sector, are perceived as expensive and not for times of personal austerity. To counter this we must offer the best in customer service and convenience and work hard to ensure we give the best value for money we can while still maintaining the margins we need to keep our businesses running. The way the luxury consumer responds to the current situation will be key to our survival and success. I also think that these price rises have come at a time when the British ‘luxury’ consumer is becoming far more discerning about the provenance of products. I am being asked more and more if items are ‘Made in China’ and am now curating the shop stock much more carefully and selectively on this basis. I think there will always be certain items that come from China (especially seasonal decorations), but now, with the tenfold increase in the cost of getting a container from the Far East to the UK, there are real alternatives with more price parity closer to home.”

Reacting to the price rises: “As a retailer, we are not able to pass all the increases on to our customers, as there are sensitive price thresholds of which we must be mindful. A perfect example is a product I was pricing this week which now works out at £3.05 retail,

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but was previously £2.95. I currently need to hold that product at £2.95. Where I feel that the price rise is reasonable and doesn’t go over these sensitive price points, then I am passing on the increase. There needs to be careful consideration of price rises between the wholesaler, the retailer and the consumer, and there needs to be a meeting in the middle ground. We are all going to have to take a hit to some extent.

I find it particularly challenging when the larger card companies are selling products to supermarkets at far less than the cost they sell to the smaller independent retailers, meaning I find myself in a position where a card that I sell for £2.70 is available at Sainsbury’s for £2.00. In some circumstances there may be a difference in the quality of the paper stock used, but that is irrelevant, as the customer perception is that the small independents are much more expensive than the supermarkets, and this myth is perpetuated by this behaviour - the customer thinks we are more expensive across the board. If the large card companies continue to sell in Above: Sally feels that something needs to be done this way, they will end up only being stocked in supermarkets, as with the rising costs we are all on the price parity front with the supermarkets. facing, we will not be able to stock their brands alongside comparable product that is cheaper and more unique.”

Mitigating measures: “Our loyalty card scheme is helping to mitigate the impact of some of these price rises - when a customer has bought ten cards they get the 11th free, which is a 10% discount and encourages loyalty.

As a business Red Card has started to become much more involved in the local Petworth community and I think this is one of the many things that will help to see us through the challenging year ahead. In a small town that has a mix of affluent customers and those at the other end of the scale, I feel that if we support our community as much as we can, they will feel they have a reason to support us.”

Trade price rises v surcharges: “Surcharges are dishonest and frustrating. If you have a wholesale price on a product it is a reasonable expectation that the listed price plus VAT is what we will pay - to then add a surcharge is not right and I won’t deal with companies who do this. I don’t add a surcharge to my customers - the price on the price label is what they pay.”

Timeframe and resilience: “Given the price rises we have seen since January, I think that this will be a year of price rises. Hopefully by the end of the year it will have settled a little, but honestly, given what we have seen happen in the world over the last two years, who knows?!

Retailers and consumers (and no doubt wholesalers) will be forced to use companies that provide best value and best customer service and this means that inevitably there will be companies in every part of the equation that don’t survive.”

Becky Dobson

managing director of Glick

“I am writing this while on a plane during Storm Dudley with people screaming in fear all around me. Talk about dealing with headwinds. Thinking about record inflation is an effective distraction! Having held our prices for year after year, like many other companies we are being hit from all angles with cost increases - from shipping to energy, board to transport. Added to this is the rise in minimum wage and the Plastic Tax coming into effect on April 1.”

Surcharge v price rise: “Hoping it would be a short-lived, we imposed a shipping surcharge last July, but removed it in December.

We have increased our prices on our products, but in some instances the increase is less than the surcharge was.”

Timeframe and resilience: “We all need an amazing crystal ball, but we are not expecting matters to stabilise this year and costs are still very volatile.

You just have to be ready for the next swerve and take comfort in the fact that our sector is much more resilient than others. Birthdays, births, weddings etc will be happening and people will be sending cards and giving gifts.”

Above: Glick’s Becky Dobson with one of the company’s many Henries trophies. Left: Glick has ditched the surcharge in favour of small trade price increases on its products. Above: Flame Tree’s Frances Bodiam (right) with colleague Christine Delaborde at the Spring Fair.

Frances Bodiam

managing director of Flame Tree Publishing

“The overall message has to be to adapt and change to embrace the challenges that you are confronted with!

Flame Tree Publishing has been making beautiful fine art greeting cards, calendars and notebooks for nearly 30 years and over that time we have changed our offer in accordance with market forces and commercial reality. A successful business must be able to take the lessons of the last two years and find ways to get better and stronger.

The biggest impact during 2020/21 was the four times increase in shipping costs. It wasn’t just cost increases that caused problems, there was a huge shortage of containers, lorries and warehouse space so not only were we paying higher prices to ship, we

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suffered delays of sometimes months for crucial stock including calendars and diaries and jigsaw puzzles.

To mitigate against all of this we’re having to plan much earlier and allow much more in terms of leadtimes for printing and shipping than we ever have before. It’s tough but good discipline! We were forced to increase the prices of our jigsaw puzzles a little and actually have found that all other jigsaw manufacturers have had to increase their retail pricing too so that we are now in line with the wider marketplace.”

Resilience factor: “I well remember the days in the early 1990s when Jan 1 saw an automatic 10% increase in prices every year! We have not increased our retail prices for greeting cards or notebook ranges for many years but I think that in an image-led industry like ours, retail customers and consumers are buying what they love, or what will suit their environment - it’s not as if they can get the same product cheaper from another manufacturer/publisher.”

Timeframe: “The general consensus from shipping companies seems to be that prices will gradually come down a bit, but will not go back to prepandemic levels. We’re being told that containers will become more available this year, although we haven’t seen evidence of that yet.”

Above: One of Flame Tree’s new sustainable jigsaws.

John Jones

sales director of Enveco, which provides many publishers with envelopes and notebooks

“In the 25 years of working in this industry I have never seen such substantial and constant price increases, circumstances have created the ‘perfect storm’, starting with Brexit and the additional associated costs, Covidrelated delays, the global bounce back after lockdowns, the demand for paper and board-related packaging as replacements for previously used plastics and now the surging energy costs.

With the scale of increases being experienced it has been impossible not to increase our selling prices. We are investing in higher levels of paper stock and placing orders a lot earlier to ensure continuity of supply, but there is no getting away from it, everything we use in our manufacturing process now costs a lot more than it did two years ago!”

Timeframe and resilience: “I can’t see this situation changing in the next six months or possibly even until the end of the year. I think everyone within the trade will have to try and work with higher unit costs than previously experienced.

We are a very resilient industry that is more than capable of adapting to the fast changing circumstances put in front of us, key for this year for manufacturers and publishers will be communication, planning, planning and a bit more planning!”

Above: Enveco’s John Jones on the company’s stand at the recent Spring Fair.

Tony Lorriman

managing director of Loxleys, specialist greeting card printer

“I have been in the print industry for almost 30 years and I have never known a period of sustained cost increases like we are currently experiencing, it is literally one thing after another! Every raw material and consumable item we purchase, even pallets, not to mention energy and distribution have significantly increased in cost over the past six months with some items increasing several times either in the form of a traditional price increase or the in vogue ‘temporary’ surcharge, or in some cases both.

The cost increases we are seeing are driven by macro issues occurring on a global scale, so although we always work with our supply partners to mitigate and minimise cost increases, the severity of the current situation means rising product costs are inevitable. This leaves us treading a very fine line between mitigating cost increases and ensuring continuity of supply.”

Timeframe: “I sincerely hope the cost pressures we are experiencing settle down quickly and we can return to a period of stability, however in reality I feel this is unlikely given the current global supply shortages, surging energy costs and the imminent minimum wage increase. Things show no sign of abating. In the last couple of weeks we have been informed at very short notice of yet more increases.”

Above: Loxleys’ Tony Lorriman. Left: From the cost of paper pulp through to cardboard, price increases have gone through the roof.

Fiona Pitt

head of commercial of Hallmark UK and Ireland

“Hallmark, like many other businesses has seen a notable increase in costs over the last six months.

Many of our key input costs, including raw materials and freight have been particularly hard hit, but we are also seeing cost pressure from many other areas, too. We’re working hard to mitigate the increases; looking for efficiencies in almost every corner of the supply chain, but some cost price increases to customers have become inevitable.”

Resilience factor and timeframe: “We expect to see inflated costs in the market at least until the latter part of 2022, but we do believe that the market is resilient and innovative enough to come out stronger and fitter on the other side!”