“Reports in the weekend papers about Clintons are false,” thundered a statement from its owner American Greetings.
The card specialist’s parent company fervently denied it was planning to shutter a slew of UK shops, citing instead its “multi-million pound” investment in the store estate.
“There are new store format trials underway and we are actively reviewing new sites,” the company insisted.
But isn’t this too little, too late?
The squeezed middle
Since Clinton Cards was rescued out of administration by American Greetings in 2012, it has found itself in an increasingly tight spot – in the squeezed-middle between Card Factory at the value end of the market and more upmarket competitors such as Paperchase.
It’s a recurring theme in the retail industry. Retailers without either a defined value proposition, or a premium one, can lose their identity and, ultimately, their custom.
Just this week in fact, The Body Shop owner L’Oreal said it was considering selling the retailer, after it failed to drive sales growth and lost relevance.
The Body Shop too became caught between budget offerings from the likes of Superdrug and upmarket beauty brands such as Urban Decay and L’Occitane.
The threat of Card Factory
But being stuck in the middle is not Clintons’ only problem.
Card Factory has become a huge competitor for many card retailers. Since its entry into the market, Clintons’ market share has shrunk from 27% to around 10%.
As Liberum analyst Adam Tomlinson points out, Card Factory’s vertically integrated model gives it tight control over its supply chain, which helps support its best-in-class margins.
“Because of its model, it’s able to produce high-quality cards at a low cost. Its cards are the same quality, if not better than Clintons’, at half the price,” he says.
For this reason, Card Factory stores often thrive when positioned close to a Clintons. Customers tend to switch their loyalty when Card Factory’s better-value proposition becomes clear.
But it’s not just price and value that makes Card Factory stand out from its competitors. It has also established its dominance through aggressive expansion and efficient use of space.
It currently has around 800 stores, including some in retail parks, and plans to open 50 stores a year until it hits its target of 1,200 stores.
“There are some questions over the total number of stores that are appropriate,” Tomlinson notes, “but its struggles in the first half of last year were more to do with footfall dynamics than its model.”
Beyond this, its value proposition and model mean Card Factory is nicely positioned to battle any volatility in the year ahead.
So, why doesn’t Clintons slash prices?
Unfortunately, lowering prices to compete may not be an option for American Greetings because, as one the UK’s biggest card suppliers, it would struggle to cut its prices for Clintons without its other retail customers demanding similar concessions.
It might also be argued that Clintons is going through an identity crisis.
Soon after buying the collapsed chain, American Greetings started refurbishing and converting stores to its ‘red’ store format. It has also explored new concepts, such as value format Simply Clintons.
However, operating under a range of fascias and formats may have confused its proposition.
As data company Read Group Insight managing director Scott Logie says: “Despite an increasingly squeezed middle market, Clintons does not necessarily have to close its stores, it just needs to find its own position in the marketplace and own it.”
“Plenty of brands occupy the middle market successfully by understanding exactly who their customers are and building strategies to target them effectively.”
Paperchase, for example, has successfully differentiated itself with its upmarket offer and range categories.
Along with other niche competitors, it has strengthened its position in the market through its conveniently located mini-stores in travel locations.
Threat of online
According to Logie, Clintons has struggled partly because of the ongoing rise of online card suppliers, such as Moonpig and WHSmith-owned FunkyPigeon.com.
The trend towards online personalisation has made Clintons’ traditional proposition look outdated.
Logie says: “Moonpig owes a lot of its success to time invested in customer insight and segmentation. It is able to market to people as individuals, appealing to the customer’s specific interests and increasing their brand allegiance.”
“Clintons needs to follow suit.”
Given that around one in six retailers in the UK sell cards, including supermarkets and convenience stores, the market is not an easy one to crack.
Even high street stalwart WHSmith tried its hand at a new card proposition – Cardmarket – but has taken its foot off the gas for now following a roll-out to around 30 stores.
Either way, at Clintons’ price-point, 400 stores may simply be too many. And given its UK operations are loss-making, dramatically cutting store numbers could be a sensible move.
Beyond that, as its leases expire, Clintons needs to act, either by finding better sites or exploring alternative pricing options.
As other previously over-spaced retailers like Woolworths learnt, Clintons’ may be better off shrinking than disappearing completely.