AMERICAN GREETINGS' NEW SCIENCE

CLEVELAND, Ohio -- The survival of supermarkets, especially in nonfood, depends on how well grocery chains make statements that reach the consumer's mind.Here at American Greetings, where the creation of statements is at the company's heart and soul, the art of social expression has been combined with the science of retailing.The science is in the investment American Greetings has made in advanced

CLEVELAND, Ohio -- The survival of supermarkets, especially in nonfood, depends on how well grocery chains make statements that reach the consumer's mind.

Here at American Greetings, where the creation of statements is at the company's heart and soul, the art of social expression has been combined with the science of retailing.

The science is in the investment American Greetings has made in advanced technologies. Tiny Town is a small example of the lengths to which American Greetings has gone in using technology to help optimize its retailers' operations.

The company uses a studio setting for miniature models of store departments, created to a retailer's specifications and to scale. Even the cards are made to scale and to fit into minuscule pockets. The store models are photographed, and through computer technology a virtual reality is created of the images. Retailers can get a three-dimensional look at a new department's design in terms of location, traffic flow, signs, fixtures and adjacencies.

This is just one of the value-added retail services that go beyond the company's greeting card offerings. These technologically driven services are all designed to help American Greetings' retail partners make a consumer statement and thus generate greater product sales.

Ed Fruchtenbaum, American Greetings' president and chief operating officer, has witnessed the evolution of the supermarket greeting card department as it's grown from a simple convenience category to a straight aisle department and then destination department. The latest retail strategy is an integrated approach that extends the card department into other store areas.

"Our key focus is always in achieving superior sales performance," said Fruchtenbaum. "Tied into superior sales performance is making sure we are always creating value-added benefits for our retailers."

American Greetings sponsorship of the American Greetings Research Council in conjunction with the Food Marketing Institute, which is about to commence its third study, is evidence of the card company's commitment to the food channel.

In fact, many of the company's value-added offerings to retailers have been spawned by what American Greetings has learned through its research council work, said Randy Mason, senior vice president and general sales manager at American Greetings.

The council will present the test results of its Baby Club promotion, a category destination program, today at the annual FMI Convention in Chicago. Retailers involved in testing Baby Club concepts include Dick's Supermarkets, Platteville, Wis.; ABCO Foods, Phoenix, Ariz.; Raley's, West Sacramento, Calif., and Price Chopper Supermarkets, Schenectady, N.Y.

Through Baby Clubs, supermarkets are targeting new parents to shop the baby aisle as well as other nonfood departments. The program uses special incentives such as coupons, rebates and gift certificates. Such programs are aimed at building a loyal consumer base, increasing store visits of existing shoppers and converting new shoppers.

"When you see the Baby Club presentation, you'll find that those retailers who went through the effort of launching the program are really getting paid a lot of benefits. We are getting women into the store who are about to have a baby or had a baby recently. They are going to be good solid customers for many years to come. They are going to buy a big basketful of products," said Mason.

He added, "You'll soon see retailers like ABCO, move into other categories like pet supplies and develop Pet Clubs."

Such programs are a way in which food retailers can distinguish themselves in a competitive landscape that is quickly becoming populated by supercenters.

Value-added services, many offered under American Greetings' smart umbrella, are:

· Smart Technologies consists of technologies to improve retail operations. This includes Street Smart Analysis II, a demographic service that defines specific store consumer profiles, and Retailer Information Services, which supports information technologies, including a Smart-Response program to control inventory and facilitate the reordering process.

· The Smart Choice department is an offering of innovative displays designed to meet retailers' various merchandising objectives.

· Retail Creative Services is a team that creates customized seasonal and image displays and decor for chain and storewide use. For example, last year American Greetings initiated a number of programs for King Soopers, Denver, including customized merchandising, product mix, department layout, character creation, research, promotions and public relations. The objective was to differentiate King Soopers from the competition with a unique look in destination greeting card and party goods prototype departments.

· Those Characters From Cleveland, creators of Strawberry Shortcake and Care Bears, are now creating store characters and images in efforts to develop a brand identity for retailers.

These and other services, such as customized sales promotion and new store planning, are backed by a greeting card product mix that represents 65% of American Greetings' $1.7 billion business.

All card lines and captions are highly researched and pretested for sales potential before cards are placed in stores. Many of the new lines have been designed to capitalize on social trends and demographic changes taking place in the marketplace.

Among American Greetings' new lines is That's Love, from the Forget Me Not brand, which addresses different communication styles between men and women. The line includes mini notes with "A Little Romance" sayings.

In addition, the company has expanded its ethnic greeting card lines. To appeal to African Americans American Greetings has introduced a card assortment called Baobab Tree, an ancient African tree, to reflect the heritage of African Americans. The Hispanic La Flor line has been expanded along with Sabor, a line of humorous alternative cards for Hispanics.

Among future consumer niches seen as important for the greeting card market are the aging population, which is expected to expand the "get well" category into the "care and concern" category, blended families with stepsons and stepdaughters, the aging baby boomers and working women.

To further produce incremental sales in the greeting card department, American Greetings is introducing a line of premium high-fashion party goods, called Designer Originals, to appeal to fashion-conscious working women.

The company also is adding Balloon Zone, a helium balloon selection merchandised from unique fixtures. An outdoor flag program was launched late last year and is producing strong sell-through, according to company executives.

In their partnerships with supermarkets, American Greetings' is using their expertise in CreataCard technology to develop an interactive party goods kiosk for customers of H-E-B Grocery Co., San Antonio. The kiosk will offer customers themed party recommendations and print out a suggested shopping list of products available in the store.

"[H-E-B's] objective was to help grow their party goods business and tie in party goods sales to bakery and other categories. Therefore, they needed a salesmen on the floor," said Fruchtenbaum.

At a new Dominick's store in Buffalo Grove, Ill., American Greetings has helped the retailer integrate greeting cards within the floral department.

"This is the direction [in which] we are leading some of our leadership chains," Fruchtenbaum explained.

"We're putting in integrated departments that create large shopping areas and a lot of browsing opportunities across categories. We'll put greeting cards with floral, books and magazines, and candy. We're creating a whole shopping environment much like is done on the fresh side of the store," he said.

As Fruchtenbaum has seen greeting departments in supermarkets changed over the years he also has seen the relationship between the retailer and supplier change.

"The relationships are far different today. We aren't selling anymore, but advising and consulting as to how retailers can improve sales in the whole side of the store," he said.

Mason added, however, that only about 20 mass retail chains, including some supermarkets, are working in a team approach and committed to category management. He expects that number to triple by the year 2,000.

Today, only about 10% of the retailers are technologically advanced enough to tie in to American Greetings' systems capabilities, said Fruchtenbaum.

One advantage American Greetings has in the Efficient Consumer Response initiative is that in addition to controlling business costs, it is solidly positioned to take advantage of the consumer-purchasing side of the business. "That is where the greatest benefits will be derived," Fruchtenbaum said.

To help retailers satisfy a "more discriminating and discerning consumer," Fruchtenbaum said it is important to make sure the right stockkeeping units get into every store.

"So while we strategize globally, we compete locally. We merchandise every store differently based upon the different demographics around the store, the store's strategy, and the stores actual sales results. That is the only way you can assure customer satisfaction when you have a very discerning consumer base," Fruchtenbaum added.