Greeting-Card Business Is Not All Rosy and Sweet

Heidi and Susie Bauer had a 1970s Sherman Oaks childhood steeped in crafts.

While their friends were playing sports and going to the mall, the Bauer sisters were encouraged to design their own clothes, toys, gifts and even some of the furniture for their rooms.

Their self-sufficiency has served them well. With no commercial design or publishing experience, they started a greeting card company in 1993, naming it Rock Scissor Paper, after their favorite game as children.

“We had both worked for other people,” said Susie Bauer, 39. “But there was something in us that made us want to create something of our own.”

Last year Rock Scissor Paper, based in a San Fernando warehouse, had $600,000 in sales, and its products -- emblazoned with the Bauers’ colorful retro designs -- made it into 1,100 gift and stationery shops across the country.

The Bauers had 11 years of growth before sales flattened in 2005. They see it as part of an industrywide slowdown and are making changes.

They are moving into new products and new ways of marketing their designs. They have introduced a line of pins, spiral-bound notebooks for children and coloring books for adults, featuring architectural and interior design motifs. They have also licensed their artwork for party goods.

But creativity may not be enough. It also takes perseverance for a small player to stay afloat in the $7.5-billion greeting-card industry. As in many businesses, it has become tougher for independents to thrive at a time when mass merchandisers have eclipsed stand-alone retailers.

The card business is also facing an aging customer base.

“Teens and young adults don’t have a history of sending something by mail,” said Erik Thoresen, an analyst at Mintel International Group, a Chicago market research firm. “It’s a tradition that is slipping away.”

A 2004 Mintel report forecast that the industry’s revenue, adjusted for inflation, would decrease 9.7% by 2009.

The two companies that dominate the industry are feeling the pinch. Hallmark Cards Inc. reported sales of $4.2 billion for 2005, down from $4.4 billion the previous year. American Greetings Corp., with $1.9 billion in sales, was also slightly down.

Third-largest was Paramount Cards Inc., based in Rhode Island. But last month it closed down.

The card business is spread among about 3,000 companies, according to the Greeting Card Assn. Most are small and many don’t survive past five years.

The Bauer sisters, with only three employees, help with shipping and other chores at the warehouse. They also run their retail Web business, which last year accounted for about 22% of their revenue.

The sisters are used to working as a unit. When they were growing up, they spent a lot of time together creating elaborate toy worlds.

“Our favorite was an entire pet hospital that we made,” Heidi Bauer, 36, said, “including a detailed X-ray machine, charts, medical records. Our stuffed animals were the patients.”

The two women laugh at the memory. But that period was a difficult time in their lives. For much of their childhood, their mother was in and out of real hospitals, struggling with cancer.

“We learned to do things on our own,” Susie Bauer said.

Their mother died in 1979. Their father’s death in 1992 helped sparked the creation of their business.

At the time, Susie Bauer was managing a store for women’s clothing company Esprit, and Heidi Bauer was a personal assistant to the family of the late singer Roy Orbison.

They created a handmade memorial card upon their father’s death that was sent out in lieu of a public funeral. The year before, they had created another card, using Japanese paper and stitched binding, as Susie Bauer’s wedding invitation.

People who saw the cards asked whether the Bauers would create invitations for them. A year later, when the store Susie Bauer was managing was destroyed in the Northridge earthquake, they used her severance check to go full time.

Their designs were geared to the under-35 crowd. Many of their design motifs strongly recall the 1950s and 1960s. There are kidney-shaped swimming pools, martini glasses, tiki masks, starburst clocks and abstract patterns inspired by the Atomic Age.

“It’s not nostalgia,” Heidi Bauer said. “What we use are cues from that design period that young people have adopted as hip and cool. It’s a visual language that Nickelodeon and Old Navy uses.”

“Their designs are eye-catching, different from anything else we carry,” said Natalie Esser, lead gift and stationery buyer for Vroman’s Bookstore, an independent operation with three stores in Pasadena.

Esser did not have sales figures for the cards, but she said they were doing well. “Otherwise, I would have gotten rid of them by now.”

The sisters have tried to get into nationwide chains, including Target Corp., but their efforts have not been successful, they said.

“The major distribution channels are very difficult to break into,” said Valerie Cooper, executive vice president of the Greeting Card Assn. Mostly, she said, big retailers get their cards from Hallmark or American Greetings.

The Bauers have gotten occasional offers to sell Rock Scissor Paper to larger firms.

“There are people who take joy in building a business and then selling it,” Heidi Bauer said. “But that’s not us, at least not right now.”

“This is a business that has allowed us to build something, ourselves, and be artists, whether it’s making cards or designing a trade show booth,” Susie Bauer said. “At this point, we can’t imagine what else we might do.”