If discount stores find their

market share slipping in

the high margin party supplies

category, they won't

have to look far to understand

why. Rapid growth of party

superstores with their festive

atmosphere and broad selection

offer consumers an attractive

alternative to the limited

assortment and straightforward

merchandising typically

found at discount stores.

Party supplies stores such as

Party City, Factory Card Outlet

and The Big Party are raising

the bar for mass channel

competitors. For the time being,

though, price and convenience

are on the side of discount retailers,

as most of their stores still

don't face direct competition

from the relatively immature

party superstore segment. The fragmented party

supplies industry accounts for an estimated 21% of

category sales, while supermarkets account for 22%.

Mass merchandisers lead the pack with a 38% share

of the $1.5 billion industry, according to American

Greetings research.

The key to maintaining that lead is expanding

space for the category to offer a broader assortment

and communicating a stronger party message,

according to manufacturers. Both Kmart and

Wal-Mart are reportedly increasing space for the

category, while Target easily devotes twice the

space of its two largest competitors and comes

closest to creating a party store feel within the

party goods department of its stores.

At a Target store open little more than a year in

the south Cleveland suburb of Strongsville, the

chain lets customers know it's in the party business

with department signage near the front of the

store hawking "cards and party." Core supplies

such as plates, napkins, favors, balloons, small

helium-filled tanks and pinatas are merchandised

along a 44-ft. party wall. Target appeals to the

juvenile birthday segment of the category with a

strong assortment of licensed merchandise highlighted

by waist-high placards which extend from

the shelf and feature characters such as Hercules,

Wishbone and Barbie. Catering further to the

juvenile segment, Target has an assortment of

Lisa Frank-brand favors as well as novelty items

such as rubber snakes, spiders and lizards.

Gondolas running perpendicular to the main

party wall are loaded with greeting cards, giftware,

candles and gift wrap. The department also

has an entire valley devoted to Target's own Color

Burst line of color coordinated gift bags, wrap

and ribbon.

At a Greatland format store in the expansive

Sawgrass Mills mall near Ft. Lauderdale, Fla.,

party supplies is also emphasized,

although the department's

gondola configuration

requires a slightly different

presentation. The card and

party department is immediately

inside the front door

with gondolas parallel to the

store front. Cards occupy the

first two 32-ft. gondolas in the

six gondola department. After

cards, customers find a valley

of gift bags and basic party

supplies. There's also a valley

of the Color Burst line followed

by a valley of party supplies,

which includes an

extensive licensed offering,

party favors and pinatas.

Wal-Mart and Kmart don't

offer the selection of Target,

but both chains devote prime

space to the category and merchandise

it adjacent to greeting

cards. At a Super Kmart

open less than six months in

the Cleveland suburb of

Maple Heights, the retailer

devoted 20 ft. to supplies.

Plates and napkins are merchandised

vertically on angled

shelves to show off the designs

on plates. Basic colors are

mixed with licensed products,

including Looney Tunes,

Barbie, Speed Racer, Jurassic

Park, Sesame Street, Mickey

Mouse and Rugrats. There

was a very limited selection of

party favors, and customers

who wanted plastic utensils

had to visit another area of

the store.

Wal-Mart takes an almost

identical approach to Kmart.

At the chain's newest supercenter

in Fayetteville, Ark.,

party supplies are merchandised

adjacent to greeting

cards just inside the front door.

The category shares a 32-ft.

valley with candles. The assortment

of licensed product, with

the exception of Barney and

Rugrats, was fairly limited

even though juvenile birthday

is the top selling segment

among discount store shoppers.

Wal-Mart's offering of party

favors from Lisa Frank and

Party Play was more extensive

than at Kmart but considerably

less than Target's. One

Wal-Mart advantage is that the

department is near the bakery

and deli area so customers

don't have to go far to pick up a

cake or tray of sandwiches.

Expansion of the category

at Kmart and Wal-Mart will

likely help those chains capture

sales from customers

looking for a hot new license,

the convenience of one-stop

shopping and a low price.

However, other customers

are likely to find the festive

party superstore format irresistible

and could conceivably

forego purchasing supplies at

a discount store if a superstore

is nearby.

It's a situation Target finds

itself in with a store in Tampa,

Fla. The retailer shares a power

center with a Factory Card

Outlet store that opened on

Oct. 11.

Nearly half of The Factory

Card Outlet's 12,000-sq.-ft.

footprint is devoted to party

supplies. One entire 80-ft. wall is

outfitted with basic supplies,

including 32 ft. of solids for

everyday and general

entertaining use. Another 20 ft.

is devoted to plastic table

covers. In addition, there are

four 60-ft. gondolas stocked with

supplies including virtually all of

the same licenses found at

discount stores as well as an

enormous assortment of

patterns, solids and themed and

milestone birthday offerings.

Color-coordinated utensils

occupy 12 ft., and 20 ft. is

dedicated to balloons. Clearly,

Factory Card Outlet is a

destination store, and that's the

way president and ceo Charles

Cumello wants it.

The Big Party, another

superstore operator which

opened a similar size mallbased

store a month before

FCO opened its newest Tampa

unit, also offers consumers an

enormous selection of product.

The store has a warehouse feel

with its exposed ceiling and tall

metal shelving. One of the

biggest differences is the way

party supplies are merchandised.

Supplies are not located in one

spot. Instead, they are grouped

in clusters depending on the

theme.

Everyday supplies occupy a

100-ft. section that wraps around

an outer wall and extends along

a rear wall. Supplies such as

juvenile birthday, adult birthday,

decorative prints, sports-themed

product and general entertaining

are all merchandised in separate

departments along with related

party favors and decorations.

Nevertheless, discount stores

still dominate the category, and

leading manufacturers are

aggressively pursuing the

channel with new designs and

logistical capabilities that

superstore operators don't yet

possess.

"We see a lot of future

growth within the mass segment,

which is why we are

putting resources there," said

Alison Stern, manager of sales

and marketing services at

Creative Expressions. The

company offers a variety of

licenses, including new ones

such as Dilbert and Godzilla, as

well as an expanded value line

for discount retailers. "Typically,

we had a more limited offering in

our value designs, but for 1998

we have expanded our value

offerings to meet the needs of

mass retailers."

American Greetings is also

aggressively pursuing discount

store customers through its

DesignWare business unit,

announced lsat January.

"DesignWare brings to our

retailers a dramatically expanded

party goods product offering

with flexible merchandising

options provided by a dedicated

product development, sales and

manufacturing team," said Peter

Fahrenkopf, executive director of

party good sales.

Hallmark targets mass retailers

with its Party Express line and

forecasts that paper partyware

sales will grow by 10% in 1998.

COPYRIGHT 1997 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
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