Apple May Have Sentenced American Greetings Corp. To Death

by: Benzinga

By Louis Bedigian

If Lazy Joes and Lazy Janes can pick and send cards from home, they won't ever leave the house again.

What about Americans who weren't the inspiration for the humans in Wall-E? They will still leave the house. They can't help it; it's who they are. But if you were to give them a superior card-buying experience at home, they, too, would eventually cave, save gas, and abandon the likes of American Greetings Corp. (NYSE:AM-OLD).

This is a big problem for the card industry now that Apple (NASDAQ:AAPL) has unveiled what could be the single-most damaging app in the company's history: Cards.

Cards is a great concept: with it, users will be able to create their own greeting cards, which Apple will print and ship for a mere $2.99. I say “mere” because of the cost and the convenience. If I'm going to spend $3 to $4 at retail on a pre-made card, plus another $0.44 to send it, why wouldn't I at least consider the option Apple is providing?

That's just it – I would. And many other consumers will as well, which is why traders aren't reacting favorably to the news. Instead of buying into Apple, they're abandoning traditional card makers, including the aforementioned American Greetings. Yesterday afternoon, Shutterfly, Inc. (NASDAQ:SFLY) dropped nearly 20% before rebounding to a roughly 2% loss at the end of the day.

This doesn't mean that American Greetings should pack up the business and move onto something else. Apple's venture may be cool and exciting, but it's still a new, unproven idea that may not incur enough business to actually hurt American Greetings.

It could, however, grow the card industry by making it easier for consumers to buy cards – particularly those who don't normally buy them. As a guy, I kind of dread the whole process, and tend to wait until the very last minute to buy a card. (Budweiser (NYSE:BUD) illustrated this perfectly with a hilarious commercial.) By making it less painful, Apple might actually encourage me to buy cards more often.



Come to think of it, that sounds like a huge commitment. But in theory, Apple could encourage an infrequent card buyer (who isn't me) to purchase cards more often.

Hallmark and American Greetings should fight back by releasing comparable apps of their own. Not next month, not next week – right now. American Greetings has already made a free e-card app (for sending free e-cards), but that won't be enough to keep Apple at bay. (Though it's interesting to note that the e-card app was updated yesterday – coincidence?)

Hallmark's app is equally as weak; it allows you to log in and view your Gold Crown account info, view driving directions, and other trivial tidbits. Meanwhile, Shutterfly's app is little more than a digital photo album that allows you to share your images with others.

There might still be time to reduce the threat of Apple's incoming onslaught. But card makers have to act fast. If they respond as poorly as Blockbuster responded to Netflix (NASDAQ:NFLX), they'll eventually need to be acquired by a larger enterprise just to survive.

Hey DISH (NASDAQ:DISH) – any interest?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.