It’s Wrapping Up to Be Poor Season for Gift Paper

As the economy goes, so go sales of... gift wrap?

This Christmas looks to be one of the worst in years for retailers, and that’s putting a wrinkle in the $3-billion wrapping paper industry, which already operates on paper-thin margins. Sales of gift wrap this holiday season are rolling up to be the lowest in more than a decade.

Peter Appert, an analyst with Deutsche Banc Alex. Brown in San Francisco, tracks gift wrap sales as a predictor of holiday sales on the theory that wrapping paper demand rises and falls with the economy. His verdict for this year: “On our scale of ho-ho, ho-hum and humbug, 2001 is clearly shaping up as a big humbug for both retailers and certain gift wrap manufacturers.”

The nation’s recession is a major contributor to the slump in wrapping paper. But certain retailing trends and the popularity of alternative types of packaging have helped to push the business of selling rolls and sheets of decorative wrapping into what many in the industry describe as a period of flat sales.

“It is a mature market. We are not seeing the growth that has taken place in other forms of retail packaging such as bags,” said John Gordon, president of Bonita Pioneer Inc., a Portland, Ore.-based manufacturer of wrapping paper and other packaging products.

Some of the items expected to be popular this year--credit-card-size gift cards, compact music discs and DVDs--are smaller gifts that don’t lend themselves to elaborate coverings and fit into gift bags.

Gift bags are the stars of the industry, growing at an annual rate of 6% to 10%, according to Hallmark Cards Inc. and American Greetings Corp., two of the largest makers of packaging products.

“They are easy and quick to use, and people like the convenience of bags,” said Cathy Mishek, a Hallmark spokeswoman.

Appert said his index is a good indicator of sales of nondurable goods at department stores, mall-based stores and mass merchants such as Wal-Mart Stores Inc., because big-ticket items such as autos and appliances typically aren’t gift-wrapped, even when given as gifts.

“Presumably, if retailers are optimistic about sales prospects for Christmas, they will be aggressive in ordering this highly seasonal product,” Appert said.

Based on a survey of manufacturers’ and retailers’ orders for shrink-wrapped gift paper rolls, Appert estimates that overall Christmas season retail sales will be relatively flat, barely rising 0.2% this year over a year ago.

Appert’s data also show that the wrapping paper industry has been in a long downward slide.

During the 1980s, gift wrap sales rose at a faster pace than nondurable retail sales, according to Appert’s Gift Wrap Indicator report. But by 1996, the rate of growth fell below the retail sales line.

Gift wrap is a $3-billion retail market, according to estimates by Hallmark. The greeting card companies such as Hallmark and American Greetings have a big chunk of the business, but there is no single dominant force and market share is spread across several dozen regional and small companies.

Gordon, whose closely held company is a supplier to the Pacific Northwest, attributed the slowdown to factors that range from the popularity of small gifts to the rise of Internet gift ordering that typically does not include fancy packaging, to department stores and specialty shops eliminating free gift-wrapping to cut costs.

At best, the wrapping paper industry is growing very slowly, according to American Greetings. The Cleveland-based company’s data show that nationwide sales of wrapping paper rolls per household have grown 2% since 1999, spokeswoman Laurie Henrichsen said.

Though there is no hard data, some in the industry speculate that the rapid growth in sales of gift cards, which require only a envelope as wrapping, have contributed to slowing gift-wrap sales.

A survey commissioned by Standard Register, which develops gift card programs for retailers, found that nearly half of U.S. consumers used a gift card during the last year.

The holiday season remains the No. 1 gift-card-giving occasion, according to the phone survey of 2,000 random consumers conducted this year.

“With gift cards becoming so popular, you would think there would be fewer gifts to wrap,” Standard Register spokeswoman Tara Talley said.