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Stationery Refuses to Remain Stationary

An Analysis of the Stationery Industry

4/28/2011

Jim Geraci Dr Dugal

Strategic Management


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Executive Summary

The stationery industry is an industry that has been constantly adapting to market preferences for

hundreds of years. Evolving from simple pen and paper products, the stationery industry now includes

greeting cards, variety of office products and personal crafts. It is impacted by the advent of technology

that has made communication quicker and easier than traditional methods. However, while the

industry is considered mature in many developed countries, there is still a powerful potential for growth

through market penetration and expanding into new and developing markets. Data suggests that the

global stationery market will grow at 4.25% over the next few years. While this is not the most lucrative

business to enter into, established companies will enjoy stable performance in the future.

In order to enjoy this performance, the industry will need to follow these growth drivers to succeed:

They will need to continually improve the quality of their products through research and development.

They will need to focus on international expansion, focusing mainly the Asia-Pacific and Latin America regions.

They will need to attack niche markets by focusing on personalization, do-it-yourself and green initiatives.

Many stationery manufacturers can take advantage of changing consumer attitude towards sustainable

development. Many consumers are now wishing to purchase “green” items at a premium and many

businesses are requiring the use of recycled stationery products as part of their own “green” initiatives.

The companies within this industry must look inward to improve efficiencies and reduce cost and

provide products that are friendly to the environment.

To put it plainly, the stationery industry is probably not an attractive industry to enter if a company is

looking to start out. Established players will see this industry as a cash cow on Boston Consulting

Group’s Matrix due to high market share and low market growth. They will enjoy incremental growth

through expansion into international markets and consolidation. Stationery is an industry that refuses

to remain stationary!


φ

Introduction to the Industry and Industry Evolution

There is no generally accepted history of how the stationery industry was created or how it has evolved

since its inception but there is substantial information about the past 50 years of stationery. Stationery

relates more often than not to paper, writing utensils, postage stamps and anything else really that can

be utilized to produce correspondence, or indeed aid their journey from the sender to receiver of those

correspondence. Though decreasingly popular in western culture, stationery has been an important

part of good social etiquette, particularly since the Victorian era.

The stationery industry is an industry that refuses to go away. Even with the advent of computers and

other technology, the need for pens, pencils and markers remains strong; though not as strong as it

once was. The global stationery market grew at a steady rate of 3.8% from 1999 to 2003 and is

expected to increase further in the next few years (Datamonitor, 2004). To continue enjoying the

growth, stationery companies will need to focus on emerging markets such as India, China, and Latin

America which promises significant growth over the next 10 years (International Monetary Fund). What

started as an industry that mainly consisted of writing instruments and paper products has consistently

transformed throughout the years to keep up with consumer demands.


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Market Size, Industry Growth and Segment Trends The global stationery market grew by 4.1% in 2003 to reach a value of $80 billion. The strongest growth

was in 2000 when the market grew by 5.0% (See Table 1 and Figure 1) (Datamonitor, 2004).

The global stationery market segment is divided into 4 geographical with 3 of those sectors combining to

total 92% of the total market share by value (See Table 2 and Figure 2 for break down).

Table 2: Global Stationery Market Segmentation

Geography % Share

Europe 33.9%

Asia Pacific 29.40%

United States 28.40%

Rest of the World 8.30%

Total 100.00%

% Share

Europe Asia PacificUnited States Rest of the World

Figure 2:

Table 1: Global Stationery Market 1999-2003

Year $ billion % Growth

1999 68.9

2000 72.3 5.00%

2001 74.1 2.60%

2002 76.8 3.60%

2004 80.0 4.10%

Annual Growth 3.8%

Source: (Datamonitor, 2004)


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In the developed countries, the growth is slowing because of the saturated and crowded market

for stationery products. There is future growth potential in Latin America, South America and Southern

Asia. In Latin and South America, many countries did not have a strong free market system with which

they could compete on a global scale. However, since the early 1990s when many of the Latin American

countries entered an agreement similar to NAFTA, called Mercosul, these countries have experienced

exponential growth in all industries including Stationery (Bomeisel, 1996).

Several markets are growing but those in emerging markets are growing at a faster pace.

Between 1999 and 2003, the Asia-Pacific market grew 2.7% but was forecasted to grow an average of

4.7% between 2003 and 2007 (Datamonitor, 2004). This represents the greatest growth potential for

those companies in the stationery industry but they must be wary of Chinese companies who may

undercut their prices. Figure 3 shows a breakdown of the market forecast from 2003 to 2008 according

to several 2004 Datamonitor industry analyses.

Major Players/Competition

Newell Rubbermaid Inc.

Newell Rubbermaid is a manufacturer of housewares, hardware, home furnishings, juvenile products,

hair products and office products. For the fiscal year ended in December 2003, the company generated

2.00%

3.00%

4.00%

5.00%

6.00%

2003 2004 2005 2006 2007 2008Global Asia-Pacific Europe United States

Figure 3 - Market Value Forecast 2003-2008


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revenues of $7.75 billion. The company brands include Rubbermaid, Calphalon, Mirro, Amerock,

Levolor, Little Tikes, Graco, Century, Goody, Rolodex and Sanford. Newell Rubbermaid is

headquartered in Alpharetta, Georgia.

Hallmark Cards, Inc.

Hallmark Cards Inc is an international company specializing in the retail of greeting cards sold under

brand names such as Hallmark, Shoebox, and Ambassador. In fiscal 2002, Hallmark reported net sales of

$4.2 billion. It produces television movies through its Hallmark Entertainment unit and has a television

series, the Hallmark of Fame. The company operates in more than 100 countries and publishes in more

than 30 languages. It also owns Binney & Smith, maker of Crayola brand crayons. The company is

headquartered in Kansas City, Missouri.

Société BIC

Societe BIC is a manufacturer of consumer products, including pens, lighters and shavers. For the fiscal

year ended in December 2002, the company generated revenues of $1.56 billion. The company’s

primary revenue source is its stationery business, which generates approximately half of its annual

revenues. In addition to pens, this business produces pencils, highlighters, markers and correction

products. Societe BIC is headquartered in Clichy, France.

Compagnie Financière Richemont SA

Compagnie Financière Richemont is one of the world’s leading marketers of luxury goods. For the fiscal

year ended in March 2003, the company generated revenues of $3.94 billion. The company markets

Cartier jewelry, Piaget and Baume & Mercier watches, Alfred Dunhill leather goods and Montblanc pens.

It is also the owner of jeweler Van Cleef & Arpels. Richemont is headquartered in Geneva, Switzerland.


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Industry Financial and Operational Ratios

Profitability Ratios

Return on Total Assets

푷풓풐풇풊풕풔풂풇풕풆풓푻풂풙풆풔푻풐풕풂풍푨풔풔풆풕풔

.0869886 This ratio is considered an indicator of how effectively a company is using its assets to generate earnings before

contractual obligations must be paid. Overall, the stationery industry provides a decent return at 8.7%. Richemont, which specializes in luxury items, maintains a 14.5% return which

means other players may be able to improve their position by adopting a higher end strategy.

Return on Stockholder Equity

푷풓풐풇풊풕풔풂풇풕풆풓푻풂풙풆풔푻풐풕풂풍푺풕풐풄풌풉풐풍풅풆풓 풔푬풒풖풊풕풚

.1687463 This ratio is considered an indicator of how profitably the

company is utilizing shareholder’s funds. At close to 17% the stationery industry is earning a respectable return for its

shareholders. Once again, Richemont’s luxury items allow it enjoy the highest ROE which means other stationery companies may be able to improve their position by adopting a higher end

strategy.

Operating Profit Margin

푬푩푰푻푺풂풍풆풔

.1408476 This ratio measures the firm’s profitability from regular

operations. At 14% the stationery companies have a respectable margin. Futures circumstances will affect how well

the industry can maintain this ratio. If companies start to implement more technology into their products they may start

to see degradation in this ratio.

Net Profit Margin

푷풓풐풇풊풕풔푨풇풕풆풓푻풂풙풆풔푺풂풍풆풔

.1141395 This ratio measures the firm’s net profit as a percentage of total sales. At 11% the stationery industry is still enviable to many in

the technology industry but may not be as high as those in the service industry. Established stationery companies will have to be cognizant of foreign competition coming from China. These companies have been known to pollute the market with cheap

inferior products. While the stationery industry may not be the most profitable, it is a stable industry that offers decent

returns. Stationery companies will need to understand that they will need to change to keep pace with

consumer attitudes. Whether this includes utilizing technology to reach economies of scale, outsourcing

operation to take advantage of lower manufacturing costs, or increasing quality, these decisions will

affect the profitability ratios.


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Liquidity Ratios

Current Ratio

푪풖풓풓풆풏풕푨풔풔풆풕풔푪풖풓풓풆풏풕푳풊풂풃풊풍풊풕풊풆풔

1.8477824 This ratio measures the net return on total investments

of the firm. Almost all of the companies are able to cover their short-term debts with their current assets. The exception of this is Richemont which is below 1. Surprisingly, BIC has close to a 4 which may indicate they are going to make some acquisitions in the near

future.

Quick Ratio

푪풖풓풓풆풏풕푨풔풔풆풕풔 − 푰풏풗풆풏풕풐풓풚푪풖풓풓풆풏풕푳풊풂풃풊풍풊풕풊풆풔

.9084587 This ratio is an indicator of a company's short-term

liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid

assets. The higher the quick ratio, the better the position of the company. Once again, the stationery

industry performs admirably with the sole exception of Richemont which has to do with their high level of

inventory. The stationery companies seem to be very liquid with the exception of Richemont which is bringing the

totals down. This has to do with Richmond’s excessive inventory and BIC’s cash reserves. Calculations

can be found in Appendix A.

Buyers and Suppliers Many of the companies in the stationery industry sell their products through two different outlets:

Office Supply Superstores and Greeting Card Stores.

Office Supply Superstores

Many of the buyers of stationery products are office supply superstores. These superstores provide a

one-stop-shop for the consumer and sell several different categories, including but not limited to:

writing utensils, craft supplies, imprintables, business stationery, blank books/journals, frames, and

calendars/date books.


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Established Sales International Outreach Source

1986 $18.2 billion 22 countries (Staples, Inc)

1988 $8.9 billion US and Mexico (Office Max, Inc)

1986 $11.6 billion 53 countries (Office Depot)

1962 $419 billion 15 countries (Wal-Mart Stores, Inc)

Greeting Card Stores

Greeting card stores focus mainly on the paper category of the stationery market. These stores allow

customers to buy greeting cards as well as other stationery products such as journals and scrapbook

supplies.

Established Sales International

Outreach

Source

1906 $1.64 billion 3 countries (American Greetings)

1910 $4.4 billion 100 countries (Hallmark, Inc)

Industry Value Chain and Vertical Integration

An industry value chain is a physical representation of the various

processes that are involved in producing goods (and services),

starting with raw materials and ending with the delivered

product.

Figure 4 – Porter’s Industry Value Chain


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Firm Infrastructure Each company must maintain a competitive structure that will allow them to deal with market changes

quickly and effectively. Through effective use of ERP, advanced planning and other systems, each

company will be able to identify internal and external opportunities and threats.

Human Resource Management Each company must hire the most qualified individual that will provide value to the end product.

Richemont may not hire someone who is very experienced in plastics because many of their pens are of

higher value and use a different material.

Technology Each company must keep abreast of technological advances. These advances could be through newer

processes or newer software which will allow each company to gin efficiencies while providing more

value.

Procurement Each company will need to maintain good relations with their suppliers to prevent possible disruptions

to the supply chain. They must also be cognizant of any regional turmoil or impending government

regulations that may affect their suppliers.

Inbound Logistics Each company will need to have real-time integrated scheduling, shipping, warehouse management and

advanced planning and scheduling across the company and its suppliers. They will need to maintain

systems that will provide information on where to source their products as well as the most effective

way to distribute their resources globally.

Operations Each company will need integrated information exchange, scheduling and decision making in in-house

plants, contract assemblers and component suppliers. Many of these companies will have a core


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competency in their own particular area. For example, BIC core competency is in their injection molding

process, which allows them to create a high volume of product at the highest possible quality.

Outbound Logistics Each company must utilize their ERP systems to its fullest to help facilitate the shipping of products out

to their customers. These systems will help the company get their product to their destination in the

most efficient and effective way possible. Systems will allow the companies to load the trucks more

efficiently and provide them with the most efficient route.

Marketing & Sales Stationery companies must market to two different segments: their customers (retail stores) and the

consumers. Each stationery company must effectively leverage their strengths communicating through

trade publications as well as advertisements.

Service Each company must provide easily accessible customer service. This can be achieved through online,

telecommunications or standard mailing. Stationery companies are starting to utilize their websites and

social media to make an impact with the consumer post-purchase.

Technology and Substitute Products

Over the years, technology has forced the stationery industry to adapt to a whole new paradigm. As

early as 2000, a stationer was well equipped if they had a good color printer and a visible print ad

campaign. Most stationery retailers currently must be able to create exclusive, high quality, resalable

products that can’t be purchased elsewhere (Baxter, 2007).

The Impact of the electronic age on stationery industry can at best be rated as moderate. While there

have been a few traditional segments such as greeting cards which have taken a direct hit, computers

and advanced gadgets have in a way, expanded the scope of the entire industry, creating a new category


υυ

of consumables such as papers, labels, PC covers, disks, disk storage containers, cleaners and mouse

pads. While electronic organizers and PDAs have revolutionized the way for information storage and

access, they can never completely replace the need for paper-based stationery such as books, notepads,

and message notes.

With electronic means of communication fast turning out to be the norm in our school, home and office

environments, stationery manufacturers have been repositioning their offerings, often underlining the

'personal' aspects of traditional product lines. The trend is readily evident among the makers of fine

writing instruments and greeting cards.

Other possible avenues stationery manufacturers can explore is digital stationery. An example of this

could be an electronic notepad which will allow a customer to write on a digital screen which can then

store the information for future reference. This can then be uploaded into a computer where what you

have written and drawn can be converted into searchable text and graphics. Advantages to offering this

or similar products include: less use of natural resources, easily accessible data, less need for storage,

and more manageable with less bulk. Disadvantages to the electronic note pad are: high investment

costs, possibility of low acceptance, and not as profitable as pen & paper.

Regulatory Issues and Developments

The stationery industry is fairly immune from governmental regulations in all major regions. There may

be some “green” regulations that may affect the content of some products but most stationery

manufacturers have implemented these changes long before the regulations we introduced. Other

regulations such as the Consumer Product Safety Act require manufacturers to test and certify their

products as safe according to the stipulations in the regulations (Consumer Product Safety Act).

Other Issues and Concerns Impacting the Industry


υφ

Sustainable Development Many stationery manufacturers can take advantage of changing consumer attitude towards sustainable

development. Many consumers are now wishing to purchase “green” items at a premium and many

businesses are requiring the use of recycled stationery products as part of their own “green” initiatives.

Green items can be defined as items that are manufactured with recycled material, are carbon neutral,

and are not exploiting cheap labor in third-world countries. Manufacturers must carefully consider cost

while producing green products. While they may demand a slight premium over non-green products, it

may cost considerably more to purchase the recycled raw materials. The shift in consumer attitudes

towards greener products will shape where the industry is heading in terms of the products it will offer.

Stationery manufacturers must also look inwards to when it comes to sustainability. They can look to

change business processes to improve efficiency and reduce waste of business operations. This can

include a reduction of paperwork required to run the business or a telecommuting program which will

allow workers to save money and gas. Stationery companies can also make their operations more eco-

friendly by installing Compact Fluorescent Light bulbs, have an effective climate control, reduced water

waste, and other building improvements. These investments into their building’s operations can

provide significant cost savings to companies as energy costs are on the rise.

Future Growth Drivers

Continued Quality Improvement One way stationery companies can continue to grow is through natural evolution of product lines. By

continually improving upon products already provided, customers will be compelled to buy more

products at potentially higher margins. An example of a continued quality improvement could be seen

as BIC’s Easy Glide technology. Through its research and development, BIC has come up with a way to


υχ

make writing more enjoyable through a smoother writing experience. This has led to growth in sales

and may attract those who have been disappointed with previous writing instruments.

International Expansion Stationery companies will also need to focus on tapping the international market for growth.

Asia-Pacific According to DataMonitor, the Asian-Pacific region has grown stationery sales 25.7% (about 4.7%

annually) from 2003-2008 which provides an attractive opportunity for expansion. The Asia-Pacific

stationery market is the second largest regional, accounting for just over two-sevenths of the global

market’s value in 2003. The region is increasingly being targeted by the large European and American

manufacturers, many of whom have moved manufacturing facilities into the region in order to benefit

from the lower production costs the region can offer. In addition, domestic players are benefiting from

the relatively high growth rates experienced within the last few years (Datamonitor, 2004).

Latin America According to the IMF, GDP in Latin America will be growing at an annual growth of about 4% with Brazil

(4.2%), Bolivia (4.5%), Columbia (4.5%), and Panama (6.3%). Stationery companies should market their

lower end products in these developing countries (International Monetary Fund).

Niche Markets

Personalization

Personalization continues to be a huge trend across many product categories, as it has really tapped into

the consumer's desire to make a product special while also being able to test out their own creative

abilities. Thanks to advances in digital technology, photos are increasingly being employed to enhance

and to customize a variety of stationery items. Personalization can make any product feel and look more

special which enables the consumer to have a greater connection with their purchase.


υψ

Do-It-Yourself

Another offshoot of personalization is the "DIY" (do-it-yourself) category, which continues to grow and

expand. This is true in both physical and digital formats where cards, boxes, packaging and other paper-

based products are created by hand, as well as in scrapbooking and memory-making where digital

products are entering the market in a big way

Green Initiatives

Green is here to stay and is being embraced by more stationery companies as an enduring mindset. The

adoption of green is widespread both in product and in the workplace, and is being accomplished

without sacrificing great design. Sustainably designed and produces products are good for people, for

the planet and for profits. As consumers demand more value from their products and vendors demand

more sustainable packaging and production, we see this category only growing more important every

year.

Differentiation

By design, stationery products industry has been characterized by high sales volumes and low profit

margins. Nevertheless there exist a few high-profit offerings, particularly in the writing instrument

segments such as fountain pens and luxury pens. Alongside the conventional market forces such as

quality and price, variety has of late, emerged as a major factor in consumer's purchase decision. A quick

glance at a cross section of any product group/segment reveals a wide choice available to the customers

in terms of their specific requirements, budget and preferences (Krassner, 2010).

Outlook for the Industry

While the stationery industry is considered mature in many developed countries, there is still a powerful

potential for growth through market penetration and expanding into new and developing markets. In


υω

developed countries, stationery manufacturers will need to find new ways to make their products

appealing to customers; this could include targeting niche markets and/or strategic price reduction. In

new and developing markets, the stationery industry will need to provide high quality stationery item at

a relatively low cost. The Asian-pacific region seems poised for the highest growth over the next few

years, but these companies also shouldn’t discount the Latin American market either. Companies that

take advantage of free trade laws in Latin America will be rewarded with tremendous growth

opportunity.

With technology advancing so rapidly, stationery companies will need to continue to find ways to be

relevant. Whether they embrace technology and create electronic products that function as pen and

paper or they focus on creating more niche products and open up new market segments, stationery

companies face an uphill battle. However, if they are able to successfully overcome these issues, the

stationery companies will continue to have solid growth of both sales and profits.


υϊ

Bibliography American Greetings. (n.d.). American Greetings: About us. Retrieved April 27, 2011, from American

Greetings: http://corporate.americangreetings.com/aboutus.html

Baxter, C. (2007, May). Brave New World... Again. Gifts & Decorative Accessories, pp. 56-61.

Bomeisel, P. (1996, February 1). Emerging markets: doing business in Latin America. Retrieved March 21, 2011, from PAPER, FILM & FOIL CONVERTER (PFFC): http://pffc-online.com/mag/paper_emerging_markets_doing/

Consumer Product Safety Act. (n.d.). Retrieved from Consumer Product Safety Commission: http://www.cpsc.gov/businfo/cpsa.pdf

Datamonitor. (2004). Global Stationery. Datamonitor.

Datamonitor. (2004). Stationery in Asia-Pacific. Datamonitor.

Hallmark, Inc. (n.d.). Corporate Information. Retrieved April 27, 2011, from Hallmark, Inc: http://corporate.hallmark.com/Company

International Monetary Fund. (n.d.). World Economic Outlook Database, April 2011. Retrieved April 18, 2011, from International Monetary Fund: http://www.imf.org/external/pubs/ft/weo/2011/01/weodata/weorept.aspx?sy=2009&ey=2016&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=75&pr1.y=15&c=311%2C336%2C213%2C263%2C313%2C268%2C316%2C343%2C339%2C273%2C218%2C278%2C223%2C283%2C228%2C288%2C233%2C293%2C238%2C

Krassner, K. (2010). Word on Stationery. Gifts & Decorative Accessories, pp. 140-155.

Masters, G. (1998). The writing is on the wall. Discount Merchandiser, 81.

Office Depot. (n.d.). Investor Relations. Retrieved March 21, 2011, from Office Depot, Inc: http://investor.officedepot.com/

Office Max, Inc. (n.d.). News Releases. Retrieved March 21, 2011, from Office Max: http://officemax.mediaroom.com/index.php?s=43

Staples, Inc. (n.d.). Investor Relations. Retrieved March 21, 2011, from Staples, Inc: http://investor.staples.com/

Wal-Mart Stores, Inc. (n.d.). Press Releases. Retrieved March 21, 2011, from Wal-Mar Stores, Inc: http://walmartstores.com/pressroom/news/


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Appendix A: Financial Ratios Worksheet

Profitability Ratios

Figures in Millions

Newell Rubbermaid

($) Societe BIC

(€) Richemont

(€) Average Return on Total Assets

푷풓풐풇풊풕풔풂풇풕풆풓푻풂풙풆풔

푻풐풕풂풍푨풔풔풆풕풔

2856,423.9

.0443655

144.92,029.1

.0714109

1,0767,411

.1451895

.0869886

Return on Stockholder’s Equity

푷풓풐풇풊풕풔풂풇풕풆풓푻풂풙풆풔푻풐풕풂풍푺풕풐풄풌풉풐풍풅풆풓 풔푬풒풖풊풕풚

2851,782

.1599326

144.91,172.1

.1236242

1,0764,832

.2226821

.1687463

Operating Profit Margin

푬푩푰푻푺풂풍풆풔

574.95,577.6

.103073

2161,562.7

.1382223

9825,418

.1812476

.1408476

Net Profit Margin

푷풓풐풇풊풕풔풂풇풕풆풓푻풂풙풆풔푺풂풍풆풔

2855,577.6

.0510972

144.91,562.7

.0927241

1,0765,418

.1985971

.1141395

Liquidity Ratios

Figures in Millions

Newell Rubbermaid

($) Societe BIC

(€) Richemont

(€) Average Current Ratio

푪풖풓풓풆풏풕푨풔풔풆풕풔

푪풖풓풓풆풏풕푳풊풂풃풊풍풊풕풊풆풔

2,182.11,759.5

1.2401818

1,208.5352.9

3.4244828

2,0282,308

.8786828

1.8477824

Quick Ratio

푪풖풓풓풆풏풕푨풔풔풆풕풔 − 푰풏풗풆풏풕풐풓풚푪풖풓풓풆풏풕푳풊풂풃풊풍풊풕풊풆풔

2,182.1 − 688.21,759.5

.849048

1,208.5 − 486.1352.9

2.0470388

2,028 − 2,4222,308

-.1707105

.9084587

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