Warning: A couple of card sharks are around town, and they’re dealing 100 million cards a year. Add to that nearly 300 million bows, miles of discounted wrapping paper, scads of balloons, birthday napkins and other party supplies. And now, this pair of kings is opening a new 440,000-square-foot headquarters in Naperville.
But the ace in the hole for retailers Charles Cumello of Hinsdale and J. Bayard Kelly of Mt. Prospect is not a great poker hand but a great greeting card, priced at 39 cents every day. That card up their corporate sleeve helped their Factory Card Outlet build a 159-store empire that analysts estimate could earn $200 million in sales this year.
“I see the customer at the card rack reading a card, and then they come up and ask, `Are these cards really 39 cents?’ It’s the biggest question we get,” Cumello, 53, Factory Card’s president and CEO, said recently at the company’s Bensenville offices. ` “Yes,’ I tell them, `every day, every card is 39 cents.’ “
Outlet-priced cards, an expanding party ware business and the company’s apparent ability to tap its target consumers are keys to its success. But Cumello is not above displaying three ceramic Buddha figurines on his office shelf.
“Good luck, long life and richness,” Cumello read from the base of each fist-sized figure, which he bought on one of the company’s twice-yearly Asian buying trips. Laughing, he added, “If you’re a retailer, you can always use some help.”
Who knows, the charms may be working. The chain that began with one Buffalo Grove store in 1985 has continued to grow throughout the suburbs and is now established in 20 states. In the next two years, Factory Card Outlet plans to open 100 more stores.
It was Kelly, 66, the company’s founder and chairman emeritus, who initially hatched this house of cards. “The concept is so simple, it’s crazy,” Kelly said. “Stores wanted (suppliers to give them) free racks, free merchandise and a person to service and fill those racks every week,” Kelly said. “That was going into the price customers paid for cards.”
The result?
According to Kelly, “In just one decade, cards went from basically 25 cents to $1.50. Today’s average card is about $2.22.” Instead, Factory Card Outlet set out to eliminate all the extras that standard retailers were demanding.
Back in 1985, as president of Chicago’s Gallant Cards (now in Schiller Park), Kelly created a greeting card showroom in an industrial park in Rosemont to show his line to distributors. Somehow word got out about the showroom, and people went there wanting to buy retail.
“I did all the wonderful demographics and then rented a Buffalo Grove storefront close to my house to sell retail,” explained Kelly, who with his wife, Marjorie, had been longtime residents in adjacent Arlington Heights. “That was the beginning of it.” The very first Factory Card Outlet opened at Dundee and Arlington Heights Roads on June 5, 1985.
At the time, most cards at retail stores were priced at $1.25 to $1.50. But at Factory Card, customers paid only half that. (The 39-cents-per-card policy began in 1990.)
When the Buffalo Grove location proved successful, more shops were opened throughout the suburbs. They included sites in Villa Park, Rolling Meadows, Palatine, Hanover Park, Hoffman Estates, Niles, Bloomingdale, St. Charles, Tinley Park, Darien, Evanston and Beloit, Wis.
Before long, Kelly recognized a new niche in the industry: party and special-occasion supplies. The big party push that began in the early ’90s graduated into today’s party superstores.
“We made a major inroad when we decided four years ago to go into party ware,” Kelly said. A quick visit to the Palatine store bears out this move. From a 5,000-square-foot store in 1991, the shop has since exploded into 21,000 square feet of limbo-dancing, pinata-crashing, banner-waving, confetti-flying party gear.
Superstores were catching on in many retail categories. Chain bookstores. Jumbo hardware and home improvement centers. Super drugstores. “Retailers got a lot of buying power that way,” explained Gina Gavish, publisher of Party and Paper Retailer, a Connecticut-based trade magazine. “It’s way beyond mom and pop. It’s gone to a whole new level.”
Gavish estimates that 20 to 25 percent of this $9-billion a year party ware and greeting cards industry is in party superstores. “These superstores have taken a relatively sleepy market and made it dynamic,” Gavish said. The number of North American party superstores in 1991 was 413. In 1997, that figure has jumped to 1,070. And 37 percent of the owners say they plan to expand.
“The research says it’s not slowing down by a long shot,” Gavish said.
That potential for growth attracted Cumello, then-CEO of Waldenbooks, to Factory Card Outlet in 1995. “I saw a great card business married up with a party store and knew this could be the explosion of the book chains all over again,” said Cumello, who was brought on board to take over operations from Kelly. “I thought this would be exciting, getting in on the ground floor.”
So Cumello and his wife, Elizabeth, settled in Hinsdale, where the tree-lined streets reminded them of their former Connecticut home. Cumello learned the party and card business and says he did indeed find what he wanted.
“I tell everybody that, almost three years later, what I thought I was going to see here, I now know for sure it’s going to happen,” Cumello said. Since his arrival, Factory Card Outlet has added 100 stores to its ever-expanding chain.
“This is what superstores do to a category,” Cumello said. “They expand the category because you keep putting more and more product in front of people, and they keep buying more and more.”
Like grocery supermarkets, these party stores are huge, well-lit and offer shopping carts. Piped-in music plays non-stop in the background. In addition to those features, Factory Card Outlets are carpeted and are decorated with the bold, festive colors of their merchandise. A wall of bows graces one section, and nearby a balloon counter seems to have enough helium balloons to set the whole store afloat.
The shops are made pleasing for the stores’ No. 1 customers: women. Cumello and Kelly agree that the store customer base is 98 percent female. Kelly noted, “The only times we see men in our stores are two days a year: the day before Valentine’s Day and the day before Mother’s Day.”
And they prepare for the onslaught those two days bring. “We gear up for it, and at about 4 o’clock, all hell breaks loose,” Kelly said. “(Mall security) actually closed us one time for having too many people in the store.”
The gender difference is felt other times also. “I remember in one suggestion box there was a note: `Why don’t you have seats for little old men to sit on while little old women shop?’ ” Kelly recalled. “So now we do have benches in every store. Sometimes people can spend an hour and 45 minutes reading cards just to pick the right one.”
Party goods supplier Nick Clementi, CEO of Michigan’s Contempo Colours, also is aware of Factory Card’s appeal to women of all ages. “Most party stores target a 28- to 40-year-old woman who has two children,” Clementi said in a phone interview. “But Factory Card also draws the woman in her 40s or 50s who is a heavy greeting card shopper. They are one of the few retailers who is drawing from such a dual audience” because of offering both greeting cards and party ware.
Clementi said the company has bought party ware from his company from the beginning, but growth in the past few years has been major. “Now, once you’re in Charlie’s store, you’re not leaving,” Clementi added.
To better serve customer needs, Factory Card Outlet has instituted a new five-point customer pledge, guaranteeing such things as best prices, satisfaction, group and senior discounts, and a promise to accept competitors’ coupons.
But meeting customer needs may prove more difficult in the future. Hallmark’s Party Express division of party goods pulled its Disney- and Warner Bros.-licensed products as of Nov. 30 from Factory Card Outlet stores. So if young Mallory wants a Little Mermaid theme party or little Jordan wants a Bugs Bunny bash, their parents may be out of luck at Factory Card Outlet. According to publisher Gavish, when it comes to birthday parties, “Licensing is the name of the game.”
Cumello remains positive. “Hallmark doesn’t like us,” Cumello said. “I’ve been told they consider us competitors in the card business, and they’ve decided not to sell (party goods) to us for that reason.” Factory Card Outlets do not sell Hallmark greeting cards, but Cumello stressed, “We’re trying to work with licensees to see if we can get the product. It’s not a done deal yet.”
That change is just another major event for Factory Card Outlet this year. The company went public one year ago. The new Naperville headquarters at Interstate Highway 88 and Illinois Highway 59 is complete, allowing the firm to consolidate all operations under one roof, and the transition from Bensenville to the new corporate home is under way. And Kelly and the company’s former chairman, William Freeman, who helped finance its startup, were recently named Illinois/Northwest Indiana Entrepreneurs of the Year.
But there’s a little secret about Kelly. Truth be told, he never sends cards. Marjorie Kelly sends out plenty. Elizabeth and Charles Cumello do too. Carol Travis, the company’s vice president of investor relations, not only sends cards frequently but is famous for providing her Carol Stream summer block parties with pinatas. But Bayard Kelly?
“It’s funny, but I guess my dad and I really don’t send cards,” said son Jeff, distribution center manager. “I guess it’s because we’re around them all the time.”
In the scheme of things, it hardly matters. Either way, it seems Kelly and Cumello have played their cards right.
