Gift, Novelty & Souvenir Stores
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Industry Overview
The US gift, novelty, and souvenir store (gift store) industry includes about 30,000 stores with combined annual revenue of about $18 billion. Major companies include Hallmark, Spencer Gifts, and Disney Stores (a division of The Walt Disney Company). The industry is fragmented: the top 50 companies account for about 30 percent of sales.
Competitive Landscape
Consumer spending, special occasions, and tourist travel drive demand. The profitability of individual companies depends on effective merchandising and the ability to generate store traffic. Large companies have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by selling specialty products, providing superior service, or delivering a unique customer experience. The industry is labor-intensive: average annual revenue per worker is about $60,000.
Gift stores compete with a wide range of businesses because they stock merchandise across many categories. Major competitors include mass merchandisers, department stores, Internet retailers, home shopping channels, warehouse clubs, and toy stores.
Products, Operations & Technology
Major products sold by gift stores include souvenirs and novelty items (25 percent of sales), seasonal decorations (12 percent), greeting cards (10 percent), and giftware (5 percent). Novelty items include gift baskets and pre-filled balloons. Seasonal decorations include decorative cups, plates, and napkins. Giftware includes glassware and vases. Gift stores may also sell home accessories and provide services such as gift-wrapping and delivery.
Gift retailers include national and regional chains and independent retailers. Hallmark stores operate through licensing agreements with independent owners. The majority of companies operate a single location. Locations include strip malls, indoor shopping malls, resorts, hospitals, museums, and airports: souvenir stores may seek locations off interstates or near tourist destinations. Companies consider market demographics, neighboring tenants, visibility, traffic counts, major roadway access, and proximity to competitors when selecting new locations.
The average size for a gift store is 2,400 square feet, while gift superstores can exceed 20,000 square feet, according to Gifts and Decorative Accessories. About half of stores have annual sales under $250,000. Some chains, such as the Disney Store, have multiple store formats to serve different markets. Companies may also operate outlet stores to liquidate excess merchandise.
Inventory size and selection can vary. Merchandise changes constantly due to different market trends in each gift category. Many gift stores continuously add and drop product categories, as well as lines within categories. Popular categories include candles and candle accessories, greeting cards, holiday products, jewelry, photo frames, and collectibles. Some gift stores offer private-label merchandise.
While companies may buy inventory directly from manufacturers, manufacturers representatives and wholesalers play an important role because the gift manufacturing industry is highly fragmented. Many seasonal products are imports from China, and companies may use foreign buying agencies to manage imports.
Order lead times can be long, especially for seasonal items. Most companies place orders in the summer for winter holiday merchandise. Gift stores may have a right of return for certain products, such as seasonal greeting cards. Many suppliers have minimum order quantities. Buyers typically attend trade shows, also known as “market,” to review new products and make purchasing decisions. Major trade shows occur in the winter and summer.
Companies may use computerized information systems integrating point-of-sale (POS), inventory, and purchasing. Bar codes and scanners identify and track movement for individual items. Some companies use software to spot fast and slow moving merchandise, and help make better purchasing decisions. Gift stores may use database programs to manage customer information and loyalty programs. While electronic data interchange (EDI) is available, most small gift retailers are unable to leverage electronic order processing due to lack of standardization across the industry.
