Winning the Card Game: Month 1

PLAINVIEW, N.Y. ( MainStreet) -- Even a few days ago, customers were rummaging through the holiday inventory Card$mart, a discount greeting card store in an upscale mall on Long Island, N.Y., wants to shed. Co-owner Dana Norman, who bought the store in June with business partner Michele Rothberg, was surprised at the continued interest in the seasonal goods.

"Somebody today bought six boxes of Hanukkah cards. It is still surprising that people are still going back there and buying stuff," Norman said Wednesday. "We're going to keep that clearance table up until it becomes an eyesore" -- or long enough to start using it for leftover Valentine's merchandise.
Dana Norman and Michele Rothberg bought a Long Island, N.Y., Card$mart store in June. Month by month, they're learning how to make a business survive and grow.

What's more surprising to Norman is that Card$mart is able to make a profit even on items marked "75% off."

What sells and what doesn't is just one of many lessons Norman and her partner are learning every day as new business owners, yet to get through a full 12-month business cycle.

This yearlong series will follow their ups and downs. Today we look at how the store fared in January, what it did to keep business coming in the door and what issues arose for the owners. (Based on advice from their accountant, the partners have declined to share revenue and profit numbers for last month.)

Norman and her partner were featured in a December story about the fate of the independent greeting card store. Card$mart was among several stores with strategies to survive and thrive among large discount retailers and online sellers dominating what is left of the greeting card industry.

Norman and Rothberg bought the store because they thought there was untapped opportunity, given the affluent clientele and high foot traffic in the shopping center where the business is located.

"We felt that there was a void. The prior owner was missing the mark in what the market needed," Norman said in December.

Designer Greetings
Card$mart sells a line of 50% off cards from its vendor Designer Greetings. The vendor is also the parent company of the Card$mart brand, but Norman and Rothberg are not franchisees -- they can add whatever merchandise they want to the store as long as they still sell the Designer Greetings 50% off card line, but don't have franchise fees or ongoing royalty payments, according to a spokeswoman from Designer Greetings. She declined to give a number on how many Card$mart independent retailers there were.

So far Designer Greetings seems pleased with the store.

Norman and Rothberg "took over that location last year and what they bring to it -- like many Card$mart retailers -- is they're very happy, they're friendly, they're incredibly service-oriented. They offer free gift wrap on virtually everything, and they have a really time-tested method of greeting people when they come in and thanking them," says its spokeswoman, Suzanne Haines. "It's such a small thing, but that builds customer loyalty."

Haines notes that while the industry and economy may be going through difficult times, the company is "on a tremendous upswing because we have a tremendous amount of territory." Designer Greetings sells its 50% off line through the independent retailers; other retailers sell its other lines of cards and giftware.

January

After a busy holiday season, the partners used the January downtime to organize, sell leftover inventory and prepare for tax time and get ready for Valentine's Day -- a busy time of year in the card business.

January taxes are a big issue. The partners were required to pay their portion of the real estate taxes on the shopping center, but Norman feels they shouldn't have to pay the full year's worth -- they've only owned the store since June. Norman has paid the landlord her portion of the taxes and tried to contact the previous owner to pay her share, but so far she's had no response. Her landlord is working with her to settle the difference, but Norman says if she doesn't hear back from the prior owner, she is considering taking her to small claims court.

"It's less than $1,000 but, still, it's money I don't want to pay," she says.

Norman is also considering taking the previous owner to small claims court to settle another issue: The partners made an asset acquisition of the store, paying a certain price for each "asset" in it, but some aren't matching up in terms of what was what was paid versus their worth. She's finding more and more merchandise items where the original seller may have inflated the values.

One example is the line of Precious Moments figurines. Norman says the items do not sell well in her store, yet she has a large inventory of them, which she will likely donate to charity for the tax write-off.

There are also invitation sample booklets. "In our contract those books are listed, and listed with a value," she says. "When we took over and called the vendors, at least one-third of the books were discontinued. So they have no value. A discontinued book is garbage."

Norman says the lesson she's learning from valuation experience is that they should have been more diligent before signing the contract and held some of the money they were expected to pay in escrow so they could verify the merchandise values once they were involved in the daily management.

"We needed to do a little more due diligence in terms of what was in the basement, in terms of what we were purchasing. We gave a cursory glance of boxes and stuff and lists, but I don't think that we really did enough. The purchase price should have been lower."

"But on the flip side we really want this store. We wanted this location. Certain things are not worth fighting for," she says.

Next month we'll look at how Card$mart did during the busy Valentine's Day season.

So far Norman says that while women are coming in to do their Valentine's Day shopping ahead of time, men are not. She worries that if there is a freak blizzard in the unseasonably mild New York winter, Valentine's Day could be a wipeout for last-minute shoppers.

"We're hoping the mild weather continues and we do well on Valentine's Day," she says.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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