Does Moonpig’s online success threaten physical gifting retailers?

Online gifts and greeting card retailer Moonpig is mulling the idea of entering the stock market after experiencing a successful lockdown trading period. Is Moonpig's success just a lockdown phase? Or should its bricks-and-mortar rivals be worried?

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Moonpig Exponent Private Equity covid-19 pandemic stock market
Moonpig is looking at the possibility of entering the stock market.

The online greeting card market in the UK is expected to increase at an annual rate of 4.3 per cent as retailers take the edge over traditional bricks-and-mortar gift and card chains.

A 2015 report by market research firm Ibis World predicted that the online greeting card retail industry in the UK would reach a value of £133.4 million by 2020.

Following the Covid-19 pandemic, the sector benefited from strong expansion in the wider online retail market as consumers searched for cheaper deals and preferred the convenience of ecommerce and home delivery.

Moonpig Exponent Private Equity covid-19 pandemic stock market
The UK online greeting card retail industry is set to reach a value of £133.4m this year.

Despite this, competition from physical stores remains, with one in six retailers stocking cards – more than any other product.

Subsequently, online greeting card retailer Moonpig emerged and capitalised on the shift to online shopping. Arguably, the company also benefited during the height of the pandemic as lockdowns forced people to stay home and use the internet to arrange for cards to be sent to loved ones for special occasions.

Earlier this month, news emerged that Moonpig was reportedly looking at the possibility of entering the stock market. According to Sky News, discussions with investment banks were at an early stage but a decision has not yet been made by parent company Exponent Private Equity.

Moonpig Exponent Private Equity covid-19 pandemic stock market
Moonpig owner Exponent Private Equity is in early-stage discussions with investment banks.

Moonpig’s sales skyrocketed by 44 per cent year-on-year to £172.8 million, boosted by a huge shift to online shopping thanks to the pandemic. It also booked a whopping 137 per cent increase in pre-tax profits to £33 million, and for the first two months of the nationwide lockdown, Moonpig added one million new customers.

Moonpig said it was evaluating its funding options and meeting with advisers on the subject of entering the stock market.

“Moonpig’s online platform has, no doubt, benefited from the Covid-19 pandemic,” Brand consultancy Stand Out founder George Deeb said.

“Because of the social gathering restrictions during lockdown, many of us weren’t able to celebrate birthdays, national and religious holidays, and other milestone events face-to-face.

Moonpig Exponent Private Equity covid-19 pandemic stock market
For the first two months of the UK lockdown period, Moonpig recorded 1 million new customers.

“Sending a personalised card and gift was the next best thing; it was one of the only ways to ‘stay connected’,” Deeb continued.

“With all of those events combined, it’s no wonder that Moonpig’s sales have skyrocketed.

“Sending a card is also a very British thing to do – and in a situation that reduces human contact with others and compels us to show more care and compassion for the people around us – Moonpig was perfectly positioned to meet those needs.”

Jake Athey, vice president of marketing at software firm Widen, agreed. He said that without a physical presence on the high street, there was no threat from a sudden decline in footfall during lockdown.

“With its tried-and-tested online offering, Moonpig will have absorbed much of the business off those bricks-and-mortar stores which had to close their doors initially, and then restrict operations due to social distancing,” he said.

“Moonpig was also able to capitalise on the fact that the world was cut off from physical connections as a result of the pandemic, but was craving a way to keep in touch.”

Moonpig Exponent Private Equity covid-19 pandemic stock market
Moonpig added gifts to its offering to reach a wide range of customers.

As Moonpig bites away at the market share of physical stores that sell similar products, retailers such as Clintons, Paperchase, Card Factory and Scribbler among others are potentially under threat. Experts speculate that they may need to shift online or improve their existing online offering.

For example, in the six months to July 31, Card Factory saw a £22.2 million statutory pre-tax loss, compared to a £24.3 million profit the previous year. While the retailer admitted that sales were impacted by the store closures across the UK and Ireland, its online revenue rose 64.4 per cent following a “positive response” to its website relaunch on July 2.

However, Athey told Retail Gazette that bricks-and-mortar stores would still have their own loyal customer base.

Moonpig Exponent Private Equity covid-19 pandemic stock market
Card Factory recently saw a £22.2m statutory pre-tax loss, but online revenue rose 64.4%.

“There are those who either don’t have the same access to the internet, or trust online shopping, or who simply prefer going into a physical shop, choosing a card, and then hand-writing it,” Athey argued.

“For the younger, always-on-the-move generation (and those adhering to strict isolation rules during this current Covid-19 pandemic), internet-based businesses like Moonpig have provided a way for consumers still to consume, and for well-wishers to send cards.

“This shift in behaviour and demand is what has driven the market share from the likes of Card Factory, to internet-based players like Moonpig.”

However, Deeb said Moonpig would not have been in the position to excel in a Covid-19 environment if it had not been for the numerous years of branding and marketing that took place beforehand.

“Building a bespoke ecommerce platform, a print-on-demand service, and an efficient and robust logistics operation, is not something you can just do overnight,” he said.

“Moonpig’s online platform has benefited from the Covid-19 pandemic”

“Moonpig already had this infrastructure in place to meet the increased consumer demands, propelling itself even further ahead of the competition.”

Meanwhile Chris Leadley, head of marketing at management consultancy Forbes Burton, said Moonpig spent a long time building its brand and cementing its position “so people would have instinctively turned to it”.

“People would have still wanted to send cards and gifts but were unable to go to a bricks-and-mortar store,” he explained.

“It shows the power of having an effective advertising campaign, something that its competitors have failed to fully exploit.

“Moonpig has captured market share from the likes of Clintons’ thanks to an effective and well-executed marketing plan.

“Moonpig’s dominance doesn’t guarantee that we’re seeing the end of bricks-and-mortar greeting cards stores. There will always be people who prefer to shop on the high street.

Peter Scott, head of retail consultancy at Graystone Strategy, said Moonpig accelerated its popularity over the years by adding gifts to to its proposition and allowing customers to personalise them.

“Moonpig has always followed a model of having no physical stores and has done a great job of being the market leader in online cards,” he told Retail Gazette.

“It’s added gifts to the proposition too allowing customers to personalise them.

“This is a shot in the arm for helping people send loved ones more than a card during lockdowns.

“Retailers like Clintons and Paperchase will have felt the force of store closures. And now with no office workers to pop in a buy last minute gifts and wrapping in their lunch hour, they will be struggling to get back to pre-Covid revenues.”

Nonetheless, just like other bricks-and-mortar retailers, greeting card retailers may need to rely on building a fast turnaround online shopping experience for cards and gifts and cut down stores in prime locations.

What Moonpig has done is diversify its offering and cater for different price points, allowing it to reach a wide consumer base, especially as they continue to stay home. Launching on to the stock market may well indeed be the logical next step in its business growth.

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