Repost from the Star Tribune:
Imagine winning the lottery but having to keep it a secret. Then 12 years later, someone says it’s OK to tell everyone.
For Travel Tags Inc., a maker of things printed on plastic like gift cards for restaurants and retailers, that day came on Aug. 16, when Apple Inc. granted permission for the company to tell others that it is a customer.
Since 2006, Travel Tags’ factory in Inver Grove Heights has printed hundreds of millions of gift cards for Apple’s iTunes and App Store services and its Apple Store retail outlets. In revealing the relationship, the companies also disclosed that Apple has helped drive numerous innovations in the printing and packaging of such cards, work that has benefited other customers of Travel Tags.
Apple, the maker of iPhones, Macs and other tech devices that last month became the first U.S. company to be worth $1 trillion in market value, is known to customers as a producer of well-designed, high-priced, high-value items. But to the businesses it works with, Apple is known as a demanding partner that values innovation, quality, speed — and silence.
Apple rarely confirms the identities of its suppliers and vendors, even firms from which it buys billions of dollars of parts annually. Tech repair shops, investment firms and geek websites routinely rip apart Apple products to identify who made the chips, displays and other parts.
“Apple obsesses over privacy and control. It’s in their DNA,” said Gene Munster, the Minneapolis-based analyst whose reputation in the investing world was made by recognizing in 2004 that Apple was transforming into more than a simple maker of computers. “They are relentless about every detail.”
He said he could recall Apple confirming relationships with only a handful of other companies, including Corning, the glass maker for flat screens, and 3M, which makes a film that sharpens the display of those screens.
Travel Tags — which is owned by Mankato businessman Glen Taylor, who also owns the Star Tribune — for years has wanted to disclose the relationship to buff its reputation as a leader in gift-card production. “We had gone through an interview process and a review board to see if we were worthy,” said Al Rausch, president of Travel Tags.
The company affixes more than 1.2 million of Apple’s gift cards in multipacks on four lines dedicated to Apple each workday. With more than a 25 percent market share in North America, Travel Tags is one of the top three gift-card providers in the world with more than 300 clients.
It faces plenty of competition. The Twin Cities alone is home to several other large gift-card designers, printers and distributors, including Archway Marketing in Rogers, CPI Card Group in Roseville and Diamond Graphics in Ramsey.
For Apple, the decision to disclose the relationship with Travel Tags is part of an effort to describe more of its impact on the U.S. economy. While the company generates more than $200 billion a year in annual revenue and employs tens of thousands, mainly in California and Texas, it relies on contractors in Asia for most of its product manufacturing and assembly.
Apple will spend more than $55 billion with 9,000 domestic suppliers this year, supporting hundreds of thousands of jobs. In Minnesota, Apple said it has relationships with about 200 suppliers and partners who employ about 34,000 people.
Even in disclosing the work with Travel Tags, Apple’s penchant for control was on display. The company sent two people from its Silicon Valley headquarters to sit in on interviews with Travel Tags executives. Financial details could not be disclosed, they said. And Apple asked to control photography that accompanied this story.
The care that goes into gift-card design is no different from the box for a new iPhone or MacBook that enhances the consumer’s experience, said Jodi Belden, an account executive at Travel Tags. “The printing industry has long been considered a craft, but working with Apple forced us to bring more science into it,” she said.
After the partnership began, Apple switched its gift-card material from PVC plastic to recyclable paper. It also wanted to add gift card multipacks of three, four or five. That enhancement led Travel Tags to build a special packaging machine with help from Apple’s engineers and parts and equipment from 11 manufacturers.
“Together our engineers have implemented new manufacturing processes that have allowed the company to grow its business and expand its workforce in Inver Grove Heights,” Jeff Williams, chief operating officer at Apple, said in a statement.
Munster said it is also rare for firms to work with Apple for as many years as Travel Tags. “Apple will rake suppliers over the coals and quickly end the relationship in its pursuit of looking after the customer,” he said. “It’s a testament to Travel Tags that they haven’t done that.”
Apple strives to stand out at the gift-card kiosks in stores. Belden said that meeting Apple’s standards for quality and aesthetics initially proved difficult for Travel Tags. “A lot of conversations started with ‘That’s not possible,’ ” she said.
Apple wanted to sell gift cards in multipacks as well as in single packs. It also wanted the cards perfectly spaced on the cardboard backing and to be the same width across the cardboard backing.
While that may sound simple, it took months of collaboration with Apple’s engineers to build a multipack assembly machine. Apple also developed an envelope for single gift cards that was designed so a perforated edge would not show on the envelope once it was removed from the packaging.
Even the glue that keeps the gift card stuck to its backing came under intense scrutiny. Apple didn’t want the glue to stretch like a rubber band when the card is removed. “It’s a special glue that affixes the card but leaves no sticky residue,” Rausch said.
After the card is removed from its backing, the consumer may notice that the “soft touch” feel is unlike any other gift card made from recycled paper. “It took weeks of qualification to get it right. It’s so the consumer can have that type of experience,” Rausch said.
Late summer and early fall is high season for gift-card manufacturers as they ramp up to supply gift cards for the holidays. As many as 200 additional employees may be added to Travel Tags’ core staff of 415. With the Twin Cities’ low unemployment, the company has expanded its use of robotics to reduce dependency on hard-to-find temp workers.
It’s unclear whether disclosure of the Apple relationship will yield a bump in business for Travel Tags, but Rausch said it’s possible. “It helps promote our brand to be associated with one of the major brands in the world,” he said.
For now, there’s a party to be had.
“We’re doing a company picnic for employees as recognition of the honor,” Rausch said.
The Twin Cities area is home to numerous gift card designers, printers and distributors, including Archway Marketing in Rogers, Diamond Graphics in Ramsey, and CPI Card Group in Roseville. One of the country’s largest gift card manufacturers, Travel Tags in Inver Grove Heights, produced 1 billion gift cards last year, more than 25 percent of the North American market.
They are satiating a shopping habit that’s as ingrained as buying a big TV on Black Friday. “Gift cards have become as universal as greeting cards, with 96 percent of Americans indicating they’ll buy at least one this year,” said Robert Passikoff, founder and president of Brand Keys, Inc.
Travel Tags — owned by Mankato businessman Glen Taylor, who also owns the Star Tribune — lists Nordstrom, Macy’s, PF Chang’s, DSW shoes, Bebe and Aeropostale as clients. “We do the production for some of the largest and most powerful brands in the world,” said Tim Lebens, vice president of sales and marketing at Travel Tags.
Besides the Inver Grove Heights facility, the company has smaller operations in Mankato, Oregon, California and Europe.
Although December is a top sales month for gift cards, Lebens said summer is the busiest for production. “We need to produce the cards three to six months ahead to allow time to get them through the merchant distribution network and into the hands of retailers,” he said.
What may seem like a quick and easy production task takes four to six weeks for most orders and eight to 10 weeks for more sophisticated designs. “Gift cards today are like a little Renoir in your hand,” said Al Vrancart, co-founder and industry adviser at International Card Manufacturers Association in New Jersey. Besides the graphic image created by the art department, the manufacturing process often includes foil, a matte or pearl finish, glitter and raised surface texture. Nordstrom has incorporated a hologram on one of its cards while Neiman Marcus’ card has a raised texture that simulates alligator skin.
“It’s a lot more complicated than it looks,” said Ken Dishno, vice president of operations at Travel Tags. If a client known for an iconic shade of red requests a gift card, he said, designers have to use a different shade of red initially because a blue-tinted laminate film that will be overlaid changes it.
Even the standard rectangular shape and PVC plastic material may be changed to suit the client. Whole Foods chose a gingerbread man shape for its holiday cards, which, instead of plastic, are made from stiff paper that’s strong enough to withstand a run through the washing machine. Target selected a holiday card in the shape of a gold metal coin.
“We are offering guests a variety of gift card options and designs this season including peppermint-scented gift cards, greeting cards paired with gift cards and gift cards that double as holiday gift tags to easily string onto presents,” Target spokeswoman Amy Joiner said.
Some of the cards are becoming collectibles. Last year Starbucks’ metal card for $450 with $400 loaded onto each card sold out online. This year it scaled back slightly to a limited edition sterling silver key chain gift card with a dusting of Swarovski crystals. The company had 43,000 made at $200 each with $50 loaded in gift card credit.
Delta Air Lines’ limited edition gift card is made of aluminum from a retired DC-9 that was flown by Allegheny Airlines, then Eastern, and Northwest Airlines before being acquired by Delta. Each of the 2,500 cards costs $250 on eBay and has $50 of value stored on it. As of last week, 123 had been sold.
Best Buy, which started replacing paper certificates with gift cards in the mid-1990s, changes its gift card designs about every two months. New this year for the holidays is the addition of a Geek Squad card. The gift card, which comes in a box with the card and a free USB vehicle charger, can be redeemed for a one-hour home visit for $100 (setup for a computer, tablet, mobile device, Blu-ray player or gaming system) or $150 (setup for TV/video or router/home Wi-Fi network).
The Richfield-based electronics retailer said that the latest technological enhancement, digital gift cards that can be redeemed on a smartphone, make up only 5 percent of its total gift card sales. That’s consistent with national figures, but digital gift card sales are expected to double by 2017, according to global management consulting firm A.T. Kearney.
Despite the lack of a physical gift to give, Best Buy’s digital cards allow for more personalization, including a written message, photo or video. There’s also an “unwrapping” feature where the gift “unwraps” after being touched or clicked.
Digital gift cards aren’t a big concern for the industry yet, said Travel Tags’ Lebens. “Digital isn’t friction-free,” he said. “In the time it takes someone to bring up an app and type in their password, I’ve already paid for my purchase with a physical card.”
Overall, gift card sales are expected to decline 3.4 percent in North America to about $26 billion this year, said Vrancart. As retailers start holiday sales earlier, last-minute gift card sales are being squeezed.
“Retailers’ early promotions and exclusive offerings have made it easier for consumers to find everything they need without having to consider raiding the gift card rack,” said Matthew Shay, president of the National Retail Federation.
But don’t expect gift cards to lose their appeal for retailers. More than $750 million in gift cards went unredeemed last year, although that number is far less since 2009 when the Credit Card Act got rid of most junk fees and expiration dates. And cards provide another lift for retailers because consumers typically spend 20 percent more than the amount on the gift card.
One advantage of paying with a gift card is speed. Gift cards will not be getting the digital chip that credit cards are because it’s not a cost-effective addition. A gift card with a magnetic stripe can cost up to 50 cents to make, depending on its design, but embedding a chip adds another $2.20 to $3.50.
“There’s no need to add the chip in a gift card,” Vrancart said. “It’s a simple transaction. You use it a few times and discard it. Too much technology is overkill.”
Read entire article at Star Tribune
Source: StarTribune.com - December 13, 2015
Written by John Ewoldt, Star Tribune
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