Hershey Ditches Gifts Business

The Hershey Co. has Already Shuttered Its Online Store, Hersheygifts.com, As of July 31; the chocolate company will close the gifts catalog business later this month.

As for why, Hershey spokesperson Kirk Saville would say only that the company decided to exit the Hershey Gifts business because “the present business model is not sustainable.” The direct business will officially close on Aug. 28, which will eliminate about a dozen jobs.

Saville did say that Hershey “will continue to evaluate all options in e-commerce, including strategic partnerships and licensing agreements.” But for now, consumers who want to buy gift items directly from Hershey will have to visit Hershey’s Chocolate World, Hershey’s Times Square or Hershey’s Chicago.

The direct business has not been easy for Hershey. It laid off about 50 employees in the catalog and online gifts department in March 2007, a result of the decision to outsource those positions.

At the time, Hershey Co. had signed a multiyear agreement to have King of Prussia, PA-based GSI Commerce handle the Hershey’s Gift and Mauna Loa catalogs and Websites.

For fiscal 2008, The Hershey Co. recorded sales of $5.1 billion. Its net income rose 6.6%, to $311.4 million.

Hershey’s direct business “probably doesn’t make money and is probably declining,” says Claire Gruppo, cofounder and sole director of investment firm Gruppo, Levey & Co. “All big companies are shedding or closing down noncore, money-losing assets,” she notes.

Hershey’s core business is selling to retailers and distributors, not consumers, says Stuart Rose, managing director with investment firm Tully & Holland. “Selling through a different channel requires different skills and sometimes products,” Rose explains.

“With distribution in every supermarket, convenience store and pharmacy, there wasn’t much reason — except specialty products — that would bring customers to the site,” Rose says.

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