[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

ChannelAdvisor:
Online Selling Strategies
Offerpop:
Social Marketing Campaigns
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[10 comments]

Holiday's Must-Have Gift — Gift Cards

December 30, 2013

For the seventh year in a row, gift cards rated as holiday shoppers' most wanted gift, according to NRF's 2013 holiday survey. The average shopper planned to spend an average of $163.16 on gift cards, up 4.0 percent over the $156.86 in 2012.

Less impressive: total spending on gift cards was estimated to reach $29.8 billion, representing only 4.9 percent of NRF's total holiday spending estimate of $602.1 billion.

But gift card usage continues to increase and appears set to expand further due to several drivers:

  • Fewer fees/expiration fears: A survey of 62 different gift cards by Bankrate found only three — Staples, Toys "R" Us and Chevron/Texaco — carried a purchase fee. State and federal legislation has also expanded the amount of time before a gift card can legally expire.
  • Digital card usage: According to CEB TowerGroup, e-gift cards are expected to reach $3 billion in 2013, up from an estimated $300 million in 2012. Digital cards also appeal for different reasons than physical cards. A survey from InComm, a provider of prepaid products, found that instant delivery was the top reason consumers purchased digital cards, followed by "easier to send," 42 percent; "easier and quicker to purchase," 32 percent; "cool gift to give," 28 percent; "easier to redeem," 26 percent; and "environmentally friendly," 21 percent.
  • Customizable designs: For a nominal fee, cards can be customized with images of Santa Claus, penguins, puppies, etc. For $2.99, Home Depot shoppers could purchase a small toolbox gift cardholder or choose a free design with a pop-up tree and flashing star. Target offered a gift card packaged with a Pez dispenser modeled after its mascot dog, Bullseye. In some cases, customers can upload their own images to a card.
  • The stigma fades: Only 25.3 percent of respondents to NRF's survey still feel gift cards were too impersonal.

The leading reason to purchase a gift card is to enable the recipient to get whatever they want and avoid a return.

Other stats around gift cards:

  • The most popular category for gift cards is restaurants, liked by 64.5 percent; followed by departments stores, 60.3 percent; online marketplace like Amazon, 54.0 percent; big box retailers, 33.5 percent; home improvement stores, 25.0 percent; and spa or leisure, 23.9 percent (Retail Gift Card Association);
  • Seventy-one percent of recipients spend more than the gift card value (Swagbucks).

 

Discussion Questions:

Do you see gift card usage around the holiday leveling off any time soon? What do you see supporting their growth? What else could stores be doing to take advantage of the popularity of gift cards?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Assuming gift cards make up approximately 5 percent of total holiday spending, where do you see spending on gift cards in a decade?

Comments:

Good question. I know in my circle of family and friends there were fewer gift cards and those who got them were planning on returning to get the cash. Baby Boomers were brought up trying to discover the perfect gift and surprising recipients. Millennials have grown up telling people what specifically to buy and adamant about not keeping something they don't like.

Do gift cards that make them spend money at a specific retailer really fit into their mindset? I'm thinking less and less, unless it is Amazon.

[Image of: View Braintrust Panelist button]
Bob Phibbs, President/CEO, The Retail Doctor

Gift cards are easy to purchase and can be sent around the world with the click of a mouse. As the stigma of the acceptability of giving gift cards fades, look for their usage to increase.

This growth is driven by the universal acceptance of gift cards and the ability to save time.

Retailers should make it ease to purchase and activate gift cards. They also need to protect the security of cards. This holiday season was filled with stories of card codes being stolen.

The times they are a changing, with the concept of finding the perfect gift and hiding the price fading. For many, gift cards are the perfect holiday present.

[Image of: View Braintrust Panelist button]
Max Goldberg, President, Max Goldberg & Associates

Of course, trees don't grow to the sky. Gift cards still have a continued upside to growth, one because consumers like them in giving and receiving, and two because they work well for retailers.

As Tom Ryan reports, it was a record year for gift cards expenditures. Fully 80.6% of respondents reported in the November Prosper Monthly Consumer Survey that they would be giving gift cards this year. That figure compares to 77.3% in November, 2010. With an average of 3.6 cards to be given (compared to 3.5 given in 2010), the average expenditure planned called for $163.16 vs. $145.61 in 2010, a +12.1% increase.

Those numbers appeal to retailers for several reasons. One, 55% of respondents who receive gift cards say that they end up spending more when they redeem them. And two, only 17.6% of those who receive the gift cards will have spent 100% of the offer by mid-January, while 37.9% haven't spent any of their gift card "money." Gift cards bring traffic to the store in the coming months, and that marvelous invention of "float" serves some cash cushion purposes.

Retailers have a strong reason to continue to promote this gift item, and we all saw it in action from retailers, service providers, card companies, and more this year.

[Image of: View Braintrust Panelist button]
Roger Saunders, Managing Director, Prosper Business Development

Gift card usage will not level off any time soon. It serves numerous purposes, particularly with certain age groups. The gift-giver finds a gift card an easy out in gift selection and many recipients prefer to be empowered to select his/her gift and the best time to acquire it. It's an effective system, but rather impersonal. Then again, who wants a new tie they will never wear?

Will the gift-giving thoughts of today's Millennials or the Baby Boomers prevail tomorrow? In the near future there is sufficient growth available from both sectors but the Millennials will live longer.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

Gift cards make giving "almost cash" acceptable to those time starved, uncreative shoppers who can't figure out something personal to give to a recipient. They won't be going away any time soon. Expect to see deals and discounts as the next incentive to buy a gift card, buy one, get one free (valid on regular-priced merchandise only).

[Image of: View Braintrust Panelist button]
Peter J. Charness, SVP America, Global CMO, TXT Group

Part of me is troubled by sending gift cards to relatives for the holidays, rather than a specific gift...but we do it anyway, and probably more so this year than ever. (And we received more gift cards in return than ever, too.) It's pretty simple: No worries about sizes, and no worries (this year) about whether FedEx or UPS will make a delivery if an e-card version is available. The business of mall developers' cards must be really booming: Sending my niece a Simon Malls gift card (rather than for a specific store) gives her even more flexibility to buy what she really wants.

[Image of: View Braintrust Panelist button]
Dick Seesel, Principal, Retailing In Focus LLC

As we all get busier in life, gift cards will increase in convenience yet be able to fulfill a personal gift requirement for anyone on the shopping list. There are too many advantages of gift cards and I see their penetration globally increasing each year for at least two more years to come.

[Image of: View Braintrust Panelist button]
Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

As time and travel increase the costs of procuring and placing gifts, the exponential growth of gift cards is seeing only three nagging obstacles on the path to maturation. The most obvious is consumer awareness and knowledge. This problem will decline with better and easier-to-use systems combined with the natural expiration of the different demographic generations that simply refuse to get on board.

The other two blockers are not going away by themselves and need attention or those failing to address these needs will surely wish they did. Retail company site ease of use and navigation is progressing very slowly in the market and there is little excuse for this. The fear of obsolesce and success underscores the need for retail executive decision makers willing and able to keep in step with the market.

This is most evident in the third hurdle encountered by the consumer, security. The recent security disasters in the market will set the entire market growth back a few clicks. Apologies, discounts and fines will fall far short of the needed confidence builders. Once again, corporate leadership must be capable of addressing the needs of customers by employing able IT management that is measured by corporate growth - as in sales and profit dollars. But that's just what I think!

'gjarnoldjr'

Gift card usage will definitely continue in the near term. For distant family and friends, and perplexed gift givers trying to please teens, Millennials, new parents and others who have very clear preferences, this works well. To make them more attractive, a small incentive, promotion tied to a popular electronic item - anything that raises retailer awareness can help support growth.

[Image of: View Braintrust Panelist button]
Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

While I wouldn't rejoice in NRF's survey that says gift cards are the most requested item ("would you prefer gift cards, home furnishing, electronics, jewelry, or clothing accessories?" is going to crown the same winner every year), value for consumers and retailers will continue to drive growth of gift cards.

They are better for gift givers because they are faster to buy, make the ideal default when you don't know what the recipient wants, and save time spent price shopping when you do know.

They are better for retailers because they build association with the store brand, not the item, carry a low risk of return, and offer the potential to build lists and loyalty from new buyers.

Finally, the demographics are favorable in 2014 and beyond, with gift card purchases associated with higher employment, higher income, and younger consumers.

[Image of: View Braintrust Panelist button]
Dan Frechtling, Vice President, Global Product Management, hibu, PLC

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters