By Tom Ryan
According to a study from Archstone Consulting, sales of holiday gift cards will surge 25 percent to a record $35 billion this year. The gains are expected to be driven by: 1) expanding gift card sales beyond their own stores, i.e., supermarkets and drugstores; 2) more sophisticated software at cash registers to process gift cards; and, 3) a growing cultural acceptance in giving gift cards as presents.
Last year, holiday gift card sales jumped 55 percent to $28 billion, according to the National Retail Federation. Gains in 2004 and 2005, when retailers were initially rolling out programs, were 0.6 percent and 6.4 percent, respectively.
Convenience - for both the giver and the recipient - is a primary reason behind the ever-increasing popularity of gift cards, Dave Sievers, a principal at Archstone, told the El Paso Times.
"Retailers are also aggressively merchandising gift cards," Mr. Sievers said. "People tend to purchase more than the face value of the gift card (when they redeem them), and they create shopper traffic, which retailers love."
"Gift cards are everywhere," Shelly Escandon, store manager for Mervyns at Sunland Park Mall in El Paso, told the paper. "You can get them at restaurants, food, music."
Ms. Escandon adds, "It's not only convenient for you, but convenient for the person you're buying the gift for -- less returns and exchanges because of the wrong size."
The study also found:
- The average U.S. family will spend an estimated $184 on gift cards this holiday season;
- Gift-card fraud has been an issue, but retailers are rolling out better technology to thwart it;
- Roughly 56 percent of all holiday gift cards are redeemed within the first month of being purchased;
- Gift cards issued by banks - which, unlike many retailer-issued cards, can be redeemed anywhere - are expected to post the biggest gains this year.
Archstone surveyed 1,000 web users between July 12 to July 18.
Andrew Buss of the Hazleton Group, a unit of Archstone, told the Dow Jones Newswire that to shore up momentum, retailers will have to become more sophisticated in how they market gift cards. For instance, retailers should recognize that men tend to buy gift cards earlier in the season than women. Also, promotional strategies should be reviewed as post-Christmas gift card sales become an increasingly important business.
Discussion Questions: Do you likewise expect big gains in gift card sales this holiday season? How much longer do you think growth will continue? How can retailers further capitalize on increasing consumer acceptance of gift cards?