November 12, 2008
Cards to Be Top Gift for the Holidays
A new study
by GfK Roper Consulting predicts that gift cards
will become the most popular gift this holiday, bumping clothing from the
top spot. According
to the research, 69 percent of American consumers plan to purchase gift
cards as a gift this year.
One website,
GiftCards.com, which offers consumers prepaid retailer and Visa gift cards,
is looking to sell some 600,000 gift cards before the end of the year.
With
the economic pressures people are experiencing, maybe they’d rather get
a Visa gift card than a toaster,” said Jason Wolfe, CEO of GiftCards.com
and Omni Prepaid Group, told the Pittsburgh Tribune-Review.
“Instead
of giving a big pile of gifts, people may give one gift and make sure it’s
really worth it,” said Diane Crispell of GfK Roper
Consulting.
Ms. Crispell and GfK are
advising merchants to offer lower priced cards this year in light of consumers’
plans to reduce holiday spending. “We know people are planning to
spend less,” she told the Tribune-Review.
Mr. Wolfe sees a day
ahead when consumers won’t need plastic and will have gift codes loaded
onto a mobile device that can be redeemed using radio frequency technology
in stores.
Discussion Questions:
What challenges will a high number of gift cards sold this holiday season
pose for retailers? What do you see as the future of gift cards?
BrainTrust
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Poll
First, I also question the survey indicating a continued growth in gift cards. Second, gift cards present an interesting challenge for retailers. The sale is only recognized when the gift card is redeemed for merchandise. Thus the growth in gift cards is shifting recorded sales from December to January and beyond.
In addition, as gift cards become more popular, merchandise sales become more unpredictable. Retailers need to consider what merchandise might be purchased in the future with the gift when developing their merchandise budget plans.
I strongly believe that gift cards are here to stay–this holiday and future; and all retailers should consider bringing in the gift card malls to their ‘product’ mix to subsidize their sales. Past are the days where people buy traditional wares; the gift card is the giftware product of the new millennium. They are no longer considered impersonal or cold; with gift cards’ evolution, there are several things occurring for the merchant it is now brand differentiation and how to leverage the marketing capabilities, the consumer’s demand for complete presentation as an additional convenience at POS, and the need for accessorizing to create additional revenue similar to that of wireless products. Face it, this generation LOVES gift cards.
Call me old fashioned, but I’m not sure that the fact that gift cards have grown to be such a huge category is good for either consumers or retailers. For consumers, they are no doubt the easy way out, but the experience doesn’t leave consumers feeling as though they have been particularly thoughtful or put a lot of effort into the gift buying/giving experience. (The recipient may feel that way too, although they no doubt like the ability to select their own gift). It’s all kind of like self-service checkout–very efficient but not much fun after a while.
From the retailer’s perspective, it just seems kind of weird to encourage shoppers to just run up to the gift card kiosk, grab a bunch of them, and be done with holiday shopping. Whatever happened to enhancing the “experience”?
I too wonder about the validity of the study’s findings, but let’s assume for the sake of discussion that they are accurate, and look at this from an individual retailer’s perspective. If gift card purchases increases as a percentage of total holiday purchases, that means that inventories would likely back up even more than they otherwise might. If that occurs, the post-Christmas markdown pressures will intensify.
In that event, heavy early redemptions of gift cards would help move through the inventory, but at pretty tough margins. In this environment that might be the best scenario for retailers. They get out from under their clearance earlier. If redemptions followed previous patterns, however, clearance inventory would linger a bit longer, impinging the transition to spring goods.
In the end, gift cards buy a retailer cash flow during the holiday shopping season, but at the expense of margins later. An increase in gift card purchases expands that trade-off.
This study flies in the face of a different finding a few weeks ago, that was the subject of an earlier panel discussion. One of the potential downsides for retailers: Will they have the inventory to sell after Christmas? It may sound unlikely that stores will run out of goods, but the most desirable styles and most popular sizes are likely to be “broken” based on ultraconservative inventory management. This could take the wind out of the sails of the post-Christmas shopping season, which has salvaged many a store’s fiscal year recently.
We’ll see if in fact gift cards end up being #1 this holiday…though it is somewhat irrelevant what order they come in.
There are three key issues for merchants and gift cards this year:
1. The dollar values, at least on a per card basis, will likely decline. This could be both beneficial and detrimental. It will be beneficial if it drives a more generative transaction. Conversely, if more utilitarian gift cards are purchased, they will likely end up being dilutive and not necessarily drive new business for the merchants.
2. While this is nothing new, merchants still fail to employ adequate techniques to link gift cards to actual customers (i.e., by name and address, including email). Using gift cards to remove transaction anonymity is one of the fundamental opportunities with the cards, yet very few merchants even provide a baseline proposition such as guaranteeing the value in exchange for registering the card.
3. Gift cards are still one-dimensional and carry little value-add. Yes they are convenient but in the end they are little else whereas properly utilized, they can deliver a range of messages, offers and other benefits to drive incremental purchases.
Gift cards, while practical and convenient for most gift giving, may project a feeling that the giver hasn’t turned on the “involvement bulb” bright enough to really see the desires of the recipient. In today’s evolving relationships, gift-giving convenience appears to be winning over true concern. But that’s life so you go with the flow…but be sure the gift card is from one of the “most likely to survive” retailers.
It’s possible that gift card sales could surpass $100 billion this year given cutbacks in merchandise spending and the general state of consumer (lack of) confidence.
The “gift card malls” those racks of cards from every retailer, are becoming increasingly common. I think there is a huge opportunity for smart cards, gift cards with content–whether it’s a card/DVD containing trailers for Disney movies or “how-to” cards from Home Depot.
Count me among those who question the results of this study.
Between the “actual value of the gift” being readily identifiable and the unclear future of an ungodly number of retailers, I am very doubtful that gift cards will become more popular. I would predict the opposite.
Now, in the most exquisite of ironies, a reduction in the number of gift cards purchased will, in fact, create an offsetting improvement in holiday sales. We all know that gift cards don’t count as revenue…and that consumers can hold those cards as long as they want to. Assuming that they will use them in January isn’t quite accurate either.
So, I’d just as soon see the survey proven wrong.
I too am a bit surprised at the results of the study. I would think in hard economic times that people would be reticent to give a gift card showing actual value of the cost of buying a present. If I gave a $30 book as a present last year and I wanted to cut back, would I choose to give a $20 gift card this year? How about, if I gave a $30 gift card last year? Do I give a $20 gift card this year?
Gift cards could be a big opportunity for both the retailers and the gift givers. If a retailer were to sell the gift card at a discount, but not have it redeemable until after the New Year, all can win. Maybe I could give that $30 gift card that I bought for $25. Then the receiver would go to the retailer after January 1 and purchase what they want; a slow time for the retailer. And that receiver is likely to add dollars to that purchase as the gift card amount does not match exactly what they may want to buy.
Gift cards are hitting a new level in the physical sense. Cards with Disney and other studio licenses are adding excitement to gift cards. Even unique cards such as the Home Depot tape measure gift card make it more interesting. I really like the partnerships malls have made with credit card companies. Adding the Amex label to an upscale mall’s giftcard adds to the exclusivity.
The only suggestion I have is that retailers should employ some sort of guarantee on the value. Customers have become a little wary because of the current economic climate.
Actually, I have read other reports to the contrary indicating that gift card sales will decline this season due to a lack of consumer confidence that certain retailers will still be around to honor them. However, in any case, retailers will face new challenges this year in that consumers are likely to try to redeem gift cards in more of a rush right after the cards are received. And whereas this is normally a positive thing in that it brings more consumers into the stores after the holiday season, I believe that this year more consumers will simply use the cards for their value and do little other shopping.
So, it’s up to retailers to create enticing programs within to capture more business while card redeemers are in the house.
Frankly, I’m a bit surprised by the results of the study. One would think that in times when consumers are cutting back on spending, they may not want the exact value of their gift to be known. Also, with the recent closings of Linens-n-Things and Meryvns and with other retailers approaching similar fates, consumers should be concerned about whether recipients will ever be able to use the cards.
Gift card values are often lost when a retailer files for bankruptcy. Buyer beware, or get to the store very quickly.
I “get” the whole gift card experience and I know it’s been quite a boon for retailers over the past 10 years, but frankly, I find the whole notion very lazy. It’s a last-minute shopping mentality refined to meet the needs of the sloth. I know, I know, the “time-starved” consumer and all that…well maybe, if everyone would stop gaming, surfing YouTube and watching their DVRs they’d have time just once a year to put some care and thought into the gifts they were buying for the people they think about and care for!
Also, on a more visceral level, cards take the fun out of shopping…which begs the question; is the retail experience so bad that customers will do anything NOT to go out and shop??? Perhaps! Maybe the best answer yet is to improve your #1 marketing tool (the store) to the point where people would rather go to the store than “laze off” and just buy a card.
Retailers can’t guarantee gift card value. They can remove the policies that deduct value from the cards over some period of time/lack of use, but in the event of company problems that would be a false promise.
If there is a total bankruptcy (e.g., Sharper Image) all value is of course, lost.
In the event of a re-org bankruptcy, the retailer has to ask the court to allow it to honor existing gift cards, as those consumers with cards are creditors just like any others. Although courts are in general inclined to protect consumers, there are no guarantees. Vendors and other creditors will press hard for their debts to be serviced first.
That is the situation right now with Circuit City–they have asked, but no answer yet.
Anyone who gets a gift card needs to get themselves to the store the week after Christmas, unless the card is to Walmart, Target, or a handful more of clear survivors.
Retailers hope that the gift cards they sell will be redeemed late or not at all, and for less than their value. This is called both “breakage” and “slippage,” factors that are carefully recorded and upon which retailers depend in forecasting their margin figures. This also enables the retailers’ money managers to make overnight banking investment income on the unredeemed cards. And while overnight money market accounts are less lucrative than previously, the fact remains that the retailers have your money while you don’t. It’s like American Express Travelers Checks, they have your money while you don’t.
Retailers also hope that gift cards will be redeemed for more than their value, counting on increased revenues and consumer ignorance of sales they offered during the period of time between card sale and redemption. An interesting dynamic that is still being studied.
Diane Crispell seems to be talking out of both sides of her mouth. While she is “advising merchants to offer lower priced cards,” she is also predicting that “people may give one gift and make sure it’s really worth it.” Little Value vs. Big Value. How do these two concepts from the same person make sense? This is drivel.
Gift cards are here to stay, of course, but they must be viewed realistically. Why buy a gift card–and in some instances be charged sales tax–instead of just giving your friend the money? Do you really need a taxed record of your gift on a pretty card to make you feel better? And then, when your friend uses your gift card they may be taxed AGAIN in some states. Is this a good idea? You paid taxes on the income you used to buy the gift card, you were taxed again when you bought it, and your recipient may be taxed yet again when they use it. Triple taxation, ya’ gotta’ love it.
Such sentimentality. I want a gift card, especially an online gift card. My nieces want gift cards and have requested them. No matter how much thought and time we put into shopping, there’s the strong possibility that we will get something that will have marginal value and get little use (see the shirts in my closet). With my gift card from Amazon.com, I can have a huge selection, add more money to it and get something I might not have gotten for myself–a new lens for my camera, a good read (by my standards, music, whatever. Please give me a gift card and I will sincerely appreciate your thoughtfulness.
No question, consumers will be spending less this Christmas season. Anyone who thinks otherwise is likely living in a cave. This lower spending will be accomplished by spending less on individual gifts and dropping people from the gift list. This survey appears to be self-serving and illogical for past consumer behavior. Yes, gift cards sales will increase some this year. This will be more about saving on mailing costs. The problem for retailers is redemption–when and for what merchandise. Retailers want the Christmas merchandise sold before their year-end. This is so they can bring in the next season’s merchandise and lower inventory value taxes. Reduced consumer purchasing will likely delay gift card redemptions. The result: retailers having cash, but no sales. Interest profit will not make up for gross margin.
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First, I also question the survey indicating a continued growth in gift cards. Second, gift cards present an interesting challenge for retailers. The sale is only recognized when the gift card is redeemed for merchandise. Thus the growth in gift cards is shifting recorded sales from December to January and beyond.
In addition, as gift cards become more popular, merchandise sales become more unpredictable. Retailers need to consider what merchandise might be purchased in the future with the gift when developing their merchandise budget plans.
I strongly believe that gift cards are here to stay–this holiday and future; and all retailers should consider bringing in the gift card malls to their ‘product’ mix to subsidize their sales. Past are the days where people buy traditional wares; the gift card is the giftware product of the new millennium. They are no longer considered impersonal or cold; with gift cards’ evolution, there are several things occurring for the merchant it is now brand differentiation and how to leverage the marketing capabilities, the consumer’s demand for complete presentation as an additional convenience at POS, and the need for accessorizing to create additional revenue similar to that of wireless products. Face it, this generation LOVES gift cards.
Call me old fashioned, but I’m not sure that the fact that gift cards have grown to be such a huge category is good for either consumers or retailers. For consumers, they are no doubt the easy way out, but the experience doesn’t leave consumers feeling as though they have been particularly thoughtful or put a lot of effort into the gift buying/giving experience. (The recipient may feel that way too, although they no doubt like the ability to select their own gift). It’s all kind of like self-service checkout–very efficient but not much fun after a while.
From the retailer’s perspective, it just seems kind of weird to encourage shoppers to just run up to the gift card kiosk, grab a bunch of them, and be done with holiday shopping. Whatever happened to enhancing the “experience”?
I too wonder about the validity of the study’s findings, but let’s assume for the sake of discussion that they are accurate, and look at this from an individual retailer’s perspective. If gift card purchases increases as a percentage of total holiday purchases, that means that inventories would likely back up even more than they otherwise might. If that occurs, the post-Christmas markdown pressures will intensify.
In that event, heavy early redemptions of gift cards would help move through the inventory, but at pretty tough margins. In this environment that might be the best scenario for retailers. They get out from under their clearance earlier. If redemptions followed previous patterns, however, clearance inventory would linger a bit longer, impinging the transition to spring goods.
In the end, gift cards buy a retailer cash flow during the holiday shopping season, but at the expense of margins later. An increase in gift card purchases expands that trade-off.
This study flies in the face of a different finding a few weeks ago, that was the subject of an earlier panel discussion. One of the potential downsides for retailers: Will they have the inventory to sell after Christmas? It may sound unlikely that stores will run out of goods, but the most desirable styles and most popular sizes are likely to be “broken” based on ultraconservative inventory management. This could take the wind out of the sails of the post-Christmas shopping season, which has salvaged many a store’s fiscal year recently.
We’ll see if in fact gift cards end up being #1 this holiday…though it is somewhat irrelevant what order they come in.
There are three key issues for merchants and gift cards this year:
1. The dollar values, at least on a per card basis, will likely decline. This could be both beneficial and detrimental. It will be beneficial if it drives a more generative transaction. Conversely, if more utilitarian gift cards are purchased, they will likely end up being dilutive and not necessarily drive new business for the merchants.
2. While this is nothing new, merchants still fail to employ adequate techniques to link gift cards to actual customers (i.e., by name and address, including email). Using gift cards to remove transaction anonymity is one of the fundamental opportunities with the cards, yet very few merchants even provide a baseline proposition such as guaranteeing the value in exchange for registering the card.
3. Gift cards are still one-dimensional and carry little value-add. Yes they are convenient but in the end they are little else whereas properly utilized, they can deliver a range of messages, offers and other benefits to drive incremental purchases.
Gift cards, while practical and convenient for most gift giving, may project a feeling that the giver hasn’t turned on the “involvement bulb” bright enough to really see the desires of the recipient. In today’s evolving relationships, gift-giving convenience appears to be winning over true concern. But that’s life so you go with the flow…but be sure the gift card is from one of the “most likely to survive” retailers.
It’s possible that gift card sales could surpass $100 billion this year given cutbacks in merchandise spending and the general state of consumer (lack of) confidence.
The “gift card malls” those racks of cards from every retailer, are becoming increasingly common. I think there is a huge opportunity for smart cards, gift cards with content–whether it’s a card/DVD containing trailers for Disney movies or “how-to” cards from Home Depot.
Count me among those who question the results of this study.
Between the “actual value of the gift” being readily identifiable and the unclear future of an ungodly number of retailers, I am very doubtful that gift cards will become more popular. I would predict the opposite.
Now, in the most exquisite of ironies, a reduction in the number of gift cards purchased will, in fact, create an offsetting improvement in holiday sales. We all know that gift cards don’t count as revenue…and that consumers can hold those cards as long as they want to. Assuming that they will use them in January isn’t quite accurate either.
So, I’d just as soon see the survey proven wrong.
I too am a bit surprised at the results of the study. I would think in hard economic times that people would be reticent to give a gift card showing actual value of the cost of buying a present. If I gave a $30 book as a present last year and I wanted to cut back, would I choose to give a $20 gift card this year? How about, if I gave a $30 gift card last year? Do I give a $20 gift card this year?
Gift cards could be a big opportunity for both the retailers and the gift givers. If a retailer were to sell the gift card at a discount, but not have it redeemable until after the New Year, all can win. Maybe I could give that $30 gift card that I bought for $25. Then the receiver would go to the retailer after January 1 and purchase what they want; a slow time for the retailer. And that receiver is likely to add dollars to that purchase as the gift card amount does not match exactly what they may want to buy.
Gift cards are hitting a new level in the physical sense. Cards with Disney and other studio licenses are adding excitement to gift cards. Even unique cards such as the Home Depot tape measure gift card make it more interesting. I really like the partnerships malls have made with credit card companies. Adding the Amex label to an upscale mall’s giftcard adds to the exclusivity.
The only suggestion I have is that retailers should employ some sort of guarantee on the value. Customers have become a little wary because of the current economic climate.
Actually, I have read other reports to the contrary indicating that gift card sales will decline this season due to a lack of consumer confidence that certain retailers will still be around to honor them. However, in any case, retailers will face new challenges this year in that consumers are likely to try to redeem gift cards in more of a rush right after the cards are received. And whereas this is normally a positive thing in that it brings more consumers into the stores after the holiday season, I believe that this year more consumers will simply use the cards for their value and do little other shopping.
So, it’s up to retailers to create enticing programs within to capture more business while card redeemers are in the house.
Frankly, I’m a bit surprised by the results of the study. One would think that in times when consumers are cutting back on spending, they may not want the exact value of their gift to be known. Also, with the recent closings of Linens-n-Things and Meryvns and with other retailers approaching similar fates, consumers should be concerned about whether recipients will ever be able to use the cards.
Gift card values are often lost when a retailer files for bankruptcy. Buyer beware, or get to the store very quickly.
I “get” the whole gift card experience and I know it’s been quite a boon for retailers over the past 10 years, but frankly, I find the whole notion very lazy. It’s a last-minute shopping mentality refined to meet the needs of the sloth. I know, I know, the “time-starved” consumer and all that…well maybe, if everyone would stop gaming, surfing YouTube and watching their DVRs they’d have time just once a year to put some care and thought into the gifts they were buying for the people they think about and care for!
Also, on a more visceral level, cards take the fun out of shopping…which begs the question; is the retail experience so bad that customers will do anything NOT to go out and shop??? Perhaps! Maybe the best answer yet is to improve your #1 marketing tool (the store) to the point where people would rather go to the store than “laze off” and just buy a card.
Retailers can’t guarantee gift card value. They can remove the policies that deduct value from the cards over some period of time/lack of use, but in the event of company problems that would be a false promise.
If there is a total bankruptcy (e.g., Sharper Image) all value is of course, lost.
In the event of a re-org bankruptcy, the retailer has to ask the court to allow it to honor existing gift cards, as those consumers with cards are creditors just like any others. Although courts are in general inclined to protect consumers, there are no guarantees. Vendors and other creditors will press hard for their debts to be serviced first.
That is the situation right now with Circuit City–they have asked, but no answer yet.
Anyone who gets a gift card needs to get themselves to the store the week after Christmas, unless the card is to Walmart, Target, or a handful more of clear survivors.
Retailers hope that the gift cards they sell will be redeemed late or not at all, and for less than their value. This is called both “breakage” and “slippage,” factors that are carefully recorded and upon which retailers depend in forecasting their margin figures. This also enables the retailers’ money managers to make overnight banking investment income on the unredeemed cards. And while overnight money market accounts are less lucrative than previously, the fact remains that the retailers have your money while you don’t. It’s like American Express Travelers Checks, they have your money while you don’t.
Retailers also hope that gift cards will be redeemed for more than their value, counting on increased revenues and consumer ignorance of sales they offered during the period of time between card sale and redemption. An interesting dynamic that is still being studied.
Diane Crispell seems to be talking out of both sides of her mouth. While she is “advising merchants to offer lower priced cards,” she is also predicting that “people may give one gift and make sure it’s really worth it.” Little Value vs. Big Value. How do these two concepts from the same person make sense? This is drivel.
Gift cards are here to stay, of course, but they must be viewed realistically. Why buy a gift card–and in some instances be charged sales tax–instead of just giving your friend the money? Do you really need a taxed record of your gift on a pretty card to make you feel better? And then, when your friend uses your gift card they may be taxed AGAIN in some states. Is this a good idea? You paid taxes on the income you used to buy the gift card, you were taxed again when you bought it, and your recipient may be taxed yet again when they use it. Triple taxation, ya’ gotta’ love it.
Such sentimentality. I want a gift card, especially an online gift card. My nieces want gift cards and have requested them. No matter how much thought and time we put into shopping, there’s the strong possibility that we will get something that will have marginal value and get little use (see the shirts in my closet). With my gift card from Amazon.com, I can have a huge selection, add more money to it and get something I might not have gotten for myself–a new lens for my camera, a good read (by my standards, music, whatever. Please give me a gift card and I will sincerely appreciate your thoughtfulness.
No question, consumers will be spending less this Christmas season. Anyone who thinks otherwise is likely living in a cave. This lower spending will be accomplished by spending less on individual gifts and dropping people from the gift list. This survey appears to be self-serving and illogical for past consumer behavior. Yes, gift cards sales will increase some this year. This will be more about saving on mailing costs. The problem for retailers is redemption–when and for what merchandise. Retailers want the Christmas merchandise sold before their year-end. This is so they can bring in the next season’s merchandise and lower inventory value taxes. Reduced consumer purchasing will likely delay gift card redemptions. The result: retailers having cash, but no sales. Interest profit will not make up for gross margin.