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Gift cards will extend retailers’ holiday cheer

Renewed demand for gift cards may extend retailers’ holiday cheer well into January.

Gift card spending rose to nearly 18% of total holiday spending this year, the highest percentage since 2006 and up from 14.6% last year and 13.1% in 2009, according to a consumer-tracking survey by the International Council of Shopping Centers and Goldman Sachs.

The spending “might suggest a better sales performance in January as a result,” said council Chief Economist Michael Niemira. He said this week will catch the first wave of gift-card redemption, with further activity on tap for the first two weeks of January.

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Retailers don’t count gift-card purchases as sales until consumers redeem them.

Gift cards were already being seen as the likely top gift choice, above clothing, toys and electronics, before the holiday season started, Niemira said, adding that demand may have picked up because of a scarcity of must-have items and soft apparel demand this year.

The rise of digital gift cards that can be instantly delivered through Facebook, personalized videos and mobile phones also have made gift cards a novel gift idea in their own right, according to the National Retail Federation.

The trade group’s consumer survey in November showed holiday shoppers were expected to spend an average of $155.43 on gift cards, the highest sum since 2007 and up from $145.61 last year. Total gift-card spending this holiday season is expected to total $27.8 billion.

This year was the fifth in a row in which gift cards were the most requested holiday gift, the survey showed: 80.2% of shoppers, versus 77.3% last year, said they intended to buy gift cards.

Shoppers also said they planned to spend an average of $43.23 per card, up from $41.48 last year. Men were planning to spend significantly more on gift cards than women this year, shelling out an average of $164.24 versus women’s $147.06, the survey showed.

Retailers have not lost sight of the promise of gift cards.

About 57% of retailers offering the cards expected an increase in gift-card sales this holiday season, up from 47% last year and 32% in 2009, according to accounting and consulting firm BDO’s November survey of retail-industry chief marketing officers.

Retail giant Wal-Mart Stores Inc., which got aggressive in marketing its price-matching guarantee this holiday season, offered customers rebates in the form of a gift card if a rival beat Wal-Mart’s prices.

In the final countdown to Christmas, Wal-Mart and other retailers, including Kohl’s Corp., heavily marketed gift cards as a great last-minute gift option.

Wal-Mart’s archrival, Target Corp., which called Dec. 26 the typical peak day for gift-card redemption at its stores, offered shoppers who used their gift cards beginning Monday savings of up to 50% on some women’s apparel and other categories.

Target shoppers who redeemed their cards on the company’s website on Christmas Day also received $10 off purchases of $50 or more. Target has said most of its shoppers redeem gift cards within 60 days of receipt.

At the Westfarms Mall in Farmington, Conn., 50% of new purchases Monday were made with gift cards, while at the Shops at Willow Bend in Plano, Texas, 30% of new purchases Monday were made with gift cards, according to the malls’ parent company, Taubman Co.

Toys R Us’ post-Christmas sales this week through Saturday include giving a $50 store gift card for the purchase of any tablet costing $250 or more.

Teen retailer American Eagle Outfitters Inc. this holiday season handed out $10 cards, to be redeemed Dec. 24 to Jan. 25, with any gift-card purchase.

In addition to pushing gift-card sales, retailers recognize the urgency of attracting speedy redemptions.

Marketing software firm Responsys Inc., which tracks the email marketing activity of retailers, forecast that more than 22% of retailers will have sent emails this year reminding shoppers to redeem their gift cards as early as Christmas Eve, compared with 17% of them last year.

“With inventory levels high, retailers will be anxious for consumers to redeem their gift cards,” said Chad White, the firm’s research director.

Cheng writes for MarketWatch.com/McClatchy.


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