Gift Cards: Still Hot in 2008?

Gift card sales are desirable for both retailer and consumer for several reasons. As we mentioned last year, gift cards topped consumer wish lists with 53.8% of adults over 18 indicating they’d like to receive one (BIGResearch and the National Retail Foundation), and the average shopper purchasing 5 gift cards for others.

Gift cards are usually free to ship, and often recipients end up spending more or less than the full value of the card.

For online retailers in particular, electronic gift vouchers were a perfect solution for last-minute shopping – especially for out of town recipients!

But recent research by Archstone Consulting predicts the gift card market will shrink by 5% compared to last year.

I found this little chart interesting…it predicts the amount the average person will spend on gift cards this year (Holiday 2008) based on gender and age:

Chart credit: MediaPost. Research credit: Archstone Consulting.

Perhaps this data can be explained this way (please forgive my generalizations, this part of the post is meant to be a bit light-hearted):

  • Males under 35 are more likely to be single. As guys, they don’t want to spend hours trolling the mall. It’s convenient to buy gift cards – you can even get them in your grocery store checkout stand along with a TV Guide, AA batteries and a pack of Chiclets.
  • Women 35-65 are more likely to be married with children and responsible for gifts for their own family, in-laws, Hubby’s extended family, nieces, nephews, teachers, neighbors and co-workers than their younger female counterparts. Meanwhile, men in the 35-65 age group have relinquished the bulk of their shopping duties to Wifey.
  • Once you’re out of the workforce, you actually have time to shop therefore the propensity to spend more on gift cards goes down compared to other age brackets.

Of course, my analysis is just for fun – but this is real research, and here are some other interesting findings from the survey:

Gift Card Predictions 2008

  • Overall, consumers will spend about 5% less on gift cards in Holiday 2008 compared to last year
  • Consumers will shift spending towards more practical gift cards – gas, groceries and restaurants
  • Restaurant cards are expected to outsell other categories
  • Most desired by gift recipients will continue to be pre-paid bank cards like Visa, American Express and Master Card, as they were in ’07
  • 24% of consumers plan to increase spending on gift cards over last year, teenage and post-college shoppers are most likely to spend more
  • 13-24 year olds will proportionately spend more on gift cards (least discretionary income) and will receive about 40% of all gift cards
  • Approximately 50% would consider purchasing a gift card from a retailer if it comes with an additional coupon/discount for them
  • Gift card sales through grocery, drug stores, banks and other “outside locations” is expected to grow 30% over last year

Despite the prediction of restaurants, gas and bank cards taking the lion’s share of the gift card spend, we can expect gift cards to again be customer and retailer favorites in retail shops. If you offer gift cards (physical or electronic) through your ecommerce store, make sure you promote them on your home page, your email campaigns and as “no brainer” add-ons on your shopping cart pages. It’s also becoming common practice to include a “Gift Cards” link in your main navigation:

You may also want to play around with “give some, get some” promotions – spend $X on a gift card and receive $X for yourself.


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11 Responses to “Gift Cards: Still Hot in 2008?”

  1. This is a timely topic for me. I have never offered Gift Cards but was planning to start. I see PayPal offers them, and seems to have a pretty easy way to start up.

    Is there anyone else out there that has used someone better?

    Are there any concerns with me using Paypal?

  2. I’m confused… sales of gift cards are expected to drop by 5%? How does that compare to overall Holiday spending?

    In view of the economic crisis, I’d expect overall Holiday spending to decrease by more than 5%. Does this mean gift cards are expected to outperform other gifts?

    Personally, I love them! (Being a Chicklet-loving single guy and all…)

  3. Carla says:

    I never even thought about offering gift card/certificates. Great idea!

  4. @Audio Bible,

    I would imagine you just use them as a separate SKU on your site. Were you thinking to resell PayPal gift cards as an affiliate?

    Linda

  5. @Michael Straker

    Overall spending is expected to increase 1.9% over last year according to the National Retail Federation. http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=590

    Again, this is offline & online – and very general statistics. A lot of this research happened before the big bank crisis too – I’m working on compiling a collection of studies on the holiday season, should be up next week, stay tuned ;)

  6. @Michael Straker,

    PS, online flat at 44%

    “Although the number of people buying gifts online is expected to remain flat over last year (44.2% in 2008 vs. 44.3% in 2007), shoppers will rely on the Internet more than ever to browse for holiday gifts and research products. According to the survey, the Internet will influence 33.6 percent of holiday purchases, up from 30.2 percent last year and 28.9 percent in 2006. “

  7. It’ll be interesting to see what effect the economic crisis will have. I’d be surprised if overall spending increased, especially in the US.

    I’m still not sure why gift card spending is expected to decrease compared to overall spending. That’s a result that would definitley surprise me. My personal experience is that people are really warming up to them.

    I look forward to seeing these other studies!

  8. charles says:

    There are some scam gift cards out there. so be careful.

  9. Gift cards a boon for retailers. After all, consumers will underspend the value (the retailer earns a “profit” on it), or overspend in the store to use up the value of the card (gain an sale). Gift cards are a win-win situation for retailers. And they’re nice gifts because they’re easy and sometimes look pretty cool.

    Some places like Costco and other wholesale retail stores offer $50 gift card values for $40, a potential savings for consumers (and more of an incentive for customers to buy gift cards).

    As a consumer, I’d caution from spending too much on gift cards because it’s scrip that doesn’t have any value elsewhere other than the store. So it could be a potential waste of money. Better off giving a check, money order, or cash as a gift =).

  10. @Linda Bustos It may suggest growth at 1.9 percent, but if you read the lede, the last sentence says “this represents the lowest increase in consumer spending since the survey began in 2002.” And during that time after 9/11, we were going through a recession. I wonder if that increase takes in consideration inflation of the dollar from last year, because a 1.9 percent increase could actually be a negative when it’s all said and done.

  11. [...] the end user of the product choose and not spend the money on a gift nobody will use. The concept works not only in classic retail with real cards but also in software sales, where the products are usually delivered [...]

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