Retailers offering new perks to encourage gift card giving
Posted Nov 15th 2009 2:01PM by Tom Johansmeyer
Filed under: Target Corp. (TGT), Penney (J.C.) (JCP), American Express (AXP)
What's on your Christmas wish list? If the National Retail Federation is right, gift cards are probably holding a respectable place toward the top of the list. These little pieces of plastic are requested most this time of year, and they have the added perk of allowing people to get what they want instead of money wasted on presents that sucks. This trend may give retailers a hand this year, as they'll be able to keep their inventories down.
If shoppers are slow with the cash, retailers won't have to resort to just slashing prices as they had to last year to move product out the door. When the stuff on the shelves is cheap, gift cards aren't as attractive because there's a deal to be had! This year, if inventories are kept down, gift cards are more likely to move.
Ralph Rolen, general manager of Stored Value Solutions (which processes gift cards for retailers), told USA Today, "If you have a choice between buying something at 70% off or a gift card, you're more likely to give something at 70% off."
Last year, gift card sales fell almost 6% to $24.9 billion, the NRF says, making it the first year gift card sales fell since tracking began in 2002. Fees and restrictions made them a bit less popular, as did the bankruptcies of several major retailers. Though it's unlikely that we'll see the same problems again this year, consumers still have their doubts.
A decline in consumer spending could push the average value of gift cards down to 11.5% this year, according to Archstone Consulting, but retailers are hoping to move more cards to compensate for the smaller face values.
To entice gift-card giving, some companies take the following steps:
1. Down with fees!
American Express (AXP) decided to eliminate monthly fees back in September. While this trims $2 a month in revenue from each card, it may help the company access the 13% of shoppers who don't turn to gift cards.
2. The human touch
Personalized gift cards are being offered by some retailers in order to make them seem more personal. For consumers who prefer to give gifts that make a connection with the recipient, this could be an option.
3. Here's a little something extra
To stimulate gift card sales, some companies are accompanying them with a free gift or discount with purchase. J.C. Penney (JCP) is tossing in discounts on seasonal items, and Target (TGT) is giving shoppers who spend $100 or more before noon on the day of Thanksgiving a $10 gift card.
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