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Published: Sunday, 12/11/2005

From lowly status to star: Gift cards expected to draw nearly 20% of holiday spending

BY JON CHAVEZ
BLADE BUSINESS WRITER
Jennifer Dewar, of Perrysburg, selects from the gift cards on display at Best Buy on Monroe Street in Toledo. Jennifer Dewar, of Perrysburg, selects from the gift cards on display at Best Buy on Monroe Street in Toledo.
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Gift cards, once the choice for a shopper unsure what to give someone, have become important holiday staples.

The cards are expected to pull in nearly $1 out of every $5 spent on holiday gifts.

They are on display racks in many stores, in many shapes, colors, and sizes. And they are available at retailers previously unlikely to offer them. Some stores carry gift cards to be used at other stores.

"Back in the old days with gift cards, they were a piece of paper that the merchant filled in and stuck in an envelope," said Scott Krugman, a spokesman for the National Retail Federation.

"But now they're actual merchandise, they're on displays, they're impulse buys at the cash register."

The explosion of card purchases is credited to convenience, particularly for the buyer, said Paco Underhill, a retail sociologist and managing director of a New York City retail testing service. The cards also allow the recipient to get something he or she wants rather than what someone else chooses.

And the cards extend Christmas for the recipients. "It means a $50 gift card at Best Buy spent before Christmas is only worth $50," Mr. Underhill said. "But if spent after Christmas, it may be worth $75 or $100 because of markdowns."

The cards, which some consider impersonal, can be personalized, even with a photo of the giver.

The surge in card purchases has affected retailers, too. Because the cards are used after Christmas, holiday shopping will continue into the new year, which in turn means that stores must have enough quality merchandise available to satisfy card-bearing customers.

Still, for Lisa Parsons, of Toledo, the cards mainly offer conflict. Accompanied by her daughter, Ashley, Mrs. Parsons recently bought a gift card for her niece at Westfield Franklin Park

"She says, 'All I want is gift cards,' but I would personally rather buy someone a present," Mrs. Parsons said.

She said she doesn't feel as though she has purchased a real gift, yet admitted the cards permit the recipient to pick out what he or she wants.

Kroger shoppers in Toledo have kiosks offering one-stop gift-card shopping from several retailers. Kroger shoppers in Toledo have kiosks offering one-stop gift-card shopping from several retailers.
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Rosette Ajluni, head of personal shopping for Neiman Marcus in Troy, Mich., said gift cards are rising in status but aren't likely to reach the level of a well-thought-out gift.

"While it doesn't say 'I took the time out and found this lovely gift and I hope you like it,' it says 'I'm going to let you choose your own thing because I don't want you to end up with something you don't like and have to return,' " she said.

"Overall, I would not give a gift card to a friend. But I might give it to a child."

Retailers, however, are gung ho about the cards.

At Franklin Park, for example, shoppers can get gift cards from traditional mall stores and for area restaurants, hair salons and spas, and even a local car wash.

Paul Ford, co-owner of Minuteman Car Wash near the mall, said his firm booked a kiosk in the mall to sell gift cards, providing exposure for the business.

"We sell a lot of gift cards at the car wash but a lot of people don't think of us unless they come in," he said. "So we thought we'd try this for a week."

David Broadway Salon & Spa is in its fifth year at the mall selling gift cards, which introduces the business to new clients, said manager Kara Broadway.

Richard Feinberg, director of the Purdue University Research Institute, which focuses on retailing, said gift cards are critical because studies show that when they are redeemed, holders purchase 30 percent more than the value of the cards.

The National Retail Federation has found a significant increase in gift card sales, with 53 percent of those surveyed saying they expect to buy one this year, up from 45 percent three years ago. The trade group's survey said total sales will hit $18.5 billion this year; a university study said they could rise to $40 billion.

On average, each consumer will buy 3.49 gift cards this year, up from 3.34 two years ago, the retail group found.

Dressing up the cards has become important as retailers try to lure buyers.

Best Buy, a leader in gift cards, puts its cards in CD cases designated for video games, music, or movies.

Marshall Field's is offering popular novelties - a 9-inch stuffed Santa Bear toy, a box of its Frango Mint candy, and special Christmas ornaments - as packaging for gift cards. It also positioned card stations throughout its stores. "Last year we had gift bags that could be associated with the gift card, but it was not as formal," said Jennifer McNamara, a spokesman for Marshall Field's in Chicago.

Wal-Mart has gone further. For 88 cents, a shopper can personalize gift cards by having a photo put on it - a sure hit with grandparents.

Kroger has sold its own gift cards for years, but this year the supermarket chain has kiosks in its stores to sell gift cards from nearly two dozen retailers, including Circuit City, Best Buy, TGI Friday's, Bass Pro Shops, Staples, and Panera Bread.

"Kroger receives a percentage of what gets sold," said spokesman Dale Hollandsworth.

But the bigger benefit, he said, is that customers may find it easier to drop by Kroger's, instead of the mall, to buy a gift card and then possibly buy some of Kroger's expanded merchandise, such as furniture and electronics, toys, and small appliances.

Gift cards have attracted the attention of state legislatures, including Ohio's, which have passed or are considering laws that limit when cards can expire and regulate whether fees can be charged to keep cards valid.

This year, the Ohio Senate passed a bill, which is awaiting action in the House, that would prohibit expiration dates less than two years after a card is issued and barring service charges or fees within two years after a card is issued.

The law would not apply to gift cards issued by banks or financial institutions, so popular items like Visa Bucks cards would still carry fees that eat into a card's value.

But most retailers are moving away from fees and expiration dates. Experts advise consumers to always check cards for expiration dates and fees before buying, and recipients to determine early on whether the card might expire or have fees.

Gift cards "have taken on a new look and a new role for the industry," said Michael Niemira, chief economist for the International Council of Shopping Centers.

"What has happened is the gift card has become a 'gift.' It's really become one of the most popular single items that's wanted."

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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