Consumers savvier on gift cards

In surveys, folks like getting them but are aware of risks

— Spending on gift cards for Christmas appears headed for a second straight year of decline, though not for lack of popularity.

The cards remain the top-requested gift in several consumer surveys, but they are also subject to the same economic pressures as other gift categories: shoppers are spending cautiously.

“People are just strapped,” said Patricia Edwards, a retail analyst who runs Storehouse Partners LLC in Seattle.

Tower Group of Needham, Mass., a research and advisory firm that focuses on the financial services industry, forecasts that sales of store-brand gift cards will fall 7 percent, while sales of general-use cards will rise by 3 percent.

Brian Riley, research director for bank cards at Tower Group, cites three factors likely to hold down spending on gift cards: Decreased confidence in retailers, lower levels of inventories at chain stores and a generally more frugal shopper.

He noted that millions of dollars in gift-card value was lost when retailers including Sharper Image, Linens ’n Things and Circuit City went bankrupt.

This year, if shoppers find a store “relatively unstocked,” he said, they’re likely to ask, “Does it make sense to buy a gift card?”

Riley expects Wal-MartStores Inc. and other retailers that have “a lot of things you can look for” to benefit most this year from gift-card sales.

Wal-Mart says that, based on surveys done for the company by Bigresearch LLC of Worthington, Ohio, 40 percent of the mothers surveyed intend to add gift cards as stocking stuffers this year.

And as of Saturday, the retailer was offering a free $50 iTunes gift card with purchase of an 8GB iPod Nano priced at $145.

Wal-Mart’s store-brand gift cards have no fees or expiration dates and can be used in stores or for online purchases, spokesman Melissa O’Brien said. The company also sells the cards online in a variety of colors and themes, including snowmen, red bows, blue ornaments, Merry Christmas and Snoopy Christmas in values ranging from $10 to $2,500.

In recent years, it has become common practice for retailers to feature gift-card displays, especially for businesses that are not direct competitors.

Harps Food Stores Inc., the Springdale-based grocer, is featuring a “gift card mall” in its stores and even promoting the selection in a television commercial. The message, the company says, is that while grocery shopping, you can do your Christmas shopping as well from a selection of 150 national chains including restaurants, home supply stores and other nongrocery retailers.

“With the economy being what it is, and sales hard to come by, we’ve seen an increase of gift-card sales for the year. We’re definitely seeing strong numbers,” said David Ganoung, a marketing specialist at Harps.

For only the third year, Harps also is selling its own gift card. Because of consumers’ focus on necessities such as groceries, he said, the company has fielded calls from people out of the area who buy the cards for family members in the region.

Bigresearch, in a survey done for the National Retail Federation, found that giftcard buyers plan to spend an average of $139.91, down from $147.33 last year. The average value per card was put at $39.80, down from $40.54.

The survey of 8,692 consumers was conducted Nov. 3-10.

Archstone Consulting ofStamford, Conn., a management consulting firm, says surveys it conducted earlier in the season point to a 1 percent decline in gift-card buying. The firm cited negative publicity about card expiration dates, fees and retail bankruptcies among reasons for the likely drop in sales.

Corporate Research International, a mystery-shopper firm based in Findlay, Ohio, said 2,526 surveys completed online between Nov. 27 and Dec. 7 indicate shoppers plan to buy the same number or more gift cards than they did last year. The company did not forecast gift-card spending for the season.

Of significance for retailers, the surveys indicate that more than 42 percent of respondents would spend more than the amount on the card while in the store.

“People are definitely willing to spend above and beyond what they otherwise would spend, by an extra $40 or $50, because they got the first $100 for free,” said Brad Holdgreve, vice president.

To contact this reporter:

[email protected]

Business, Pages 51 on 12/20/2009

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