Gift cards are booming -- on the buyer and seller sides of the market. According to Comdata, in the 2007 holiday season, the average gift card buyer will spend $203 on cards, a $23 increase from 2006. And the National Retail Federation's 2007 Holiday Consumer Survey found that 54 percent of consumers said they want to receive a gift card as a holiday gift.
With consumers purchasing more gift cards than ever before, it's no surprise that the variety of companies and organizations that are utilizing them is growing just as fast.
"Gift cards are a compelling product for the giver and the receiver," says Tim Sloane, director of the Debit Advisory Service at Mercator Advisory Group in Waltham, Mass. "Trying to find new ways to engage the gift buyer as well as the recipient continues to be an opportunity for the suppliers."
|Trends in gift cards|
Sloane says that a gift card with a
charitable component, or one that offers discounts at specific stores, raises the value of the card. "I've recently seen a card where the card itself is a multimedia CD, so you get music or video on the card in addition to the value of the card."
The Comdata survey asked respondents about a gift card that is a CD or DVD and 48 percent said they would be likely to buy a card with multimedia content.
Partnering for benefits
Another trend Sloane discussed is a restricted authorization network. American Express has been leading the way, bundling various incentives with their cards.
"At back-to-school time, if you bought two American Express network cards, you got an incentive, a special store gift card for places like the Gap and Linens 'n Things for $25. It didn't have the American Express logo on it and it could only be used at those specific stores," says Sloane. But, he says, it provided incentive for the consumer to buy American Express gift cards in the first place.
"The benefit for American Express is that those merchants contributed part of that $25 on the card. American Express didn't have to put $25 on each card. I think we'll see more of that. We'll see mixed categories like a meal and a movie. Those different kinds of gift cards will be more general to what you're offering but specific in where you can use it."
Year-round sales rising
While gift card sales peak at the year-end holidays, other events during the year are also proving to be popular times to give prepaid plastic. "Year-round sales spike around Father's Day and graduation," says Dan Horne, a marketing professor at Providence College and an expert on the gift card market. "On Father's Day we are seeing sales of experiential cards, restaurants. Older men are not big shoppers -- I'm generalizing there -- but if you get them something experiential, they'll use it."
To target those other events, Best Buy and American Express offer cards specifically for birthdays and weddings, among many other special cards.