Gift card trends: Gift cards are everywhere

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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
Partnering for benefits
Year-round giving
State parks
Gift card malls

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.

Plastic meets the great outdoors
One type of business that has effectively implemented gift cards is state and national parks. A number of state parks now offer gift cards that can be used for campground fees, accommodations in lodges, concessions or park admission. Even national parks such as Yosemite and Glacier National Park offer gift certificates that can be purchased online.

“We’ve been doing gift certificates for about seven years,” says Patrice “Sissie” Summers, a spokeswoman for
West Virginia State Parks & Forests. “The gift certificates had a two-year limit on them. Then the West Virginia legislature changed the law, so that gift cards can’t expire.” West Virginia State Parks & Forests has been selling gift cards for three years, and expects to take in nearly $100,000 this year.

With gift certificates, the parks could not reissue a certificate for the unused portion of the total value, leading to frustration for the certificate holder and the state, Summers explains. “Now we can go to the virtual terminal to check balance, add value and track cards when the holder has the card number available.” Switching to gift cards reduced “confusion for our staff accepting the card use — and the biggie — cardholders could spend every last penny of value on the card.”

“We sell most of our cards via the Internet,” says Summers, and the state sells many more gift cards than they do certificates.

In addition to West Virginia, the states that sell parks gift cards are
Ohio State Parks,
Alabama State Parks (purchase in parks or via toll-free number), and the
New York State Parks’ golf gift card.

The “Unbridled Spirit” gift card sold through the
Kentucky State Parks can be used at multiple places in the state, including historical sites, Kentucky Horse Park, the Kentucky Artisan Center and, of course, the state parks.

“We knew that gift cards were growing in popularity and we wanted to tap into that market,” says Chris Gilligan, a spokesman for Kentucky Commerce Cabinet, which oversees the various organizations where the card can be used. Introduced in fall 2006, the multiagency gift card did $556,000 in sales during its first year, a 35 percent increase over the previous year when a state parks-only gift certificate was sold. “We are the first state to have a statewide gift card, and it’s good to be ahead of the curve,” Gilligan says, adding that Kentucky is considering expanding the use of the gift card in the state, but “right now we’re going to walk before we run.” The Unbridled Spirit card has no fees and never expires.

Massachusetts offers a “ParksPass” gift card through its Department of Conservation and Recreation that pays for annual admission and parking for all its parks except certain beaches.

Many other state parks offer gift certificates for use in their parks.

While the holidays tend to be the time of year when West Virginia sells the most cards, Summers says she sees a surge at Mother’s Day and Father’s Day as well. “And corporate is all over the place — parks gift cards as an employee incentive are very popular. People in West Virginia love their parks, and our population has always supported the parks.”

State parks cards certainly are a unique gift. “For the person who has everything,” says Gilligan, “you can give the whole state of Kentucky.”

Gift card malls
To make gift cards readily available to consumers, the gift card mall is popping up everywhere. According to Mercator Advisory Group, sales of gift cards through gift card malls grew 88 percent in 2006, for a total of $3.6 billion.

These “malls” are display racks that are often near the checkout counter of drugstores or grocery stores, and the gift cards offered are from a variety of merchants. According to Summit Research Associates, there will be more than 105,000 self-service gift card kiosks in stores by the end of 2007. There are good reasons why so many retailers are setting up a shop within their stores.

“There are two different people involved in gift card malls, the mall provider and the host retailer,” says Horne. “There is no cost of goods for the retailer. Anything they turn goes straight to bottom line. Plus there is the promise that the store will become a destination for gift giving. They’ll generate more store visits because of the mall.”

The gift cards available at gift card malls range from restaurants such as T.G.I. Friday’s, Ruby Tuesday and Starbucks to golf or spa cards that can be used at participating places.

“A fascinating implementation of the gift card is the Utix card,” says Sloane. “It offers experiences like a round of golf at one of thousands of courses. Spas nationwide. You can imagine the value of a card that can be used in so many places. I think we’ll see more of those kind of offerings.”

For those who still think gift cards are an impersonal gift, a company called Pay By Touch is introducing the “Reward and Gift Card Kiosk” that will allow customers to make their own gift cards embossed with the recipient’s name.

But given the billions of dollars’ worth of gift cards that are being sold each year, consumers don’t seem to mind giving a 2-by-3-inch plastic rectangle.