Mercator Perspectives

Gift Cards Are NOT a Dying Trend

A recent article on entitled “Why Gift Cards May Be Dying Trend” suggests consumers are buying fewer gift cards and retailers are selling fewer gift cards, despite ample evidence to the contrary. It provides as evidence lower mall card sales, reduced in-store redemptions of cards, and consumer anecdotes.

While these individual points may hint at a localized stories, the big picture is that gift card sales have continued to increase and redemption remains strong.

In an informal survey of retailers, Mercator has found merchants across categories all say their card sales are up when compared with last year’s holiday season. Though merchant discounts may have led some shoppers to opt for merchandise over gift cards, nevertheless, the example of shopping mall cards may be the part of the market to use when considering the overall market. Shopping mall cards have faced increasing competition from the prepaid card malls that are in many grocery and convenience stores.

Reduced in-store redemptions is interesting, but not necessarily a sign that fewer people are using gift cards. Instead, based on our preliminary conversations with members of the industry, what lower in-store redemption seems to show is that more people are taking their gift cards online. Initial redemption patterns seem to indicate that consumers are doing more shopping through the web, no doubt encouraged by deals such as free shipping and free returns.

Finally, while the person in the story says that fees have made her and her family less inclined to give and receive gift cards, closed-loop cards have no fees in nearly every case. Additionally, gift cards remained at the top of consumers’ wish lists for the fifth year in a row according to pre-holiday survey information from the National Retail Federation.

Although the gift card market is undoubtedly mature, it continues to grow at a respectable rate. People still enjoy the convenience and flexibility offered by gift cards of all kinds. Mercator hopes to compile and release data in the near future to further validate these observations.

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