Holiday gift-card sales expected to rise

Friday, Nov. 19, 2004 | 9:18 a.m.

BLOOMBERG NEWS

Gift-card sales will rise this holiday season with 74 percent of U.S. shoppers buying at least one, a survey found, as retailers appeal to higher-income customers with special packaging and redemption values of as much as $1,000.

Merchants such as May Department Stores Co. and Barnes & Noble Inc. are expanding their gift-card offerings, sales of which are expected to increase by $100 million to $17.3 billion, Washington-based National Retail Federation said. Last year, 70 percent of shoppers bought a gift card in November and December.

Gift cards are the top holiday gift among shoppers this year, according to a Deloitte & Touche USA survey of 16,000 consumers. Last year, gift cards and certificates were the No. 3 choice, behind apparel and CDs and DVDs, the survey said. Barnes & Noble is offering a $1,000 gift card in a fabric-lined box with a pair of bookends and a portrait of William Shakespeare.

"People have accepted gift cards as truly being a gift," Deloitte & Touche Vice Chairman Tara Weiner said in an interview. "It's not like giving cold cash where you gave it no thought."

Gift cards are expected to play a significant role during November and December, when total retail sales are forecast to rise by 4.5 percent, according to National Retail Federation projections.

Shoppers will spend $80.45 on gift cards, or about 11.5 percent of their average gift budget of $702 this year, the group said. Total retail spending is forecast to reach $219.9 billion.

May, the St. Louis-based operator of the Lord & Taylor and Marshall Field's chains, has added cards with more contemporary designs printed on them.

"We would be very disappointed if our gift-card sales don't grow between 10 to 20 percent," said May Chief Financial Officer Thomas Fingleton on a conference call last week.

Retailers also are using gift cards as part of discounts and as a way to get consumers to return to their stores. At Best Buy Co., the largest U.S. electronics retailer, shoppers buying a $1,000, 30-inch Samsung high-definition television receive a $100 gift card to use later.

No. 2 U.S. electronics chain Circuit City Stores Inc. is giving a $25 gift card for people signing up for a new credit card.

The growth in gift cards also means that more sales are now in January. Retailers typically don't book the sale as revenue until the gift recipient uses the card to make a purchase.

ValueLink, a First Data Corp. unit that began issuing gift cards for retailers in 1995, found 58 percent of 1,000 people it surveyed redeemed the card within the first month they had it. Fifty-five percent said they made purchases for more than the value of the card when they were redeeming it.

"It is redefining the season," said Wendy Liebmann, president of New York-based consulting firm, WSL Strategic Retail.