Electronic gift cards top robust forecasts

The 2006 holiday season is past, but smart retailers are applying lessons learned from it to the upcoming year.

One item is already standing out as a popular gift for the 2007 holiday season—the gift card, which beat the already high sales projections for the 2006 holiday season.

According to a National Retail Federation (NRF) survey conducted by BIGresearch, consumers spent an average of $164.81 on gift cards during the 2006 holiday season, up from the $146.20 they said they expected to spend. As a result, gift card spending during the holidays was $27.8 billion—$3 billion higher than the $24.8 billion initially estimated by NRF.

Men spent the most on gift cards ($176.84), while young adults 18-24 spent the least ($118.12).

According to the survey, department store gift cards were the most popular gifts, as 38 percent of consumers said they gave a gift card from that type of store. Restaurants (27 percent) were also a popular choice, in addition to bookstores (18 percent), electronics stores (16 percent) and discounters (15 percent).

While shoppers can easily purchase gift cards at a variety of locations, most consumers (77 percent) chose to buy gift cards from stores where the card could be used. However, an increasing number of shoppers (17 percent) purchased store gift cards from other retailers, like convenience stores and supermarkets. Also, nearly one-fifth (18 percent) of consumers said they purchased a gift card online.

"As gift cards increase in popularity, retailers are looking for more convenient ways to sell them," said Phil Rist, vice president of strategy at BIGresearch. "Many time-strapped holiday shoppers chose to buy several different gift cards at once by purchasing gift cards at supermarkets or convenience stores, which is a trend we expect to continue."

Consumers reported they had spent less than half of the value of their gift cards (37 percent on average) by the second week in January. Because retailers generally do not count a gift card as a sale until the card is redeemed, companies encourage consumers to spend gift cards as soon as possible.

Retailers also know that customers redeeming gift cards are likely to spend more than the value of the card. According to the survey, half of shoppers (51 percent) who have redeemed holiday gift cards said they spent additional money beyond the value of the card to purchase an item.

Michigan Retailers Association offers a full-service gift card program that provides card creation, card packaging, transaction processing, administration and customer service support to merchants nationwide.

The program is designed to integrate easily into existing systems. Typically, a partial or full download to a stand-alone credit card terminal is the only change necessary to begin accepting MRA gift cards. Comprehensive gift card reporting is included in the service. For more information or to get started with the program, contact MRA's John Mayleben at 800.366.3699 or jmayleben@retailers.com.