The sale of gift cards will rise six per cent touching US$26.3 billion this holiday season which though beating the industry forecast of four per cent is nowhere near the breathtaking 34 per cent sales during the same period last year, said a report.
The forecast, by National Retail Federation, a retail trade group, based on a consumer survey, added to the speculation that consumers are reticent to spend money this holiday season. It could also signal a dose of gift card fatigue.
The sales of the decorative plastic cards rose 6.5 per cent in 2005 before the big jump last year. Analysts pointed to new technology, wider distribution and savvy marketing strategies behind last year’s growth. This year, retailers are looking for new gimmicks, but the economic environment is making it more difficult.
“At some point, you just reach a ceiling,” said Phil Rist, vice president of strategy for BigResearch, the Worthington, Ohio-based consumer intelligence firm that conducted the survey for the retail trade group.
That hasn’t stopped retailers from looking for new ways to market gift cards, given another BigResearch survey found that more than half of consumers listed gift cards as the most-wanted item on their wish lists.
The gift card phenomenon took off with a vengeance last year as new technology allowed drugstores and supermarkets to sell cards for retailers spanning Old Navy to Blockbuster by loading a dollar value on the cards at checkout.
In an effort to boost sales, retailers made colorful designs and added such bells and whistles as holiday music jingles or the scratch and sniff scent of pine cones and peppermint.
And there is still plenty of room for growth, said Dave Sievers, a principal at Stamford, Conn.-based Archstone Consulting. Contrary to the National Retail Federation’s forecast, Archstone predicts gift card sales will have another robust year, climbing 25 percent this holiday, to $35 billion.
“We expect this year to be a significant year too,” said Sievers. “You’re starting to see retailers continue to push their programs. Plus consumers want them.”