Gift card sales suffering

The post-holiday sales surge retailers have come to expect from gift card redemptions is not expected to materialize this year, as consumer surveys suggest gift card sales have become a casualty of restrained consumer spending this holiday season.

Last week, new research from the National Retail Federation suggested gift card sales this holiday season will decline 6% to roughly $24.9 billion from $26.3 billion last year. The number of people planning to purchase gift cards is also expected to decline to 53.5% compared to 56.6%. One reason is consumers’ expectations of a highly promotional environment and the availability of tremendous deals.

“Since gift cards never go on sale, some price-conscious shoppers will be passing up gift cards in favor of holiday bargains,” said NRF president and ceo Tracy Mullin. “Retailers may need to make minor adjustments to holiday plans as fewer people may be hitting the stores in January to redeem gift cards.”

Research conducted for NRF by BIGresearch found that the main reason shoppers plan to buy fewer gift cards this holiday season was because they feel the cards are impersonal (22.7%), that they would rather stretch their dollar by buying merchandise on sale (10.9%), and because they do not want to buy a card with expiration dates or added fees (9.8%). The survey polled 8,758 consumers from Nov. 5 to 11.

If the decline materializes as anticipated it would mark the end of a period in which gift card’s experienced double digit annual increases the past few years. Target may fare better than some other retailers however given the company’s renewed emphasis on value and a desire of gift card buyers to see recipients get more bang for their buck.