January 7, 2005

According to the National Retail Federation, traditional gift cards increased in popularity between 2003 and 2004, accounting for over $17 billion in sales during the 2004 holiday season.

The NRF also found that almost 70% of consumers bought a gift card this holiday season, and recent research from Paymentech finds that almost one-half of the nationwide sample of consumers it surveyed between December 26 and 28 say they received a gift card during the holiday season, with 16% receiving three or more such cards.

Over one-half of these consumers will use a gift card they received during the holidays within four weeks after Christmas, with 16% using it within three days.

Gift cards have had a stigma in the past, perceived an impersonal and often last-minute purchase. Regarding the former, Paymentech finds that opinion is split down the middle on how impersonal cards are, with 50% preferring to receive gift cards and the other half preferring actual gifts items. Similarly the NRF found that 50.2% of consumers would like to receive gift cards during the holiday season.

It also appears that gift cards are not necessarily a last-minute gift anymore, at least as far as people foresaw in an American Express poll conducted in November 2004. Only 26% of US holiday shoppers planned to buy gift cards during the last week of December, according to American Express.

Additionally, only 27% of US holiday shoppers polled by AmEx say they are planning to buy gift cards as a "last minute gift."

Many more say that the cards save time and effort (68%), are more appropriate than cash (58%) and are chosen for "difficult-to-please" people (51%).

This corresponds with findings by Stored Value Systems (SVS), a gift card supplier. SVS Executive Vice President Bob Skiba noted that "the survey also reinforced a major trend we saw emerging last year. While there is certainly significant impulse purchasing of gift cards, we are seeing a much larger number of buyers who are purposefully choosing a gift card as a first choice, saying they want to ensure the recipient receives something he or she would enjoy."

Both Paymentech and SVS find that most of the gift cards given fall in the range of $25 to $50 per card (with the latter finding an average of $42 per card).

Many people spend more or buy more than one card however, meaning that the average amount spent by consumers could be higher. The NRF pegs the average gift card expenditure for the holiday season among card purchasers at $108.28, while SVS estimates it to be $223. Overall gift card spending in the holiday season is estimated by the NRF at $17.34 billion, an increase of $100 million from last year.

Source: eMarketer