National projection showed booming sales, local shops had mixed results
Once a primo option for last-minute holiday shoppers and relatives who haven’t the slightest idea of your age, gift cards have become the choice of the holiday season.
The National Retail Federation’s fourth annual gift card survey predicted massive growth in gift card sales – up more than a quarter from $18.48 billion in 2005 to $24.81 billion in 2006.
Not only that, the survey indicated the average consumer would spend more on gift cards in the 2006 holiday season – $118.51 versus $88.03 in 2005.
Large national chain retailers have become synonymous with gift cards, offering them everywhere from online stores to grocery store check out lanes, but several local independent shops also market prepaid cards.
Mike Merrill, owner of Pro Golf of Vancouver said although the shop’s holiday sales were up over 2005, gift card sales were down, both in the number sold (about 12 percent less) and the amount purchased on the cards.
"I don’t know if customers bought actual product (in lieu of gift cards), but we did not see a rush of gift cards," he said.
Merrill said he marketed the gift cards in the Hazel Dell shop’s holiday advertisements and created a small display for them at the store.
Gift card sales don’t factor into the store’s sales numbers until they are redeemed, only counting as cash flow until then.
In terms of accounting, a gift card sale is essentially creating a liability, but Merrill said he likes having gift cards as an option.
"If someone comes in and doesn’t know what they want to buy, especially for someone else, they may not spend any money at all without the gift card option," he said. "It saves on returns if they buy something that’s not quite right. I’m a supporter."
The shop has had a good experience with them, Merrill added.
"Golf is fairly specialized, and golfers are somewhat particular," he said. "A lot of customers come in and are overwhelmed. They don’t know which of the 12 fill-in-the-blanks their golfer wants."
Pro Golf is able to track when the cards are redeemed and who they are for, and Merrill said most of them are redeemed in a timely manner. A problem, he said, is that they’re essentially cash, so if they’re lost, there’s no way to "unlose them."
Some retailers have the ability for consumers to register their gift card on the retailer’s Web site, enabling them to check the balance online and receive a replacement card if it’s lost.
Vancouver-based specialty shoe store When the Shoe Fits had a great holiday season for gift card sales, said one of the store’s pedorthists, Victor Noyola.
"We’re a specialty shop that caters to fitting, and a lot of people didn’t want to come in right away," he said.
But the store’s season may have been an aberration, said Noyola, who worked with Nordstrom for a long period of time.
"There’s not any focus on independents in the gift card market," he said. "Small businesses have to have the draw in the first place, or they won’t get people in the door."
Downtown Vancouver toy store Kazoodles has opted to stick with paper gift certificates, a cheaper alternative to the plastic cards, which cost about $1 each, said owner Mary Sisson.
Since opening in March, the shop has sold 74 certificates, although a couple were freebies, she said.
"I’ve been satisfied with their sales, but I really had no idea what to expect," Sisson said.
She said the store’s holiday sales surpassed her expectations. Top sellers included play foam and screaming, flying monkeys that retail for $4.95 and had to be restocked several times.
Sisson said she hasn’t marketed the gift certificates, which never lose their value, and said she sees them as a convenience to shoppers.
She added that the plastic alternative would probably make tracking the prepaid certificates easier, but that there have been no problems so far with the shop’s system.
Most gift cards are now "stored value," so when a consumer spends $25 from a $50 card, the card automatically updates the balance – a more efficient method for retailers, according to the National Retail Federation.
Merrill of Pro Golf added that gift cards’ stigma of being an impersonal gift has faded away in recent years.
"In our case, a gift card might actually be the more thoughtful option," he said.
More than two-thirds of consumers polled in the National Retail Federation survey said they would purchase at least one gift card for the holidays, and more than half said they would like to receive one.
