November 19, 2007

Holiday gift cards to ring up $30 billion in sales, Purdue expert says

When Christmas shopping begins in earnest the day after Thanksgiving, an estimated $30 billion will be spent on gift cards, a 10 percent increase over last year, says Richard Feinberg, a researcher with Purdue University's Retail Institute.

"We estimate that over 60 percent of gift givers will be purchasing gift cards this year," Feinberg says. "Each buyer will purchase five cards or more. Other research shows that 50 percent or more of people who expect gifts would like gift cards."

Gift cards trail only apparel as the most frequently given holiday gift, Feinberg says. He says the institute's studies also show that cards from department stores and restaurants are the most popular. Although some supermarkets and drug stores sell gift cards for other retailers, Feinberg says most are sold in the stores where they will be used.

In addition to drawing customers into stores, gift cards also help to drive additional consumer spending.

"Our research shows that people with gift cards spend an additional 25 percent over their value," he says.

Often, though, gift cards present a problem for retailers because of accounting procedures. Since more than 50 percent of the cards are redeemed in January, they do not count for the official holiday sales, affecting fourth quarter earnings.

Feinberg has a couple of tips for consumers before they purchase gift cards. One is to be wary of buying them from auction sites.

"There is little protection for consumers who find they have purchased counterfeit cards from an auction site," he says.

He also says that gift cards are considered money. If they are lost or stolen - even in the mail - they cannot be replaced.

Writer: Greg McClure, (765) 494-4394, gmcclure@purdue.edu

Source: Richard Feinberg, (765) 494-8301, xdj1@purdue.edu

Purdue News Service: (765) 494-2096; purduenews@purdue.edu

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