Unredeemed cards do not count toward revenues.
This holiday season consumers will spend more than $35 billion on gift cards, according to Archstone Consulting.
Retailers have primed gift card sales with creative marketing. Cards can be purchased at locations other than where they are to be redeemed, such as when iTunes gift cards are sold at pharmacy counters. "Retailers are innovative in their use of gift cards, making them double as DVDs and CDs and offering them in bags, boxes and tins," said Jeffrey Grau, eMarketer senior analyst.
Mr. Grau noted that The Home Depot this holiday season plans to offer a plastic gift card with how-to home improvement videos.
In 2006, one-quarter of gift cards were purchased online, according to a study conducted by The Marketing Workshop for Comdata.
Archstone pointed out that growing gift card usage does not necessarily translate into holiday sales growth, since revenue cannot generally be recognized until the cards are redeemed.
The company predicted that holiday retail sales would increase 3% in 2007, marking the slowest growth rate in retail holiday sales in the past five years.
“Retailers will see limited growth in holiday spending, resulting in a ‘season of discounts’ that will reward savvy shoppers,” said Dave Sievers, retail and consumer products practice leader at Archstone, in a statement.
“While this tactic will drive shoppers to the stores, it won’t allow retailers to overcome the adverse economic factors that will affect sales, including the downturn in housing and a tightening credit market,” Mr. Sievers said.
The eMarketer US Online Holiday Shopping Preview report will be published in November 2007. Please click here to be notified when it is released.