Gift Cards Top Holiday Lists For Fifth Year, But Total Card Spending Likely To Be Down

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Consumers plan to give gift cards this year, but plastic gifts do not hold the same allure as in years past.
In a survey commissioned by New York-based consulting firm Deloitte LLP and conducted online by an independent research company between Sept. 26 and Oct. 7, 66% of 13,276 consumers polled said they planned to buy gift cards this holiday season. This is the fifth year that gift cards were the top gift choice for consumers, Stacy Janiak, Deloitte retail leader, tells Prepaid Trends.
Despite the high place gift cards hold on shopping lists, however, 59% of respondents said they expect to reduce their holiday spending this year and plan to buy, on average, 21.5 gifts this year compared with 23.1 last year.
With the drop in spending on gifts in general comes a drop in spending on gift cards. Last year, 69% of consumers said they planned to buy gift cards. Though three percentage points is not a large drop, it does show that consumers plan to buy fewer cards, Janiak says. 
"We see two trends here. First, consumers seem to be becoming concerned about the number of unused gift cards they have," Janiak says. "And second, in this economic environment, consumers may be more likely to buy a $50 sweater that's on sale for $30 than a $50 gift card."
Consumers this year will buy gift cards based on how recipients can use the cards, Deloitte's data suggest. Just less than half (47%) of respondents said they would buy gift cards for specific stores and products compared with 54% who said so last year. For example, 17% of respondents said they plan to buy gasoline gift cards this year compared with 13% who said so last year. Moreover, 12% of consumers said they plan to buy supermarket gift cards this year. (The survey did not include this question last year.)
"Those findings would seem to indicate that gift cards will be bought for, and used for, the essentials," Janiak says.
Survey respondents also were worried about whether they would be able to redeem gift cards, as 23% cited concerns about stores closing before recipients could use a card and 24% saying they have had at least one gift card expire before they could use it.
"We could see higher gift card redemptions in January as recipients make sure they use their cards while they can," Janiak says.
Retailers may offer more promotions this year to encourage consumers to buy, and spend, gift cards, Janiak says. An example of a promotion might be a store offering a free $10 gift card if a consumer uses a $50 gift card. This would encourage redemptions while also drawing the consumer back to the store to use the new $10 card, she says.
Despite consumers indicating they may buy fewer gift cards this holiday season, the gift card industry will continue to prosper, Janiak says.
"It's important to remember that it is still the number-one gift for 5 years running and that gift cards still appeal to consumers, particularly for their convenience," Janiak says.
And retailers will be going the extra mile to make gift cards attractive to consumers, she says. "Special packaging and personalization certainly appealed to consumers last year and will likely continue to, and retailers will likely continue to look for innovative, creative ways to market their cards," Janiak says.
Recommendations from the National Retail Federation bear out Janiak's prediction.
The federation suggests consumers personalize the prepaid gift cards they buy this holiday season by packaging them with other items and by buying from retailers that allow shoppers to design their own cards.
The suggestions followed a survey Worthington, Ohio-based BIGresearch LLC conducted for the federation that found 54.9% of consumers want to receive a gift card this holiday season, up from 53.8% who did last year. From Sept. 30 to Oct. 7, BIGresearch asked 8,117 consumers what gifts they would like to receive this holiday season, the federation says.
Several factors could make consumers less likely to buy gift cards this year, the data suggest.
For example, 25.4% of respondents said they would be less likely to buy a gift card because they consider prepaid cards impersonal, 10.9% said they would rather buy merchandise on sale instead of gift cards, and 9.8% said they do not want to buy a card with expiration dates or added fees.
Gift cards from the top 25 U.S. retailers do not have expiration dates, and 84% of the cards do not have fees, the federation says, noting gift cards from banks, malls and credit card companies are more likely to have fees. The federation did not return calls for comment.