Friday, December 13, 2002

Gift cards - Perfect fit every time

Stores love 'em as much as recipients

By Randy Tucker
The Cincinnati Enquirer

It might be the thought that counts, but one of the most popular gifts this holiday season will be a no-brainer for time-starved shoppers who are unsure about what to buy for the people on their Christmas lists.

Electronic gift cards - which can be used like cash to buy merchandise from retailers who issue them - have exploded in popularity in the past few years. And a number of retailers in Greater Cincinnati have implemented gift-card programs just in time for Christmas.

"We started selling gift cards just before the Thanksgiving holiday, and most of our customers have taken very well to it,'' said Tina Baldock, district manager for Kirkland's, a gift and home dÈcor retailer. "A lot of our customers end up with gift cards when they're unsure about what to buy, but they know the person they're buying for loves our store.''

Gift cards and gift certificates are projected to be the third-most purchased items by holiday shoppers this year, trailing only apparel, ranked No. 1, and compact discs and DVDs, ranked No. 2, according to a nationwide poll of 8,569 consumers conducted last month by the National Retail Federation.

Peter Stuman of Kenwood said he was planning to buy gift cards at Foot Locker and Target this holiday season, with the Foot Locker gift cards going to his nieces and nephews and the Target gift card going to a co-worker who's moving to Florida.

"I know she (co-worker) shops at Target all the time, and I know she'll need things for the house she's moving into in Florida,'' Mr. Stuman said while shopping at Kenwood Towne Centre earlier this week. "Instead of giving her something she'd have to load on a plane or have moved, she can use the gift card to buy what she wants when she gets there.''

Mary Breeden of College Hill, who also was shopping at Kenwood, said she hasn't decided if she'll buy them, but gift cards would be an attractive option for some of the people on her Christmas list who, she said, "are impossible to buy for.''

"You always want to get the perfect gift for the people you love,'' Ms. Breeden said. "But it's really time consuming to find the perfect gift, unless you know exactly what they want. With a gift card, it wouldn't be a surprise, but I'd be sure they'd get exactly what they wanted because they'd buy it for themselves.''

In addition to making gift-giving simple for busy people, gift cards also offer numerous benefits for retailers.

Many retailers offer gift cards as opposed to paper gift certificates because they serve as a mini-billboard in a consumer's wallet, providing a cost-effective advertising tool for the merchant.

Gift cards are even being used by retailers to track inventory. Some gift cards are programmed with software that tracks merchandise and automatically ships new stock once the store gets close to selling out.

But perhaps the biggest benefit for retailers is that gift cards generate business.

Unlike gift certificates, for example, gift cards can be "reloaded'' by making a cash deposit, allowing the cardholder to continue to use a card even after the original value of the card has been exhausted.

That almost guarantees repeat business for gift-card retailers and that the dollar amount on the card will be spent at their stores, not elsewhere.

"If you only spend a partial amount of your gift card, then you have more to spend at a later date,'' said Diane Hickey, marketing manager for Sunglass Hut, which began its gift card program in October.

Simply selling gift cards can also be profitable for retailers because about a third of gift cards historically go unredeemed, according to the National Consumer and Retailer Survey of Plastic Card Usage.

In addition to increasing sales, gift cards have even helped expand the market for companies with stores outside the U.S.

The Sunglass Hut's gift card, for example, automatically calculates the exchange rate for Canadian and U.S. currency in real time.

"If you purchase a gift card in the states and go over the border, it will translate the dollar amount at check-out,'' Ms. Hickey said.

According to the Louisville-based Stored Value Systems Inc. - which pioneered the electronic cash card business in 1995 after Neiman-Marcus introduced them in its stores a year earlier - gift cards have nearly replaced gift certificates in just the past few years.

The company - which provides gift cards and gift card services for retailers including Target, Radio Shack and J.C. Penney - said purchases of gift cards have more than doubled since 1998 to $25 billion, while gift certificate sales have declined to $6 billion annually.

One reason for the dramatic growth in gift cards has been technological advances that have reduced the cost of installing gift card software at point-of-sale terminals, said Mike Brewer, a spokesman for Stored Value Systems' parent, Comdata Corp.

Gift cards are generally imprinted with magnetic strips or bar codes that are programmed with the value of the card and read by a machine at the store.

But in addition to eliminating the cost barrier, giving the gift of cash in the form of gift card has also become more socially acceptable, Mr. Brewer said.

"Giving gift certificates or gift cards used to be viewed as cold and impersonal,'' he said. "But more and more consumers are beginning to realize that a gift card chosen from a particular retailer is just as personal and thoughtful as any gift they would chose and wrap themselves.''


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