Although a number of retailers have filed for bankruptcy this year, and at least one stopped honoring gift cards in the process, consumers still say gift cards are their number one gift choice for the 2008-09 holiday season, according to the National Retail Federation’s 2008 Holiday Consumer Intentions and Actions Survey conducted by BIGresearch. In fact, more consumers say they would like to receive gift cards this year: 54.9% compared to 53.8% last year.
Additionally, NRF reports that only 3.1% of consumers would be less likely to buy a gift card because they are concerned the retailer might go out of business.
Industry experts have mixed opinions about how retailer bankruptcies could affect gift card purchases. In a recent article for RetailWire.com, Tom Ryan, managing editor for RetailWire stated: “The fear is that the possible bankruptcy of a retailer will significantly reduce the value of gift cards or even make them worthless.”
The facts could raise concern among those most in tune with business news. At least seven significant retail players have already filed for bankruptcy in 2008 including: Linens ‘n Things, Mervyns, Whitehall Jewelers, Boscov’s, Barbeques Galore, Ms. Fields and Bennigan’s, Ryan reported.
But retail analysts believe gift card purchases will still be strong, although consumers may be more careful about which retailer cards they purchase. “There are several companies on the ropes and it is public news, so people will likely steer clear of those retailers, but that won’t affect the sales overall,” says Greg Buzek, president, IHL Services. “My guess is that gift cards will increase this year, even though overall retail sales may decrease.”
Store choice affects gift card purchases
Consumer choices regarding gift cards will likely gravitate to the most financially stable retailers. “Overall, logic tells us that consumers will appreciate gift cards for super stores like Wal-mart, Target and supermarkets,” says Paula Rosenblum of RSR Research.
Buzek agrees. “The Wal-mart or Target gift card becomes almost the perfect gift because people can use it for both needs and wants. A gift card to a high-end retailer forces the person to buy something at that high-end retailer and they might not want to spend any additional money on a want. I think that will factor into people’s thinking.”
Other types of gift cards that might be popular, according to the analysts are “minor luxuries” and “cheap chic.” Buzek says: “I think minor luxuries like Starbucks cards could see a big boost. As people give up those items to lower expenses, friends and family might help them get that minor luxury.” Rosenblum adds: “For teens and tweens I still think apparel specialty will be strong.”
Rosenblum also believes that online gift card sales will outpace in-store gift card sales. “I think gift card purchases will likely move in tandem with aggregate purchases.”