NRF Says Gift Card Spending To Drop

Written by Evan Schuman
November 19th, 2008

Amidst an avalanche of hype about the desirability of gift cards this holiday season, the National Retail Federation on Tuesday (Nov. 18) predicted a six perfect drop in gift card sales this season, from $26.3 billion spent during last year’s holiday season to a projected $24.9 billion for this season.

Statistically, that’s fueled by a double whammy of fewer people planning to purchase the cards this season (from 56.6 percent last year to 53.5 percent this year) and the plans of those who will buy gift cards to spend less on them ($156.24 last year’s holiday season dropping to $147.33 for this year’s identical period).

At one level, the reason why is straight-forward enough: American consumers are clearly planning on purchasing fewer gifts of all kinds this season due to their perception of the economy. So why should gift cards be somehow immune?

But the NRF report hit on some other factors that could be contributing. NRF CEO Tracy Mullin, for example, issued a statement that suggested the abundance of pre-Christmas sales—which presumably would be less aggressive after the holidays—could be an issue this year. "Since gift cards never go on sale, some price-conscious shoppers will be passing up gift cards in favor of holiday bargains," Mullin said.

If true, this could also impact retail sales well into January. "Retailers may need to make minor adjustments to holiday plans as fewer people may be hitting the stores in January to redeem gift cards," Mullin said.

The largest factor hitting gift cards will be the traditional complaint that they are seen as too impersonal (cash is impersonal, too, but there’s something about a stack of greenbacks piled in front of a cozy fireplace that is hard to resist. Maybe that’s just a New Jersey thing).

The impersonal concern was voiced by 22.7 percent of the consumers NRF surveyed. Other concerns: They do not want to buy a card with expiration dates or added fees (9.8 percent); they do not know which gift card a person would want (7.7 percent); they are worried the gift recipient will lose it (3.9 percent); and they are worried that the retailer will go out of business (3.1 percent).


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