Challenging Economy Drives Gift Card Sales Down to $25 Billion

In reaction to the faltering economy, consumers will spend less on gift cards this holiday season and will shift this spending towards household necessities such as groceries, and gas, or small indulgences such as dining at restaurants.

According to the 2008 Holiday Gift Card Survey from Archstone Consulting, "We expect gift card sales to dip 5% to $25 billion in Holiday 2008 as consumers continue to manage the challenges of higher gas prices, higher food prices and a sluggish economy," says Dave Sievers, principal and consumer products and retail practice lead at Archstone Consulting. "While our survey found that only 24% of consumers plan to increase their spending on gift cards in 2008, potential retail bankruptcies and the potential loss of card value are not factors."

Other key findings from the study include: 
- Pre-paid bank cards (Visa, American Express, Master Card) will continue to be the most desired by gift recipients this year - as they were in 2007. "Consumers are gravitating toward cards that allow them the flexibility to purchase household needs at the gas station, supermarket, or pharmacy," says Sievers. However, retailers can increase the purchase of their cards through the creative use of incentive programs, as approximately 50% of respondents said they would consider purchasing a gift card from a retailer if it comes with a coupon/discount for the purchaser or the recipient. 

- The restaurant/fast food category will sell more cards than any other category this holiday season. "For many families, eating a meal out is a simple luxury and, therefore, an ideal gift in a holiday season that will otherwise be noted for pragmatic purchases," says Sievers. Archstone anticipates that gift cards will provide some much needed holiday support for eat-in restaurant chains, such as McDonalds and Outback Steak House.

-Teenage and post-college consumers will represent the bulk of the increase in gift card purchases. "The 13-24 year-old group has the least discretionary income, yet on a relative basis, they spend more on gift cards than any other demographic, and also receive almost 40% of all gift cards," says Michael Unger, principal, Archstone Consulting's Consumer Products and Retail Practice and co-author of the study with Andrew Buss, director, Archstone Consulting.

-Sales of gift cards through outside locations, such as grocery, drug stores, banks and kiosks are expected to grow significantly, by 30% versus 2007. "As the gift card category has matured, retailers have capitalized on its popularity by making the cards available outside of their four-walls," says Unger.