Gift cards, the most mundane gift you can buy for someone, give US retailers a much-needed infusion of cash as they close out a tough year.
Americans are on track to buy more than ever, with spending on gift cards for the holiday expected to increase 19% from last year, according to payments service Blackhawk Network. More than half of American buyerssaythey will buy more cards this season than in previous years, with buyers planning to buy 10 cards on average, twice as many as last year. And with billions of dollars in gift cards not redeemed each year, this sales boom could translate into essentially free money for retailers in the middle of their most crucial quarter of the year.
The surge in sales comes as shoppers divert money from travel and experiences during the coronavirus pandemic – and a gift card easily travels through the mail during socially distant holidays. A spike in sales bodes well for retailers, especially non-essential ones like Macy’s and Nordstrom who are still trying to recoup lost sales when their doors were closed earlier this year.
“I would expect this to be a very good year for gift cards,” said Steve Sadove, Senior Advisor for MasterCard and the former CEO of Saks Inc. He said buyers who can afford it are willing to fork the cash. “What you are seeing is resilience in terms of consumers.”
Gift cards provide many retailers with immediate cash flow, a welcome boost during a dire year for the consumer.based in a shopping centerdistribution sector. Beyond injecting cash, gift cards also provide retailers with useful customer data and may ultimately increase the total amount a customer spends with them, which could give the struggling industry a blow. inch in early 2021.
Each year, as much as3 billion dollarsin cards remain unused, languish in wallets past the expiration date and should never be cashed out, according to one CBS Analysis of current data from the Mercator Advisory Group. This is especially relevant at a time when dozens of retailers have gone bankrupt. Those who liquidated, like Barneys New York, have set repayment terms for cards in circulation. Miss the date, and this card becomes worthless to the customer. Mercator did not respond to a request for comment.
Even when customers use them, there is often either a small balance left on the gift cards that is never used, or they spend extra money beyond the card balance to get the product they want. . These extra expenses will help make up for lost impulse sales this year – those last-second purchases shoppers make while browsing the shelves and shelves in person that don’t materialize when filling an online cart.
“People rarely stick to the limit on gift cards,” said Gabriella Santaniello, founder of retail research firm A-Line Partners. “It’s beneficial that way.”
Gift cards are a proven tactic that dates back to the ’90s when Blockbuster Video became the first store to roll out the method nationwide. They are now sold by everyone, from restaurants to fashion boutiques. Even sports betting company DraftKings launched a retail gift card this year, which it calls the first in the industry.
Yet not all consumer businesses will see the growth of gift cards. Starbucks warned that holiday gift card sales are hit as fewer customers come to cafes, even though digital sales hold up.
“There will be some impact on our gift card sales this holiday season, which will likely have a ripple effect on our fiscal second quarter,” said Patrick Grismer, CFO, at Wolfe Research Consumer Access Day at the beginning of the month. “But I think it’s early to say if that will have a material impact.”
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