Gift Card Sales Down 6% This Holiday

Gift Card Sales Down 6% This Holiday

Posted by John B. Frank Tuesday, November 18, 2008

NEW YORK (Reuters) – Sales of once-hot gift cards are expected to fall nearly 6 percent this holiday season as shoppers try to stretch their dollars by buying discounted merchandise, according to a survey released by the National Retail Federation on Tuesday.

Gift card sales are forecast to fall to $24.9 billion this holiday season, according to the trade group's annual gift card survey. Last year, gift card sales were expected to rise 6 percent to $26.3 billion, up from $24.8 billion in 2006 and $18.5 billion in 2005.

Not only did the survey find that fewer people plan to purchase gift cards, gift card shoppers are also expected to spend less on the cards -- $147.33 this year compared with $156.24 in 2007. "Since gift cards never go on sale, some price-conscious shoppers will be passing up gift cards in favor of holiday bargains," said NRF President and CEO Tracy Mullin in a statement.

The expected decline in gift card sales comes as the NRF has forecast that holiday sales will grow at their slowest rate since 2002. Shoppers are confronting slumping home values, volatile energy prices, rising unemployment and a credit crunch, which has curtailed their ability to spend.

With retailers already rolling out tremendous discounts to entice consumers to spend their limited dollars, shoppers may find they can buy presents this holiday season for less than what they were planning to spend on a gift card. But the decline in sales of gift cards could hurt retailers' results into January, when they count on shoppers returning to their stores to spend well beyond the face value of the cards. "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 survey polled 8,758 consumers between November 5 and 11, and was conducted for NRF by BIGresearch. It has a margin of error of plus or minus 1.0 percent.

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