Retailers count on gift cards to shore up their January sales
Gift card redemption is expected to be a key driver of retail sales this month, a welcome relief to stores after signs consumers were tightening their belts post-holiday.
But there’s conflicting evidence on whether increased gift card sales before the holidays will be the boon retailers hope. The International Council of Shopping Centers predicts only 36.3% of gift cards will be redeemed this month, down from 45% last year and 46.4% in 2009.
Under accounting rules, retailers can’t count gift card sales as income until they are redeemed. So cautious or forgetful consumers can cost them.
“Teens like to rush out and redeem their gift cards the week after Christmas,” says Phil Rist of consumer intelligence firm BIGresearch. “More practical adults will hold on to them” until they can get good bargains.
Nathan Edwards, 32, of Minneapolis, says he used his right away to take advantage of sales. But Sara Iversen of Alexandria, Va., hasn’t redeemed one card because she’s managing her money.
“When I don’t go into stores, I don’t spend money,” says Iversen, 32. “I think that though the signs are that we are out of our recession, it will be a few years before the little people, such as myself, will feel it.”
In a post-holiday survey by ICSC, consumers said 14.5% of their total holiday gift purchases were in the form of gift cards or certificates, up from 13.1% in 2009. That was the highest since 2007, when the reported average share was 14.7%.
