First Data Study Explores Gift Card Trends

ATLANTA — As the holiday season gets into full swing, new research indicates that gift cards still rank among the top gifts. More than $43 billion worth of gift cards are expected to change hands this season.

According to global payment processing company First Data Corp., gift cards are a win-win because they allow consumers to choose a gift they like and for retailers, gift cards generate repeat customer loyalty, brand awareness and additional foot traffic.

To capitalize, retailers need to stay on top of industry trends and understand how consumers perceive and use gift cards. Additionally, to experience the true benefits of effective prepaid gift card programs, retailers must have the ability to gain insight into how attitudes, behaviors and usage vary for different segments of consumers, according to Michael Hursta, vice president of prepaid solutions at First Data.

The company recently released its 2012 Prepaid Consumer Insights Study, which gauges how the industry has changed over the past year and looks at future trends.

Some findings from this year’s study are:

• Gift Cards Are Gold: Consumers consider gift cards to be highly valuable, with more than 85 percent of consumers surveyed saying they would prefer a $25 gift card to a present worth $30. The good news for retailers is that on average, 67 percent of consumers spent more than the value of their gift card in 2012, going over the value by $20.79 on average. Fine-dining restaurants experienced the most overspend on average ($33), followed by department stores ($27).

• Closed Loop Is In: Gift cards issued by specific retailers (closed loop cards) have grown in popularity this year, accounting for 87 percent of all gift card purchases. Meanwhile, only 40 percent opted for multi-merchant gift cards — for example Visa, MasterCard, American Express, Discover and similar open loop cards that can be used at a variety of retail locations. With 61 percent of consumers saying they buy gift cards at specific retailers or restaurants, this is a trend that is expected to continue.

• Mobility Is the Future: Nearly half (46 percent) of gift card receivers are interested in storing their gift card information on a mobile device. By storing gift cards on a smartphone or tablet, consumers don't need to worry about carrying their gift cards or losing them because the value is stored on their device and redeemable at retail stores. Younger consumers have readily adopted the concept, with 71 percent of consumers aged 18 to 24 saying they are interested in storing their gift card information on their mobile devices.

• Consumers Embrace e-Gift Cards: Offering immediate delivery and ease-of-use, e-gift cards again showed growth in 2012, with the number of consumers buying an e-gift card almost doubling. Though 68 percent of consumers said they would prefer a traditional gift card, there are tremendous opportunities for merchants to promote the benefits of e-gift cards, especially during the hectic holiday shopping season. Among consumers considering e-gifting, 60 percent said immediate delivery is their top reason, followed by the ability and convenience of emailing an e-gift card (52 percent) rather than mailing a physical gift card.

"These findings confirm that not only are gift cards more popular than ever, but that this is a trend that is expected to continue," Hursta commented. "At a time when the majority of consumers are purchasing, on average, more than five gift cards per year, merchants have a real opportunity to drive business and build their bottom line. With the ease of use associated with e-gifting and mobile commerce gaining popularity among younger consumers, gift cards continue to build valuable relationships and connections with all generations of consumers."