Gift Card Trends and Holiday Forecast From First Data

NEW YORK -- The general consensus is that gift card sales will be down this 2009 holiday season. But that doesn't mean there aren't some bright spots for this segment on the horizon. Transaction processor First Data Corp., based in Atlanta, recently released its findings for 2009 trends and forecast for the holidays and 2010.

Overall sales and redemption rates for the combined categories of grocery, specialty retail, casual dining and quick-service restaurants (QSR) held steady in 2009 (using data through September), which isn't bad, considering in March 2008 they had fallen 20 percent.

Specialty retail showed the biggest increase in both reloads and redemptions so far, going from negative 26 percent in March to a positive 6.2 percent in September for redemptions.

Holiday trend highlights include:

-- Merchants will increasingly use their gift card as a consumer incentive to drive sales. In holiday 2008, more merchants than ever before included a free gift card with the purchase of merchandise or a gift card.

-- An increasing number of merchants will provide a full "gifting solution" to consumers this holiday, including creative packaging.

-- With reloading and loyalty programs gaining traction, innovative merchants will leverage their gift cardholder information to target customers with incentives that will encourage holiday shopping at their stores.

"Overall, we're seeing a convergence of loyalty and gifting cards," says Jim Contardi, senior vice president of the prepaid division for First Data. "Starbucks merged the features and benefits of its rewards card with its gold card loyalty program. You're going to see other companies doing the same, and reorienting toward spend cards. You receive the card as a gift, but it becomes a spend card when you reload."

There's also a continued evolution of how gift cards are marketed, says Contardi. "Carriers are becoming part of the gifting experience and cross marketing with other products," he says. "Say you have a handheld gaming device you're looking to sell at the counter, where you also sell gift cards used to buy games for that handheld device. Grandma walks in and buys the device and the gift card so her grandson can get the games he wants. Odds are he will spend more than value of card."

2010 Trends: New Form Factors, Going Mobile and Micro
First Data sees an increasing use of new form factors, e.g., stickers, key chains and lapel pins, to use for making purchases. "By inserting an RFID chip in a product, that item become a payment device in front of a reader," says Contardi. "This is growing particularly with private label gift cards.

A more advanced version of a new form factor was revealed Nov. 1 -- an iPhone application that allows bar codes to be scanned from the Apple device.

For incentive programs, this means a new method of delivering rewards, especially useful for on-the-spot or micro awards. "The incentive could be delivered electronically -- all of a sudden, a participant has a virtual wallet on their smart phone," says Contardi. "It can be populated with funds, points or certificates, along with a message to the recipient as to why they're getting it."

-- Nielsen Business Media

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