Retailers Market the Convenience of Gift Cards

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Retailers Market the Convenience of Gift Cards

NEW YORK-- More than 27 percent of gift card buyers are expected to make their purchases at supermarkets, drugstores and convenience stores this year, according to electronic payment company First Data Prepaid Services.

Gift cards have become the third-most-requested holiday gift, after media items (books, DVDs, video games and the like) and clothing, reported the National Retail Federation (NRF).

"It has a lot to do with retailers doing aggressive marketing," Karen Larsen, head of marketing at First Data Prepaid, told the Associated Press. "The product is a logical win-win."

Gift card sales are expected to advance 7 percent to $18.5 billion this holiday season, compared to a 6 percent projected gain in overall holiday spending, according to NRF research. The average consumer will spend $88.03 on gift cards this year, or about 16 percent of their holiday gift budget.

Supermarkets, pharmacies and convenience stores, which sell their own gift cards, tout convenience for their customers as one rationale for peddling others' gift cards, AP reported.

Third-party sellers also get a percentage from the sale of each card, ranging from 3 percent to 15 percent depending on the brand, Larsen told AP. For example, a card for a lower-margin fast-food operation would be at the lower end of the commission range compared with a larger cut for a card for a higher-margin apparel specialty retailer.

More chains are heavily promoting their cards, seeing them as a way to get new customers in the door.

"It's a great opportunity for someone in love with the brand to give a card to someone who may be new to the brand," Audrey Gerber, vice president of marketing for Pottery Barn brands, told AP.