Shop Talk

Retailers, consumers and prices

Gift cards: distressed assets, holiday-style

November 11, 2008

Holiday gift cards are feeling a lot less like the gift that keeps on giving.

Over the past few years, gift card popularity exploded and retailers rushed to display new merchandise the day after Christmas, hoping to attract shoppers flush with new cards.

Retailers could count on consumers to splurge on full-priced merchandise or spend all the money on the card, plus a few dollars more.

But as shoppers have witness a slew of retail bankruptcies this year (Sharper Image, Linens N Things, Mervyn’s, Circuit City), they are showing some reluctance toward buying the cards as gifts for friends and relatives.

A survey by America’s Research Group conducted for Reuters found that 43.2 percent of respondents said they will give gift cards less often this year because they worry that those cards would be worthless if a retailer files for bankruptcy.

Additionally, with retailers already rolling out tremendous discounts to entice consumers to spend their limited dollars, shoppers may find they can buy presents this year for less than the amount they were planning to spend on a gift card.

“You’d rather buy a $75 sweater for $30, than a $50 gift card,” said NRF spokeswoman Ellen Davis.

Roughly 10 percent of sales during the November-December holiday season happen the week after Christmas, according to the National Retail Federation. But weaker gift card demand could make ringing up those sales, in an environment where shoppers are already loathe to spend, an even bigger challenge.

(Photo: Reuters)

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