Gift Cards: $24.81 Billion and Counting

I have to admit I have several gift cards ... that I received two years ago. You see, I failed to cash them in. And I'm not alone. Of course, this is very good news for retailers, as gift cards are becoming a critical force in the industry.

A study from BigResearch indicates there were about $24.81 billion in gift card purchases for the 2006 Christmas season. This compares to $18.48 billion last year.

Smart retailers -- such as Gap (NYSE: GPS  ) and American Eagle Outfitters (Nasdaq: AEOS  ) -- have been quite creative in the design of their gift cards. It is also easy to customize gift cards with messages and the ability to track balances from the Web. Some retailers, such as Target (NYSE: TGT  ) , even have e-gift cards, which are sent via email and can only be used on the retailer's website.

What's more, companies are getting savvy in terms of restrictions, such as expirations, and fees (for example, there may be a service fee when buying a gift card from the Internet). My Fool colleague Elizabeth Brokamp has an excellent article on this topic.

What does this all mean? Well, retailers should have fewer returns, which reduces the headaches of long lines. And with a gift card, a shopper definitely has the incentive to spend. This is especially the case with post-holiday sales; according to the financial press, retailers are relying on these sales to meet their performance targets for the quarter and for the year.

Taking this a step further, a retailer cannot book sales until shoppers use their gift cards. Thus, sales are likely to be spread out beyond the holiday season; this could mean sales through February and even into March. This may be a good thing, as the first quarter is often pretty dead for retailers.

Who knew so much punch could be packed into a little piece of plastic?

For related Foolishness, check out:

Gap, Starbucks, and American Eagle Outfitters areStock Advisorselections. Gap is also anInside Valuerecommendation.

Fool contributor Tom Taulli does not own shares of companies mentioned in this article.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 519259, ~/Articles/ArticleHandler.aspx, 10/30/2014 12:17:33 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement