Gift cards losing ground

More evidence about the declining popularity of gift cards appeared in a Media Post issue this week (see “Gift cards are the new fruitcake,” 11-30-09). The Tower Group research, cited in the article, suggests that one of the reasons the cards are not as popular with shoppers this year… is that they’re not as popular with the ultimate recipients.

Implications: There could be several explanations behind the decline of gift cards, there are two issues that I think play a significant role.

#1: People want to give with a splash. In an economy like this, I can shop around and find someone a nice cashmere sweater that looks like it’s worth $150 or more… for $50. If I spend that same $50 on a gift card, it looks like it's worth about $50. Which gift is more impressive to receive (and therefore, more fun to give)? You got it. The sweater--or any other hot deal--makes a bigger splash for the buck.

#2: Consumers still have trust issues. I wrote about this back in April (see “Things are not always as they seem,” 4-28-09). What is a $50 gift card worth, if it can be redeemed only at Bombay Trading Company? Or Sharper Image? Or Linens n Things? According to the Media Post story, more than $100 million in consumer-held value was lost when cards went un-redeemed because of business closures in 2008. A few more laws have been passed with the intent of greater consumer protection, but many won't go into effect until August, 2010.

If you’re trying to sell gift cards—or any other version of a promise to deliver product or render service at a later time—the first think you have to sell is trust. Why should I believe you’ll be around? Tell me about your history, your strength, your dedicated staff, your expertise, your competence.

The second thing you have to sell… is splash. What special “extra” is the holder of your store card entitled to? What are the perks I get for buying-in?

Not so long ago, “money was no object” and consumers would seemingly buy things for no reason. Now, every product and every service needs a reason (or specific value proposition). Gift cards included.

Mike Anderson