Gift card spending up 4% in 2010 with room to grow: Ernst & Young

(Toronto – 17 March, 2011) Consumers are fuelling the hot gift card market, with shoppers reporting a net increase of 4% on gift card spending in 2010, according to a recent Ernst & Young survey. In particular, retailers should be ready to embrace the potentially thriving website and virtual gift card markets.

“Gift cards are increasingly popular, especially among the 18–34 year old set. They grew up with them, so gift cards are part of their gift-giving culture,” says Daniel Baer, Ernst & Young Partner and National Retail Industry Leader. “But the gift card market doesn’t just include physical cards. Website and virtual gift cards are two growing trends that retailers need to keep an eye on.”

Twelve percent of gift cards were purchased for or from websites in 2010. And while just 18% of respondents said they received this type of card last year, 70% of recipients redeemed them within a month. That makes them one of the fastest types of cards to be redeemed.

Despite the popularity of smartphones and growing talks of electronic wallets, a surprising 45% of respondents say they’ve never heard of virtual gift cards (which are sent to mobile devices). Many respondents also said they shun this type of card because they’re not comfortable buying it. Another high percentage of respondents say they avoid virtual gift cards because they believe the people they are buying for lack a mobile device that can accept them.

“Virtual gift cards may not yet be popular, but we’re quickly becoming a society that relies heavily on smart technology,” notes Baer. “Retailers should start thinking about how they can boost their offerings and educate customers in this area to avoid missing out on potential opportunities to grow their business.”

The good news for retailers is that most consumers (56%) purchase gift cards year round, not just during the December holidays (20%). Gift cards are an effective marketing tool and will continue to be a major source of revenue for retailers, considering that most consumers spend more that the value of the gift card.

Baer adds, “The majority of respondents said they appreciate receiving gift cards because they help offset expenses in this tough economy. This is especially true among women, with 68% of female respondents stating this, compared with 45% of males. So consumers are likely to embrace gift cards from retailers who can position them as a practical way to help with everyday expenses.”

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