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A $41 Billion Second Christmas
By: Ted Curtin
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Beyond Black Friday, Cyber Monday, and the days just before and after Christmas, there are plenty of opportunities for retailers to cash in — even in a sluggish economy. With consumer confidence on the rise and deals just about everywhere you look, more people increased their holiday spending, but the biggest gift yet may be the second Christmas retail brands enjoy in the form of unused gift cards.

Maybe your special someone already has everything they want. Perhaps you’d just rather let them decide for themselves. Whatever your reasons, gift cards present a super-convenient solution to ease our shopping woes. According to the National Retail Federation, 8 in 10 holiday shoppers planned to give gift cards this season.

Gift cards are a big business. Currently estimated at a $91 billion market, the gift card industry is expected to reach $100 billion in sales by 2012 according to the Boston-based research firm TowerGroup. Online and mobile marketing channels have added to the ease of purchasing and delivering “virtual” gift cards. Consumers can now send gift cards via email to mobile devices and even via social media sites like Twitter and Facebook.

There’s more good news for retailers — shoppers that do redeem the cards tend to spend more than the value of the cards, which means incremental revenue for the brand or retailer. Those who don’t redeem the full value of the card essentially leave that money on the table, since there’s no “change” for the unused portion of a gift card. A recent Consumer Reports’ poll found that 65% percent of adults who received a gift card spent more than the value of the card. Still, the greatest windfall for retailers is the billions in unused gift cards that, in spite of our best intentions, never get used. Since 2005, $41 billion in gift cards have not been redeemed, said analyst Brian Riley of the TowerGroup in a recent NPR report.

While less of a factor — thanks to the consumer protections built into the Card Accountability, Responsibility, and Disclosure act of 2009 — fewer gift cards have fees and most have increasingly generous expiration restrictions, but through 2008, expired cards accounted for 52% of value loss, fees caused approximately 39% of loss, and lost gift cards accounted for 9% of total lost value.

In addition to billions of dollars collected for nothing, it’s easy to see why gift cards have become so popular for retailers. Gift cards combine additional branding opportunities with valuable business intelligence gained through virtual card purchases, usage statistics, and customer contact information. Any way you unwrap it, it all adds up to one very nice gift to the retailers’ bottom line.

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About the Author
Ted Curtin is a recognized strategic marketing leader with over 22 years experience covering online and offline marketing channels. Follow him on Twitter or at TedCurtin.com
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