December 21, 2014

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Plastic is fantastic: More folks want gift cards for Christmas

By M.S. Enkoji
McClatchy Newspapers

“All I want for Christmas is my two front teeth.”
— 1944 novelty Christmas song

These days, more than half of adults actually want gift cards, those colorful slivers of plastic that can buy everything from a Grand Slam breakfast at Denny’s, to a shotgun at BassPro Shops to an airline ticket at Southwest.
Holiday shoppers nationwide this season will buy almost $25 billion in gift cards, averaging about $40 a card.
It’s the gift to give.
In a survey of consumers asked to choose their most desired holiday present, 55.2 percent of adults chose gift cards, the highest single category, according to a survey from the National Retail Federation.
That preference has been nudging upward since 2006 as some other major categories, such as clothing and video games, have declined.
Holiday shoppers buy an average of almost four gift cards each, according to the NRF.
Men and women aren’t equal in their love of receiving gift cards, though. Forty-nine percent of men preferred getting books, CDs, DVDs, videos or video games, while 46.6 percent favored gift cards. But 63.4 percent of women preferred gift cards.
Broken down by age, 63.4 percent of 25- to 34-year-olds preferred to receive gift cards.
This season, unlike in the past, card recipients are more likely to spend on basics rather than save them for extravagant purchases, said Dan Horne, an associate professor of marketing at Providence College in Providence, R.I.
“How they’ll be redeemed will shift, and they’ll be spent for things like underwear and toothpaste,” he said.
Ed Murray of Sacramento likes the convenience and practicality of gift cards when it comes to gift-giving for co-workers.
“I’m not going to buy clothes for one of my supervisors,” he said.
But he will give a Macy’s gift card to a female colleague, and a Starbucks or Home Depot card to a male, he said.
Murray, 60, a state worker, figures he will buy about four to six cards this season.
Gift cards, no matter how ubiquitous, won’t do for family, he said.
“In that case, they seem a little impersonal,” he said.
Gift cards are essentially the same things as gift certificates, which businesses have used for many years. Who came out with the first gift card in its current form — a plastic card with a magnetic strip like a credit card is still in dispute. But Blockbuster, the video giant, and Neiman Marcus, the luxury department store, are generally credited with issuing the first ones, Horne said.
Horne, who has studied and researched gift cards, said sales rapidly increased during the late 1990s, giving retailers a unique marketing tool.
Unlike gift certificates, gift cards are displayed with eye-catching designs that become tiny advertisements, he said. Target offers a dizzying array of gift card designs, with animals snowboarding, dancing gingerbread men, Spanish-language greetings and dreidels for Hanukkah.
Also, given that gift-card recipients on average spend 140 percent of the card’s face value, they can drive up sales, Horne said.
Technology has extended the opportunity to the smallest shopkeeper, Horne said.
“It’s not rocket science,” he said.
Based on the same principle as a credit card, the magnetic strip, bar code, and, in Europe, a minuscule computer chip, makes the concept work, Horne said.
Companies that manufacture the plastic card charge a fee, and depending on the way a company sets up its card program, a small transaction fee could also be deducted, similar to the fee paid to credit card companies.
Even local businesses can issue gift cards, like Paragary Restaurant Group in Sacramento, Calif., whose card featuring a stylized city skyline is good at any of 10 locations.
Paragary is about to submit a new design for a gift card that will feature the company’s logo and a sparkled luster finish, said spokeswoman Callista Wengler. Card manufacturers will reproduce any elaborate design, including special sizes and cut designs.
But then they cost more, she said.
Paragary’s pays 50 cents per card to the manufacturer, but the cost pays off in marketing, Wengler said.
“It’s a great way to get new customers in the door,” she said. “And a lot of them will spend more than what’s on the card.”

Gift cards are displayed with catchy designs that become tiny advertisements. And since many recipients spend more than the face value of the card, they also boost sales. Surveys show that more than half of adults prefer to receive cards as gifts.