Consumer Study Offers Insight into the US Gift Card Market

from Retail Customer Experience - July 7th, 2011

Understanding consumer demand and trends can help gift card-issuing merchants and retailers create or adjust their strategy. As the U.S. gift card market matures, new distribution channels are creating opportunities for gift card issuers. A new study shows that gift card malls are growing in popularity, and while many people still want to give actual cards, nearly half of the respondents were interested in receiving virtual gift cards. Additionally, more consumers are reloading prepaid cards, which can affect their spending habits when it comes to merchant-branded closed loop cards.

These trends were underscored in research First Data, a provider of electronic commerce and payment processing, recently released in the results of its 2010 U.S. Gift Card Consumer Insight Study.

Additional study highlights include:

• Purchases at gift card malls are on the rise. The percentage of consumers purchasing closed-loop cards at gift card malls jumped to 46 percent in 2010, up from 38 percent in 2009.
• Virtual gift cards on the horizon. While most people preferred to give an actual gift card, 25 percent of respondents indicated they would be likely to give an electronic gift card, and 48 percent said they are interested in receiving one.
• Average value of open-loop gift cards increases while closed-loop holds steady. Open-loop card recipients reported an average value of $68 in 2010, compared with $59 in 2009. Average closed-loop gift card values remained steady at $39 in 2010. The average value of fine dining, grocery and drug store cards increased, while the value gifted via gas station cards decreased.
• Overall, more consumers are reloading open- and closed-loop cards, which can mean more visits and a greater spend. Of those who reloaded closed-loop cards, 35 percent said they visited the merchant more often and 20 percent said they spent more money at each visit.
• Consumers continue to spend more than the value on their closed-loop cards. Nearly three-quarters (72 percent) of consumers reported spending more than the value of their closed-loop gift cards. The amount of overspend was greatest at department stores ($28), followed by grocery stores ($27), discount stores ($25), fine dining ($24) and specialty retail ($24).