The Green Sheet Online Edition

January 11, 2016 • Issue 16:01:01

Selling Prepaid:
Gift card spend to reach $26 billion

Consumer spending analyses from the National Retail Federation and MasterCard Worldwide confirmed the generally bullish forecasts for the 2015 retail holiday season. A report issued Dec. 28, 2015, by MasterCard SpendingPulse found a 7.9 percent increase in payment card, cash and check activity and 20 percent increase in e-commerce spending between Black Friday and Christmas Eve compared with the same period in 2014.

The National Retail Federation expects overall gift card spending to reach $26 billion during the holiday season. The NRF Holiday Consumer Spending Survey found that six out of 10 of the 7,276 consumers polled between Oct. 5 and Oct. 13, 2015, would prefer to receive gift cards, "making this the ninth year in a row that gift cards have topped the list of most requested gift items." The survey further noted that sales, discounts and quality of merchandise were top concerns for holiday shoppers.

The NRF Retail Insight Center reported 2015 holiday retail spend reached $630.5 billion, crediting improved Internet access and big e-commerce events, such as Alipay's Singles Day and Amazon Inc.'s Prime Day, with driving global adoption of mobile and digital shopping. The survey revealed that 65.9 percent of respondents plan to continue their holiday shopping right up until New Year's Day, which prompted retailers to respond with discounts and clearance sales.

Gift giving, exchanging

A survey released Dec. 22, 2015, by Pleasanton, Calif.-based Blackhawk Network Inc. found growing gift card activity in online marketplaces, mobile apps and brick-and-mortar stores. A majority of the 1,100 survey respondents claimed to have unused and unwanted gift cards. As many as 97 percent had up to 10 unused gift cards.

This trend is driving traffic to gift card exchange sites, stated Blackhawk Chief Marketing Officer Teri Llach. "Our survey finds that gift card exchanges are a popular new trend to get deals," she said. "We believe that exchanges can ultimately drive both the usage of and demand for gift cards."

Following are additional findings from the Blackhawk Network survey:

• Thirty-eight percent of consumers surveyed are aware of gift card exchanges.
• When consumers were informed about gift card exchanges, 55 percent said they would use a gift card exchange site to buy or sell gift cards; 78 percent would buy discounted gift cards for self-use.
• The majority of consumers surveyed expressed interest in being able to use an in-store gift card exchange, in addition to digital gift card exchanges (online or via mobile app).
• Ninety-one percent of consumers said they would feel the same or better about the brand if they purchased their cards from a gift card exchange.
• Ninety-one percent also said they would purchase cards from retailers and merchants they already frequent. Consumers also said they would try new merchants as a result of buying the gift card through an exchange.
• Ninety-one percent of those surveyed also said they would prefer to use a gift card exchange versus a platform such as Craigslist to buy and sell gift cards.
• Sixty-five percent stated they would consider using a gift card exchange to buy gift cards at a discount before a major shopping occasion.
• Sixty-eight percent would use gift card exchanges as a cost-savings method to purchase gift cards for their own use at favorite stores, restaurants, etc.
• Sixty-six percent would add selling and buying gift cards from exchange sites to their regular deal-finding behaviors.

Increased exchange activity, competition

Competition has been fierce among gift card exchanges, a trend that is expected to continue in step with increased gift card adoption. Most gift card exchanges enable consumers to buy discounted gift cards, sell gift cards for cash and exchange gift cards. Many provide services to retailers that promote these services online and in brick-and-mortar locations.

"You often find that grocery stores, gas stations and the mass merchandisers will often have some of the higher prices closer to the face value," said Patrick Ramsey, General Manager at San Francisco-based Cardpool Inc., a Blackhawk company.

Cardpool recently completed a deal with Target Corp. that is expected to enable the retailer to exchange more than 600 leading retailer gift cards at 1,562 Target store locations in the United States.

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