Connect with us

Shopping

Why gift cards are the hottest holiday presents, for people and retailers

Published

3 weeks ago

on

Why gift cards are the hottest holiday presents, for people and retailers

play

The hottest gift this holiday season may be one of the easiest to buy. 

Turns out shoppers don’t need to spend hours browsing online or combing through clothing racks to find a suitable present. Research shows people love receiving gift cards – even if some shoppers are hesitant to give them. 

A recent survey from Bank of America found 96% of surveyed consumers were happier or equally satisfied with gift cards compared to physical gifts. Another report from the National Retail Federation found gift cards are the most popular item on consumers’ wish lists, with 53% of shoppers requesting them this year.  

“There’s nothing easier than a gift card,” said Bank of America’s head of consumer and business products Mary Hines Droesch. “It feels more personal than cash but enables you to get something thoughtful, somebody’s favorite store or brand, but you don’t get caught up in having to know what size someone is or what color they like. There’s less risk with the purchase.” 

Michael Caraang, 31, of Beltsville, Maryland, said there’s no such thing as a bad gift. But he likes how gift cards are a forced “fun” purchase. Cash or checks are always nice, but that money will more often than not go toward basic expenses like a phone bill or car payment. 

Even so, he said he tries to avoid giving gift cards unless he’s sure it’s something the person would enjoy to avoid an “awkward situation.”

People tend to be more reluctant to give gift cards than they are to receive them because they’re afraid to break social norms, according to Julian Givi, an assistant professor of marketing at West Virginia University who has researched gift card preferences.  

Gift card scams: Card draining latest gift-card scam to be aware of around the holidays. Here are 5 more.

“When we think of what a gift is supposed to be, we think of the red box with a green ribbon that encompasses a tangible item. Gift cards don’t really fit that norm,” said Givi. “People are reluctant to give them because of their perceived lack of thoughtfulness. It’s not like you go into the store picking out the perfect color shirt, the perfect sized shirt. It can kind of feel like a cop-out.”

Mary Steffel, an associate professor of marketing at Northeastern University, said her research found people want to give gifts that people will enjoy, but they also care about seeming thoughtful and increasing how socially connected the recipient feels to them after receiving the gift, which makes some hesitate to hand over a gift card.

“Recipients probably appreciate gift cards more than givers realize, or maybe more than gift givers are ready to accept and act upon,” she said.

But researchers said the stigma against gift cards appears to be on its way out. Americans are expected to spend roughly $28.6 billion on gift cards this holiday season, according to NRF. The only category more popular with givers is clothing and accessories. 

Bank of America’s survey showed 68% of people give gift cards to allow the recipient more of a say on their gift.  

“Oftentimes when people buy particular things for people, the recipients don’t like those particular things,” said Joel Waldfogel, a professor of applied economics at the University of Minnesota and author of “Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.” “An interesting feature of gift cards is they allow the ultimate choice to be in the hands of the recipient.” 

They’re also popular with retailers.  

Sixty-one percent of shoppers spend more than the value of the gift card when making their purchase, according to a 2019 survey from branded payments provider Blackhawk Network.

Gift cards can also curb costly returns for retailers, according to Givi. And unutilized cards have been found to boost companies’ profits, although some states require retailers to turn the money over to unclaimed property programs to return the money to consumers. 

An August Bankrate survey found 43% of U.S. adults hold an unused gift card. That’s allowed some companies to report significant earnings from “breakage” ‒ or money from unredeemed gift cards. Starbucks claimed $207.6 million in revenue from breakage in fiscal 2024.  

Related Topics:
Continue Reading