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What’s the Truth About Gift Cards?

Monday, April 25th, 2016


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There is a lot written about Gift Cards online, and we wanted to get under the skin of the stats and see – do people like gift cards? Are they in decline? And what do the statistics that are out there really show?

Do people leave gift cards unspent?

A survey from the CEB TowerGroup showed that $1 billion on gift cards goes unredeemed annually, however their report also shows that the annual amount of ‘spillage/ breakage’ (Breakage represents the unredeemed portion of gift card sales (Kile & Wall, 2008) and occurs when gift cards are lost, or when consumers elect to partially redeem or never redeem their gift cards) is actually in sharp decline from $7 in every $100 in 2008 to less than $0.75 per $100 in 2015.

When we consider unspent or unloved gifts – we can’t look at the balance sheet alone! We have to consider traditional gifts- the bottles of wine undrunk or regifted, the promotional pens that end up in the bin, or the well intentioned but poorly executed gifts that get put in a cupboard and forgotten about. The truth is, a gift card that is tied to choice will be unlikely to be left to ‘go cold’ – and with the increase in department store e-tailers and retailers with a huge and diverse range of goods – such as Tesco, Amazon, Debenhams and House of Fraser, there’s never been a better time to buy a gift card. SVM Global also offer a range of Preference led services, so whether you gift colleagues or 3rd parties, you can choose a gift card of choice.

Do people want to receive gift cards?

In 2015 gift cards were the most requested holiday gift item in 2015 for the ninth year in a row, according to the National Retail Federation’s Holiday Consumer Spending Survey. Approximately 58.8 percent of consumers said they would like to receive a gift card during the holiday season. The survey polled a huge 7,276 consumers and was conducted by Prosper Insights & Analytics, October 5-13, 2015. (The consumer poll has a margin of error of plus or minus 1.2 percentage points.) With the rise in talk of millennials and smartphones, gift cards are seeing a resurgence. As well as cards that can be used to pay for apps and music, there is also the increased convenience of an eCode that is bring Gift Cards to the forefront of people’s minds.

Do people prefer cash?

A Consumer Report conducted in November 2015 by ORC International (via phone to a nationally representative sample of 1007 adults with a median age of 45 years old); asked people if they would prefer to have cash or a gift card – whilst 57 percent opted for cash – 43% chose a gift card, a difference of opinion of just 144 people, and based around the median age of 45. However, a larger study done by the Incentive Federation in the ‘Survey of Motivation and Incentive Applications’ of 13,661 people consistently indicated that merchandise and travel related incentives were more attractive than cash – and in the merchandise category, gift cards were the most popular items.

Many motivational surveys show time and time again that people don’t recall what they spent cash bonuses on. For example, research firm Wirthlin Worldwide asked 1,010 people how they spent their last cash reward or incentive. Far from being spent on a treat, a new hi-fi, a book, a day out – 58 percent used the cash to either pay bills, add to savings, or worse – they couldn’t even remember what they did with it. In contrast, gift cards provide guilt free shopping – something that we all love. If you really want to treat someone, a gift card is the best way to ensure that the money goes on something memorable and exciting.

Do people spend more than they would normally when they use gift cards – making them a ‘bad choice’?

One of the main cited studies when it sees if people spend more with gift cards is a study called ‘Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior’. The study split 29 undergrad marketing students (who were given course credit for the study) into groups of 16 (who had a $50 bill) and 12, who had a $50 gift certificate – and gave them a shopping list.

They were asked to imagine they were shopping for groceries from a list comprised of toothbrushes, canned soup, and ketchup. Participants were given a booklet of products and brands available including brand name, variety, size, – sorted by price. The results showed there was no difference in the number of items purchased between the groups – yet the stat of ‘increased spending’ has been used because on average the total amount spent was higher in the gift card group. However – the actual data is a bit drier – for example the cash holders spend $3.81 on soup, gift card holders spent $3.86 – a tiny 5 cent difference.

The truth isn’t found in science – you know it yourself – some people like to spend more on themselves if it feels like a pleasurable treat! A survey of the same run in 2015 of 1000 Christmas shoppers showed that on average, whilst shopping Britons will spend £475 on gifts for others, whilst also spending £84 on treats for themselves! That doesn’t make gift cards a bad gift – if it enables the purchase of something really fantastic, what could be better?


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