Popularity of Gift Cards Grows

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STEVE INSKEEP, host:

The holiday shopping season is not quite behind us, not when you factor in the increasing popularity of the gift card. Here's NPR's Kathleen Schalch.

KATHLEEN SCHALCH reporting:

Gift cards first showed up in the mid-1990s, according to Karen Larsen, vice president of prepaid services with First Data.

Ms. KAREN LARSEN (First Data): 2004 and 2005, you've really seen it basically explode.

SCHALCH: First Data found that nearly six out of 10 American adults had purchased or received a gift card in the past 12 months, and that the percent of people giving gift cards as Christmas presents has doubled. Last year the National Retail Federation found that gift cards accounted for 8 percent of holiday sales. NRF Vice President Scott Krugman says that number's probably headed higher.

Mr. SCOTT KRUGMAN (National Retail Foundation Vice President): Clearly the stigma of gift cards being the lazy person's gift is gone. We did poll consumers and they told us they're going to spend 6.6 percent more than last year, which would translate into $18 1/2 billion in holiday sales.

SCHALCH: What accounts for this? Karen Larsen says retailers have found ways to make the cards seem more personal. There are cards for teen-agers, homemakers, chefs and so on. There are cards that sparkle, feature holograms and even pictures.

Ms. LARSEN: And that's where perhaps a grandchild can have his photo taken and that card goes to Grandma, or there's a lot of pets being photographed and put on gift cards this year.

SCHALCH: Larsen says another innovation is what she calls gift card mini malls. Retailers, grocery, convenience, office supply stores and others are selling other retailers' gift cards. Merchants get a commission and perhaps some extra foot traffic. Retailers like gift cards for another reason, as well, as an antidote to the January doldrums. Barry Ritholtz is chief market strategist for the Maxim Group.

Mr. BARRY RITHOLTZ (Maxim Group): What that ends up doing is actually extending the Christmas season into January, which the stores love.

SCHALCH: Gift card sales will take time to tally. Stores can't report them until the cards are actually redeemed.

Kathleen Schalch, NPR News, Washington.

INSKEEP: This is MORNING EDITION from NPR News. I'm Steve Inskeep.

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