Industry Perspective

Nilson Report
Gift card systems are the fastest growing consumer payment system in the U.S. over the last three years. Retailers have much to gain from the migration from paper certificates to plastic cards, and we expect gift cards will dominate the prepaid payment system market for years to come.

Retail Card Forum
American Express estimates retail gift card outstanding balances alone are currently $1 billion, and project they will grow to $15 billion in the next 2-5 years. Shoppers using prepaid gift cards and certificates are less concerned about paying full price in retail stores than shoppers using other media, according to research by Daniel R. Horne, assistant professor of marketing at Providence College, RI. Horne’s survey of gift card and certificate users found that 40% of shoppers using a retailer’s gift card or certificates purchased items at full price, compared to 16% of shoppers using other payment methods.

Los Angeles Times
Macy’s, Gap, Bloomingdale’s and others are promoting prepaid gift cards that take the place of paper gift certificates, hoping to boost sales. The cards have an important advantage for retailers over paper gift certificates. Consumers using gift certificates receive their change in cash, which can be spent elsewhere. The electronic gift cards keep the money from leaving the store.

Dan Horne, retailing professor at Providence College in Rhode Island, said sales of gift cards and certificates have been growing 11% to 15% annually since 1993, thanks in part to gift cards. Americans will spend billions on them, he said. The cards appeal to time-pinched consumers in search of a convenient gift, Horne said. Also, corporations purchase batches of the cards to give to customers. Retailers view the cards, which usually have the store logo on them and easily slip into a consumers’ wallet, as a form of branding.

“A reusable gift card can be a constant reminder of a store and its brands,” said Joe Enos, a spokesman for Old Navy. Neiman Marcus is credited with creating the electronic gift card in 1994. The retailer known for its expensive, not to say extravagant merchandise, has actually sold cards with values in the $100,000 range, said Billy Payton, vice president of marketing at the Dallas-based chain. “We launched the prepaid gift card because we believe it can be fun to buy, fun to give and fun to use,” Payton said.

The Associated Press
Retailers have high hopes for the future of electronic gift cards. Finding that perfect gift for someone at Christmas or any other time is never easy, but a growing number of retailer’s think they have the solution…It’s plastic. Stores are converting gift certificates from documents to electronic cards. They’re less cumbersome to carry, have a technological edge that appeals to kids and are advantageous for retailers.

Card Marketing
Neiman-Marcus and Barneys New York are wrapping up higher gift sales after replacing paper gift certificates with magnetic stripe, prepaid cards in all stores. Customer response has been so strong; the upscale stores are now jockeying to develop the most colorful and unique cards for every occasion, before mainstream department stores jump on the bandwagon. Although the trend began at two of the nation’s most upscale stores, retailers from Bloomingdale’s to Target are expected to begin offering prepaid gift cards in the near future, say industry experts, because of the convenience and cost savings the cards offer.

MasterCard International
The average consumer today carries with them 12-14 credit cards.

National Retail Federation
U.S. annual retail establishments registered sales of more than $2.5 trillion in 1997 and $2.7 trillion in 1998