Gift card business fueling post-Christmas sales

By Jamie Jones

That stack of gift cards you received for the holidays could be the key to a merrier-than-expected holiday shopping season.

While shoppers are out this week looking for post-Christmas shopping deals, retailers are waiting to see when shoppers will redeem a projected $26.3 billion in gift cards. Those sales are not recorded until the gift cards are used.

The $26.3 billion in gift card sales compares to $24.8 billion in 2006, according to the National Retail Federation (NRF) Gift Card Survey. The average consumer is projected to spend more on gift cards this year than last year: $122.59 in 2007 compared to $116.51 in 2006.

Stacy McKinney, store manager of the Wal-Mart Supercenter on Shugart Road, attributed “strong” shopping crowds there on Friday to a combination of factors. Many shoppers are drawn to buy Christmas decorations, which have been reduced in price, while the expected throngs are returning or exchanging items they received. But McKinney also chalked up some of the shopping traffic to “growth in the gift card business.”

“I think a lot of it has been gift card sales,” he said. “A lot of giving has been through gift cards. And some of what we have read is there are so many gift card purchases that are being made after Christmas.”

One industry analyst said the gift card factor could boost his outlook despite a “slow performance” at the beginning of the month.

“Post-Christmas spending and gift card redemption could restore that softness in our expectation,” said Michael P. Niemira, vice president, chief economist and director of research for the Minnesota-based International Council of Shopping Centers.

Jennifer Strain was perusing the stores at Market Street Shops of Dalton on Friday, despite a steady downpour of rain, looking for post-Christmas deals. Strain said she had already spent most of the money she set aside for gifts.

“I’m not really looking for anything in particular,” said Strain, who was in town from Kentucky visiting family over the holidays. “I might pick up a few things here and there if it catches my eye.”

Another out-of-towner at the outlet center, Chad Holloway, said he was looking for deals on clothes and electronics but was a bit hesitant to splurge on gifts for himself.

“There’s just a lot of things on everybody’s mind,” Holloway said. “Seems like so many things we buy everyday — gas, milk, food — is getting more and more expensive. So I think people have less money to spend.”

Experts predicted retailers would struggle this shopping season because of concerns over the war in Iraq, the seemingly ever-increasing gas prices, a slowing housing market and a nationwide credit crunch. Some retailers hope a strong post-Christmas shopping surge will help boost profits.

A clearer, less anecdotal picture of how retailers fared in November and December won’t be revealed until next year. On Jan. 10, several major merchants are expected to report final same-store sales figures for December. Many retailers are scheduled to unveil fourth-quarter profits in February.

The NRF, the world’s largest retail trade association, predicted sales for this year’s holiday season to rise 4 percent to $474.5 billion. But that sales increase is expected to fall below the 10-year average of 4.8 percent and would be the slowest holiday sales growth since 2002, when sales rose 1.3 percent. Retail sales were $456.2 billion in 2006, $436.15 billion in 2005 and $410.33 billion in 2004.