Gift cards are a popular gift option for non-crafters (people like husbands and parents, in my case) to give to crafters as holiday gifts. The gift-givers get confused in specialty stores and don’t know what to buy or what the recipient might already have. So a gift card is a “safe” gift that lets the crafter pick exactly what they want or need for their projects.
Normally this isn’t too much of a problem for crafts stores – and is even a bonus because purchasing gift cards brings in gift shoppers that would be too intimidated to even attempt to select a gift from the unfamiliar store otherwise. And spending the cards brings in shoppers who almost always spend more than the amount of the card.
But this year there are several factors at play that are turning some consumers away from gift cards. And losing those gift card sales could be a big problem for scrapbook and crafts retailers.
First, a viral email has been circulating on the internet warning people to stay away from gift cards because of the risk of retailers going bankrupt. The email contains a purported list of stores that will go bankrupt or close large amounts of locations by the end of 2008, and warns that gift cards from those retailers will be worthless. It advises staying completely away from gift cards this holiday season.
The email is filled with old information, such as the fact that it lists KB Toys as being in bankruptcy when in fact the company filed for bankruptcy in 2004 and emerged from bankruptcy protection in 2005. [Update: The email ended up being eerily correct, as KB Toys filed bankruptcy for a 2nd time on Dec. 11th, 2008, nine days after this article was originally written.] The “scary” store closure numbers omit to mention what percentage of a company’s stores the closures account for. In some cases the percentage of locations closed was less than 1%, and the email neglects to mention numbers of stores that were also opened by those same chains.
Despite its inaccuracies, the email has undoubtedly scared some people away from buying gift cards in this uncertain economy because they just don’t trust institutions with their money anymore. And small retailers like scrapbook stores are especially suspect to many shoppers because they are especially vulnerable in the poor economy.
Another threat to holiday gift card sales this year is retailers themselves. The perceived value of gift cards has gone down in the eyes of consumers when compared to what they can get for that same money on the huge sales that are being run by retailers desperate for customers in the failing economy. Consumers think they can get more for their money by taking advantage of sale prices on actual product.
“Since gift cards never go on sale, some price-conscious shoppers will be passing up gift cards in favor of holiday bargains,” said National Retail Federation President and CEO Tracy Mullin. “Retailers may need to make minor adjustments to holiday plans as fewer people may be hitting the stores in January to redeem gift cards.”
The National Retail Federation’s sixth annual Gift Card Survey, conducted by BIGresearch, predicted that gift card sales will fall nearly six percent this holiday season to $24.9 billion, down from $26.3 billion last year. Fewer people plan to purchase gift cards this year (53.5% vs. 56.6% last year) and gift card shoppers will be spending less overall on the cards ($147.33 vs. $156.24 in 2007).
The reality – at least on Thanksgiving weekend – was even worse than predicted for gift card sales. The National Retail Federation’s 2008 Black Friday Weekend survey, conducted by BIGresearch, found that gift card sales actually dropped ten percent, with 18.7% of shoppers purchasing a gift card over the weekend, down from 21.0% last year.
Even gift cards that do get bought may end up going for practical items. MSNBC has an article up right now about how gift cards are increasingly being seen as a practical gift in the bad economy. Grocery and gas cards are becoming popular gifts. Walmart and Target declined to comment on gift card usage for the article, but it isn’t much of a leap to see that some holiday gift cards given from those stores are probably going to be spent on necessities instead of hobbies – resulting in fewer scrapbook aisle purchases.
Given all of this, scrapbook and crafts stores may be wise to make extra efforts this year to sell products as gifts to shoppers, with methods such as using customer wishlists to assist gift buyers. This is one of those times that small stores can use customer service to win over the big chains by offering their regular customers the opportunity to fill out a wishlist and then have a store employee help gift shoppers guide people through filling it!
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