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Shoppers buy gift cards for practicality, as some ditch the plastic altogether December 15, 2008

Posted by jyu in Uncategorized.
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BY JAMES HAGGERTY
STAFF WRITER
Published: Sunday, December 14, 2008 11:50 AM EST
Although researchers predict that gift cards will once again be the most popular holiday present this year, sales will be down from 2007 — due largely in part to worries about retailers who are hinging on financial trouble.

Sale tallies for certain types of cards will also be down because people are purchasing cards for items like gas and groceries as opposed to items considered more of a “splurge.”

Kathy Catling, front-end manager of Boyer’s Food Store, Hazleton, typically handles gift card sales.

While Boyer’s card sales have been about the same as last year, she said that the store’s Gift Card Center, which vends cards for chain restaurants and Internet retailers, hasn’t been used much.

“They’re not really moving,” she said.

“What we’ve got is a tidal wave of fear on the part of consumers and it’s reflected in gift card sales,” New York City retail consultant Howard Davidowitz said.

Sales of gift cards for the year will drop 9 percent from 2007, to $88.4 billion, according to the TowerGroup, a financial research firm based in Needham, Mass. Card sales connected with specific restaurants and retailers will total $59.9 billion, down from $70 billion last year, its research concludes.

Cards will be the leading gift purchase for the fifth straight year, according to a survey by Deloitte LLC, a New York-based financial and tax services firm. Deloitte’s sampling of more than 13,000 people indicates 66 percent of shoppers will buy them, down from 69 percent in 2007.

There is an exception to the downswing. People are buying more cards associated with consumable products, such as fuel and groceries, surveys indicate.

“Some retailers will see increases in the areas where the consumer is moving to,” said C. Britt Beemer, a retail analyst whose consulting and research firm gauges consumer behavior.

Sheetz Inc., Altoona-based chain of 350 stores that melds gas sales with quick food and convenience store services, benefits from the move toward cards for practical purchases.

“Card sales are up 28 percent over last year,” Sheetz spokeswoman Monica Jones said. “People are moving toward buying people gifts that they can use.”

Outside the comfort zone of gas, snacks and groceries, though, the frightful retail picture spooks some potential card buyers who see a fast-shifting landscape. November retail sales posted the weakest monthly performance in 39 years.

“Forty-six percent of people are concerned about buying gift cards because they weren’t sure about which retailers would be around next year,” said Beemer, whose firm queried 1,000 people recently about their holiday purchasing plans.

Troubling evidence crowds the regional retail front. Boscov’s department store chain and electronics leader Circuit City are emerging from bankruptcy. Housewares vendor Linens & Things, off-price merchant Value City, budget clothier Steve & Barry’s and women’s apparel vendor B. Moss are liquidating.

Consumers have lost $100 million in gift card value this year as major retailers vanished, according to TowerGroup data.

“The rule for the person who gets the gift card is, spend it immediately,” Davidowitz said. “The person who gets it has to understand it’s not FDIC-insured.”

The lost value of cards for defunct retailers hardly rivals the worth of unredeemed cards, which TowerGroup says totals $6.4 billion, down from $8 billion in 2007.

Some companies levy dormancy fees against the value of unused cards, eventually terminating their redeemable worth.

“The terms and conditions vary from card to card, so when you make the purchase you’re agreeing to those terms,” said Nils Fredericksen, spokesman for the state attorney general’s office. “Most chains have backed away from fees and expiration dates.”

Shoppers, who are losing wealth through the financial markets upheaval and have seen 2.7 million people lose their jobs in the last year, back away from cards for another, stark reason, Beemer said. More people opting out of card purchases are giving money gifts, his survey shows.

“Almost two-thirds are saying they are giving cash instead of gift cards because the person needs help paying their bills,” Beemer said.

Staff writer Jill Whalen contributed to this story.

jhaggerty@timesshamrock.com

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