Gift Card Trends

First Data study finds closed-loop cards popular but open-loop growing, and virtual gift cards are on the horizon.

As the U.S. gift card market matures, understanding consumer demand and trends can help gift card-issuing merchants and retailers create or adjust their strategy. In fact, First Data, a global provider of electronic commerce and payment processing, recently released the results of its 2010 U.S. Gift Card Consumer Insight Study, which showed that consumers still consider prepaid cards very popular choices as gifts.

According to the study, while closed-loop cards (gift cards for a designated store) remained more prevalent in 2010, there was a significant uptick in open-loop (issued by banks or credit card companies and can be used anywhere cards are accepted) gift card purchases. The study also showed an increase in the percentage of consumers reloading open- and closed-loop cards. Birthdays were the most popular closed-loop gift-giving occasion, followed by Christmas.

Study Highlights

·  Virtual gift cards on the horizon. While most people preferred to give an actual gift card, 25% of respondents indicated they would be likely to give an electronic gift card, and 48% said they are interested in receiving one.

· Consumers continue to spend more than the value on their closed-loop cards. Nearly three-quarters (72%) of consumers reported spending more than the value of their closed-loop gift cards. The amount of overspend was greatest at department stores ($28), followed by grocery stores ($27), discount stores ($25), fine dining ($24) and specialty retail ($24).

· Average value of open-loop gift cards increases while closed-loop holds steady. Receivers of open-loop cards reported an average value of $68 in 2010, compared with $59 in 2009. Average closed-loop gift card values remained steady at $39 in 2010. The average value of fine dining, grocery and drug store cards increased, while the value gifted via gas station cards decreased.

· Purchases at gift card malls are on the rise. The percentage of consumers purchasing closed-loop cards at gift card malls jumped to 46%in 2010, up from 38% in 2009.

· Overall, more consumers are reloading open- and closed-loop cards, which can mean more visits and a greater spend. Of those who reloaded closed-loop cards, 35% said they visited the merchant more often and 20% said they spent more money at each visit.





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