New York Consumer News

Gregg Geller, WCBSTV.com
NEW YORK (CBS) ― The holidays are nearly upon us, creating more urgency to the oft-dreaded race to find gifts for everyone on your "nice" and "not-so-naughty" lists. But with the annual madness of mall mob scenes and the added anxiety of massive consumer product recalls from China, finding that elusive "perfect gift" seems particularly daunting this year.

Before you go the way of The Grinch or Ebenezer Scrooge (before their makeovers, that is), one straightforward solution could make your shopping a little simpler.

Apparently, 'tis the season to buy…plastic.

Gift Cards For Everyone!

A survey by Archstone Consulting of 1,000 Web users nationwide examined how gift cards will impact the holiday gift marketplace this year. Archstone expects gift card sales in 2007 will soar to $35 billion -- up from $27.8 billion or 25 percent over last year.

One major part of the growth in the industry comes from prepaid credit cards, which are gaining new popularity this year.

"Prepaid credit cards are emerging as the No. 1 consumer preference this year -- closely followed by retailers' cards," said Dave Sievers, principal and practice leader for Archstone Consulting's Consumer Products Practice.

Archstone predicts that the market for prepaid credit cards will hit nearly $6 billion this holiday season and discounter gift cards will grow to nearly $5 billion.

"These are big markets and really point to the incredible popularity of gift cards this year," Sievers said.

"A consumer can walk into the neighborhood drug store and buy a pre-paid Visa card or gift cards for Target or iTunes," said Andrew Buss, vice president, Strategic Innovation at The Hazelton Group, a unit of Archstone. "This allows retailers to broaden their reach beyond their traditional customer base."

Personalizing Gift-Card Gifts

Recipients of gift cards consistently say that perceived indifference is their No. 1 turn-off. "Teenagers in particular feel a lack of personalization when an adult family member gives a gift card that they can't relate to," Sievers said.

He warns that if gift givers are not careful, they can deliver what turns out to be the modern equivalent of a pair of itchy wooly socks to a niece or nephew or that other old cliché, a loud necktie for dad.

Some retailers have taken note of this potential downside to gift carding, allowing consumers to personalize their cards or make them appear as a stand-alone gift.

For example, Home Depot offers a gift card with a "how-to" video; Target's has a built-in flashlight or a "Naughty Nice Meter"; Sears offers a paintable card; and Toy-R-Us has design-your-own cards with personalized pictures, Sievers noted.

Orange & Rockland, Rockland Electric Company or Pike County Light & Power Company offer "Energy Gift Certificates" for friends or relatives "who may need a little help with paying bills." And Highmark Inc., a Pittsburgh health insurer, is marketing a Visa gift card this season to cover health costs, such as prescription expenses, elective surgery and even gym fees -- the ultimate gift that keeps on giving.

'Re-Gifting' Gift Cards?

Some 56 percent of gift cards will be redeemed within one month of receipt. But gift card expiration dates continue to draw the ire of consumers everywhere.

"Roughly 20 percent of gift cards go unredeemed, so use and enjoy them, and keep them handy in your wallet," Sievers suggests.

What if you get a gift card to a store you don't like? There are online gift card exchanges, such as CardAvenue.com, that will buy your unredeemed cards.

"I'm sure just as many people swap gift cards as exchange any unwanted holiday present. The usual rules of 're-gifting' apply with gift cards," Sievers said. "Beyond that, online exchanges have become a great method for making good use of an unwanted gift card."

But caveat venditor (seller beware): These online exchanges typically pay you less than face value for your gift cards.

Upside For Retailers

As for retailers, they benefit when consumers visit the store and use their gift cards. The Archstone survey found that gift cards help draw consumers to stores they might not have otherwise visited.

Better yet for the retailers, the survey also found that gift-card toting consumers tend to spend more than the value of their cards (often on higher priced merchandise purchased as gifts).

Of course, issuers of prepaid credit cards do not have this benefit and charge higher fees for purchasing their cards to make up for the shortfall.

"Prepaid credit cards are very popular this year -- fees and all -- because they can be used anywhere. They are particularly popular as corporate gifts to employees," Sievers said.

Strong Growth Continues

Beyond the rosy growth predictions for 2007, Archstone expects the rate of growth for gift cards to slow next year to 10 percent to 15 percent (which is still impressive) as the market becomes more competitive.

In 2008, expect to see much more emphasis on holidays earlier in the year like Valentine's Day and Mother's Day, Sievers said.

Toy recalls from China are also impacting gift card purchases this year, with buyers moving to avoid the risks of buying a potentially dangerous product.

"Gift cards have been a great way to give a child a gift without risk. They effectively offload the selection process to the child's parents," said Sievers.

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