Gift Cards: Perfect presents?

San Antonio Express-News
Nov. 24, 2005
Meena Thiruvengadam

At almost any Walgreens in the city, shoppers nowadays can pick up gifts of Starbucks, hotel rooms, makeovers, massages, movie tickets and even race car driving lessons.

The retailer is among the thousands of drug and convenience stores nationwide clamoring to get a bigger piece of the country's nearly $20 billion-a-year gift-card market.

Once considered impersonal and unthoughtful, gift cards have gotten a new image as the perfect presents for picky family members and friends who seem to have everything.

"The stigma of gift cards being the lazy man's gift is gone," said Scott Krugman, a spokesman for the National Retail Federation. "It's really become a gift of choice."

Last year, shoppers spent $17.3 billion -- about 8 percent of all retail sales -- on gift cards, according to the federation. This year, spending is expected to climb to nearly $18.5 billion.

"In a way, giving a gift card is like giving the gift recipient a little freedom," Krugman said. "They're perfect for when you don't know what to get a person, but whatever you get them you don't want them to have to return or exchange it."

Gift cards are expected to be among the most-requested gifts this year, and in the past five years they've become easier than ever to get.

"One of the things that's proliferated in the last few years is what's called gift-card malls," said Bob Skiba, executive vice president and general manager of Stored Value Systems, an electronic gift card provider.

The malls are essentially kiosks in third-party stores that are stocked with gift cards from some of the country's top retailers, including Pottery Barn, Nordstrom and the Gap.

Walgreens, Tower Records, Build-A-Bear and Toys R Us are among the 19 retailers whose gift cards are prominently displayed at checkout lines. Walgreens also carries cards redeemable for Best Western hotel rooms, massages and even "experiences of a lifetime" -- lessons at a Las Vegas race car driving school for $2,300 or a flight on a MiG jet for $1,900.

"This is another one of our tools for making the shopping experience in our store a more convenient one, especially around the busy holiday season," company spokeswoman Tiffany Bruce said.

CVS Pharmacy carries cards from retailers including Barnes & Noble, Radio Shack, Sears, and Bed Bath & Beyond. Exxon stations carry cards from Linens 'N Things, Home Depot and Target.

"In just a few years, gift card malls have gone from 1,500 locations to over 75,000 locations," Skiba said. "The reason why this has spread so rapidly is because it's another way to attract customers into your building."

A recent survey of more than 1,000 Americans found that 27 percent of last year's gift card buyers made their purchases at stores selling gift cards from multiple merchants.

"Part of it is the high price of gasoline," Skiba said. "Instead of driving to the mall and several other locations, you can go to a grocery store and do all of your gift card shopping while you're doing your grocery shopping."

When buying gift cards from third-party retailers, consumers pay face value for the cards. Retailers collect fees from the businesses whose cards they're selling and sometimes attract new shoppers to their stores.

"It gives the retailer another channel through which to reach customers without having to put up any brick and mortar," Skiba said.

The concept started as an experiment in California but quickly took off, thanks in part to its popularity among busy women shoppers.

"Because we're a time-strapped society," the National Retail Federation's Krugman said, "this really works."