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It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

This blog will look at the winners and losers in the retail space. Who has the right strategy to capture consumer dollars? It also will look for trends in consumer spending and how that will impact the economy.

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Nov.18

4:04 PM ET

Tuesday, 18 Nov 2008

A Gift Card as the Perfect Gift? Not Anymore.

Posted By:Cindy Perman

Topics:e-commerce | Economy (U.S.) | Consumers | Retail Sales

Sectors:Personal and Household Goods | Retail

Gift cards used to offer shoppers the perfect holiday punt: You could avoid the mall and still be a hero for giving a great gift.

Getty Images
Gift cards are expected to have a hard time competing with super sales on merchandise this season.

But the crazy discounts that have resulted from the downturn in spending are expected to change all that.

Gift-card sales are expected to fall nearly 6 percent this holiday season to $24.92 billion, after rising for the past four years, according to the National Retail Federation.

The average amount that people spend on gift cards is also expected to decrease, falling to $147.33 from $156.24 last year.

"Since gift cards never go on sale, some price-conscious shoppers will be passing up gift cards in favor of holiday bargains," said NRF 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."

That had become a new formula for retailers in recent years: Retailers could always explain away any shortcomings in the regular November-December season with the promise of gift-card redemption in the new year.

The rules of Christmas's past no longer apply, says Richard Hastings, a consumer strategist for Global Hunter Securities. He says the fundamentals are definitely pointing to less being spent on gift cards this year.

Nearly 23 percent of shoppers surveyed by the NRF said they were cutting back on gift-card spending because they were too impersonal. Almost 11 percent said it was because of the too-good-to-pass-up holiday sales.

Just over 3 percent of shoppers cited concern that the retailer might go bankrupt as the reason they planned to buy fewer gift cards this year.

Slideshows:

With retailers dropping like flies these days, that's a surprisingly low number.

Mike Unger, a principal at Archstone Consulting, said a lot of people don't know — or, worse, don't care — that retailers in bankruptcy protection aren't obligated by any law to honor gift cards.

So, what do you do if your gift-card issuer goes bankrupt? Bankrate.com offers some tips.

Of course, gift cards are easy money for retailers and they're not about to let the category fall by the wayside. Many are introducing gift cards that double as gifts themselves — like Target's [TGT Loading... () ] gift card that's also a digital camera — to lure shoppers.

But quite honestly, it's going to take a few more bells and whistles than that to rip some savvy shoppers away from 50- or 75-percent off cashmere!

Recent Holiday Central Posts:

Tech the Halls: Gift Cards Get Gadgets to Lure Shoppers
Why You Should Worry About Weak Holiday Sales
Toy Trends: Lean and Barbie Green
Christmas on Consignment: Luxe Without the Guilt—or the Pricetag
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