The Secret Behind Retail Brands and Gift Cards

According to the National Retail Federation holiday survey, Gift Cards are the #1 requested item this year (for the 4th year in a row) for holiday gifts.  As retailers continue to scramble each year to bring in door busters and high buzz items to attract shoppers, it may be that the work they do all year long to build their brand image may be the most important thing they can do to drive Gift Card sales.

2010 NRF Holiday Survey Results

According to Accenture, gift givers say they choose gift cards because they are more convenient to ship (take that, postal fees) and because they do not know what the gift recipients would like or want.  But as in the past, a gift – even a Gift Card – is a reflection on the giver as much as the receiver.

The same survey, for example, found that high income givers tended to give more entertainment-related gift cards (for movies or restaurants, for example) than lower income givers.  The hypothesis is that the giver has moved past the desire for “things” and is sharing their search for “experiences” with their gift recipients.

For retailers, they need to burnish their images to ensure that gift givers will feel proud to give out a gift card with their retail logo as the only indication of the gift.

If in the past, givers were frugal in selecting a cashmere scarf on sale at Kohls and wrapped it in a Bloomingdale’s box, ask if the giver would give a $25 gift card to Kohls or Bloomingdales today?  For the same expenditure, the giver can make a different statement about themselves by giving the Bloomingdales card instead of the equivalently-priced Kohls card. The perception of the retail brand as a reflection on the gift giver means retailers have to ensure that their brand conveys a style statement as well as a value statement.  A $50 Gift Card to Best Buy or Apple mean something different for both the recipient ($50 at the Apple store doesn’t go far) and the gift giver (I’m hip – so are you.)

Given that the majority of shoppers say that they spend their gift cards in a single purchase and typically spend more than the value of the gift card, retailers would be wise to consider this when allocating their marketing budget between straight up item-price promotions and image-building brand marketing.  Retailers who help the gift giver feel that their gift card is a symbol of good taste and style will see long term holiday growth while those retailers who represent pragmatic frugality will be less likely to have their gift cards under trees in the years to come.

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