Have we gotten gift card fatigue?

Retailers are looking at new ways to market their cards.

CHICAGO TRIBUNE

CHICAGO — Gift cards have become the wild card for this holiday season.

The National Retail Federation, a retail trade group, predicts sales of gift cards will rise a sober 6 percent this holiday season, to $26.3 billion, outpacing the overall industrywide forecast of 4 percent holiday season retail growth, but paling against a breathtaking 34-percent climb in card sales for the same period last year.

The forecast, based on a consumer survey, adds fuel to predictions that consumers are reticent to spend money this holiday season. It could also signal a dose of gift card fatigue.

Sales of the decorative plastic cards rose 6.5 percent in 2005 before the big jump last year. Analysts pointed to new technology, wider distribution and savvy marketing strategies behind last year’s growth. This year, retailers are looking for new gimmicks, but the economic environment is making it more difficult.

“At some point, you just reach a ceiling,” said Phil Rist, vice president of strategy for BigResearch, the Worthington, Ohio-based consumer intelligence firm that conducted the survey for the retail trade group.

That hasn’t stopped retailers from looking for new ways to market gift cards, given another BigResearch survey found that more than half of consumers listed gift cards as the most-wanted item on their wish lists.

Home Depot is offering a DVD-gift card that tells recipients how to install a faucet or the basics of painting. Target offers gift cards that have a “naughty or nice” meter and others that sing and glow. Macy’s allows shoppers to create personalized gift cards with their own photos. Starbucks stuffs its cards in cute little red mittens.

The gift-card phenomenon took off with a vengeance last year as new technology allowed drugstores and supermarkets to sell cards for retailers spanning Old Navy to Blockbuster by loading a dollar value on the cards at checkout.

Retailers also got more clever by creating more colorful designs and adding such bells and whistles as holiday music jingles or the scratch-and-sniff scent of pine cones and peppermint.

And there is still plenty of room for growth, said Dave Sievers, a principal at Stamford, Conn.-based Archstone Consulting. Contrary to the National Retail Federation’s forecast, Archstone predicts gift card sales will have another robust year, climbing 25 percent this holiday, to $35 billion.

“We expect this year to be a significant year, too,” said Sievers. “You’re starting to see retailers continue to push their programs. Plus consumers want them.”

Just the same, Consumer Reports executive editor Greg Daugherty said his publication has experienced an increase in letters from readers complaining about gift cards, frequently citing hidden fees or complaining about expiration dates or lamenting what to do about a lost card.

The number of gift cards forgotten, tucked away in dresser bureaus and desk drawers, appears to be rising as well, he said.

The consumer watchdog group found in its own survey that 27 percent of gift-card recipients still have yet to spend gift cards from holiday 2006, up from 19 percent the same time last year.

“Gift cards seem to be an increasing source of aggravation among the people who write to us,” Daugherty said.

One in four teenagers are already bored with gift cards and think they are a “lame gift from people who have no clue what they really want,” according to a recent report from WSL Strategic Retail, a New York-based retail consulting firm.

That said, gift givers find gift cards an easy and timesaving present. And, with the economic downturn taking its toll, it is a socially acceptable way to help a friend or family member pay for groceries, gas or phone service, said Mandy Putnam, vice president of TNS Retail Forward, a Columbus, Ohio-based retail research and consulting firm.

“We see this whole shift toward more practical gift buying going on at the moment because people are nervous about rising gas prices and the housing market weakness,” said Putnam. “It’s not as crass as handing someone a $100 bill.”