Store Gift Card Sales Expected to Fall

Sales of private label store cards are expected to fall for the second straight year, while general-purpose gift card sales are expected to increase slightly, according to TowerGroup.

The reduction in card spending is reflective of a weakened economy, decreased holiday sales and less confidence in retailer inventories and stability, according to the research and consulting firm. Store gift card spending volume is expected to fall 7 percent, while general-purpose cards are expected to increase 3 percent this year.

TowerGroup projects volumes for gift cards will fall slightly in 2009, from $91 billion to $87 billion.

Consumers are expected to exhibit more practical usage in each gift card category. For example, fast food will perform better than white linen dining, and discounters will perform better than high-end specialty stores. Niche players, such as local stores, will experience the largest negative impact.

TowerGroup estimates lost value, referred to as “spillage” in industry jargon, will improve to 6 percent from a high of 10 percent in 2007. This lost value still represents nearly $5 billion.

“The attractiveness of captive store gift cards appears to be waning, particularly in an economy in which retail inventories are shrinking and consumption is concentrated on more practical purchases including food, gasoline and heating oil,” said Brian Riley, research director of bank cards at TowerGroup.

— Nielsen Business Media