As America officially enters the holiday season, the country is dealing with record-high spikes of coronavirus infections, casting more economic uncertainty for retailers and restaurants. U.S. retail sales are expected to plummet by $321 billion in 2020 according to Forrester Research—a decline of 9.1 percent compared to 2019. However, retailers have hope of survival—gift cards.

On average, 73.4 percent of adults are likely to make a gift card purchase during the holidays and spend roughly $44.83 per card. With most consumers still taking health and safety precautions, and many states reimplementing various mandates and restrictions on businesses, it’s likely that dollar amount will remain the same, if not increase by 10 percent or more. Self-use gift cards, like the ones available for purchase at places like Starbucks and Chipotle, will likely gain a significant market share as a result of the pandemic.

According to research conducted by BizRateInsights, there are indications that as many as 15% of consumers will opt to give gift cards this year instead of gifts they may have originally planned, meaning that retailers who don’t provide gift card options might be left out in the cold. In December 2019, the average value added to physical gift cards was $58—a dollar amount that is expected to increase as we enter peak shopping months and make more online purchases as opposed to in-store.

But it won’t just be physical gift card purchases that drive the holiday shopping season. E-gift purchases are expected to increase significantly as a result of more consumers staying home. An analysis of gift card purchases made during the spring and summer months of pandemic indicated that e-gift cards were the favored option at the start of the nationwide shutdown. And, because the timeline of a pandemic recovery is still so uncertain, it’s likely over the next year and a half e-gift cards will have a strong probability of holding their place as the go-to option. 

Many restauarants rely on the holiday season to bring them back into the black for the year. However, the challenges that have come with this year have made it clear that may not happen—at least not in the traditional sense. To continue to encourage spending, retailers are aggressively pushing promotions, including those on gift cards. Stores that do not have e-commerce will likely suffer, and those that do not offer an e-gift card option on their website have a high probability of being passed over this year.

That said, it’s important for businesses to remember not to underestimate the value of a physical gift. Perhaps not surprisingly, consumers purchased nearly nine times as many gift cards the week before Christmas in 2019 as did in the first week of November. Last minute shoppers who haven’t budgeted their time for shipping deadlines will look to e-gift cards in a quick pinch. About 1.6x more e-gift cards were purchased in December of 2019 versus November, with a 2.5x increase in dollars spent—taking the average value per card from $30 to $81.

The numbers indicate that during the 2019 holiday season e-gift card sales more than tripled from the first week of November to the week before Christmas, jumping from an average of $40 to $93 per card. With a harder push for e-gift cards this year, it’s expected that their increase in sales will be explosive. With these consumer shopping habits in mind, retailers should plan their promotions accordingly to maximize sales opportunities.

It’s important to remember that many people are still without work this holiday season as a result of the pandemic. We predict this year will see a boom for gift cards that can be used for everyday necessities. Expect a spike in gift cards for grocery stores, pharmacies and big box retailers, as gift givers trend toward more practical concerns during economic downturns.

Gift cards and e-gift cards are certainly not new concepts, but in an unprecedented year when consumers are choosing to shop from home instead of in-store, businesses need to prepare to make gift card purchasing easy and convenient for their customers if they want to see a profitable holiday season.

Since joining Givex in 2007, Mo Chaar has helped the company expand its North American footprint. He began his tenure as a Business Development Manager before becoming Vice President of Sales for North America, and then moved to his current role of Chief Commercial Officer. In this role, Chaar oversees commercial strategy and development worldwide as well as managing the sales teams within North America. His experience in gift card, loyalty and POS has played a pivotal role in the success of some of Givex’s largest partners.

Outside Insights, Story