Australian gift card market boosted by seasonal spending

For consumers, Christmas can be an exhausting period where choosing gifts for family, friends and colleagues is more burden than pleasure. It is now apparent that many are turning to gift cards as a way of solving this problem.

Seasonal trends

In 2015, spending in the pre-Christmas trading period of November 15 to December 25 was $47 billion, an increase of 4.2% on the previous year, according to figures from the Australian Retailers Association (ARA) and Roy Morgan Research. Online sales for the period were $3.1 billion.

Australians planned to spend an extra $1,079 each between 1 December 2014 and 6 January 2015, according to a Commonwealth Bank survey, with gifting and vacations accounting for the majority of increased spending.

Gift cards are a popular choice for consumers, with 16% of annual gift card purchases being for Christmas gifts.

The gift card market

Every year, Australians spend up to $2.5 billion on gift cards for family and friends. In the past year, nearly 90% of us have received a gift card or given one as a present.

A 2010 survey conducted by Global Prepaid Exchange (GPX) and Retail Decisions found that 69% of the participants had purchased at least one gift card in the previous year. Most gift cards are given to friends or close family members.

People are less likely to give one to a spouse, because it could be perceived as a less thoughtful gift. Women purchase gifts more frequently than men, and are more likely to plan their gift purchases in advance.

Types of gift cards

Two types of gift cards are available:

1) Closed loop gift cards: these are accepted as payment for goods and services at a single retailer or an affiliated merchant group. In the Australian market, closed loop cards are by far the most popular.

2) Open loop gift cards: these are usually associated with a payment system (such as Visa or MasterCard), and can be used at a variety of retailers honouring cards from that network.

Gift card benefits

A key factor in deciding to give a gift card is the dislike people have of giving or receiving an unwanted present. 83% of gift card recipients believe that the choice a card offers is the best feature of gift cards. 89% said that gift cards are easy to use. 60% of people receiving a gift card prefer it to receiving cash, and 73% believe that gift cards are the best option when they don’t know someone well.

For retailers, gift cards have the benefit of reducing the number of gifts returned or exchanged by customers. A positive experience with a gift card is strongly correlated with customer intention to buy more gift cards in the future. Providing an excellent customer experience through their gift card service is key to increasing retail gift card sales.

With benefits for both the consumer and retailer, gift cards are set to remain a popular choice this festive season.

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