Card Tricks: Gift Cards Are Big Business for Retailers

(Promo) Sure, you loved that pink fluffy kitten sweater from Aunt Bertha two Christmases ago, even if it was three sizes too small. And the year before, you adored the singing fish plaque. Yeah, right.

Chin up, friend. Chances are good you won't be looking to regift Auntie's presents in the future, thanks to the burgeoning popularity of gift cards and gift card "malls" — those racks offering cards from multiple retailers you've seen in locations like CVS.

For many — including befuddled gift givers who don't have a clue what their friends or relatives might want to receive — the category has been a godsend. Consumers are expected to spend upwards of $90 billion this year on gift cards, up from $76 billion in 2006, forecasts Dan Horne, associate professor of marketing at Providence College in Rhode Island. And by 2008, the category is projected to surpass $100 billion.

The fact that a gift card can cater to every interest works for both buyers and recipients.

"It used to be gift cards were always the lazy-person way to give a gift," says Bob Skiba, executive vice president, general manager for gift card provider Comdata (formerly Stored Value Solutions). One of the largest gift card providers with 650 clients, Comdata distributes cards in 150,000 retail locations.

"Gift cards have become accepted," adds C. Britt Beemer, founder of America's Research Group, a consumer behavior research and strategic marketing firm. "There is virtually no negativity around them anymore."

In order to stand out in a sea of plastic at retail, marketers are using more imagination in their designs. Moveable parts, scented cards and audio chips are some of the gimmicks to recently hit store shelves.

"Retailers are looking for card products and card services that bring innovation to something which had become rather stale," says David Brown, CEO of digital publishing company Serious USA, which markets interactive CD-ROM cards.

One way to stand out is to be useful. For example, Home Depot created a tape measure gift card around Father's Day. The item not only looks the part, but has an actual tape measure and level. The design was a hit. The product is so popular that it's often sold out.

"One of things we try to make a cornerstone in our strategy, whether it's across the retail business or the B-to-B channel, is innovation," says Manish Shrivastava, director of Home Depot Incentives Inc. "We are trying to get our brand in more places, in front of more people. It's a way of going beyond the orange box to reach consumers and then, in turn, drive them in."