Wednesday, January 02, 2008

Gift cards boom alterates end of year sales figures

I was discovering Daniel Lucas' blog, a mortgage blogger, when I read this interesting article about Holiday Spending APPEARS To Be Lower, But It Isn't Really Lower.

Indeed, statistics seem to tell us sales have not been that good this holiday season, but these figures are impacted by a new growing type of present: the gift card.

No need to wonder anylonger for weeks what to buy for your friends! Simply offer them a gift card to a store you know they will find interest in, and they will pick what they need. Thus, the new customers, what Henri Kaufman call the Ego customer, has so much ego that does not say what he wants, but he expects you to give him it. That is making situation pretty difficult.

This new trend impacts the holiday spending stats as these gift cards are only accounted for when they are redeemed for actual store merchandise. Therefore, some of the christmas sales in gift cards will have an impact on the up coming monthly sales figures. This is actually a good thing as a retailer, since it appropriates the turnover on a longer basis, which helps in term of logistic and forecasts.

You may also chech another article from the Wall Street Journal.

The shortcome of the gift cards

That reminds me of the case of Airfrance with its Miles. Airline companies are champions in giving miles to its customers in order to get their loyalty. But the shortcome is these miles are delayed discounts. Now let's imagine that tomorrow all clients of Air France come to get at the same time their Miles, Air France won't be able to redeem it all. That also implies, if these gift cards become systematic, to implement some plan to incentive people to redeem their gift cards as fast as possible. It is the same thing that happens when you give a check to someone who cashes it out a year afterward.

However, as I have said, one of the main advantage of the solution is to restrain the customers to by in your store. This potential customer is locked into the retail that gave him the card, and then it secures in a way some sales that might have gone to the competition somehow.

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