Blackhawk Network payment service found in a survey Buyers expected to spend an average of $ 313 on gift cards over the vacation. This is an increase of 19% from the 2019 average. In addition, 52% of respondents said they would likely buy more gift cards in 2020 than in the past.
In an interview on “Close bell” Simon said the increased spending on gift cards could initially negatively affect retailers already grappling with the disruption caused by the coronavirus pandemic.
“Gift cards are shaky … because you don’t see the sale when the customer buys the card. You see the sale when it’s actually exchanged,” he said. “So if you try to measure Christmas sales, you will have this liability on the balance sheet, which is not a sale even though the sale was closed.”
However, the impact of gift card purchases could be much more beneficial with a view to next year, explained Simon, who was President and CEO of Walmart USA from 2010 to 2014.
One reason for this is that recipients tend to spend more than the face value of the gift card when shopping. “In general, you see about 20 to 30% more than the gift card,” he said.
The second reason is that, according to Simon, there may be a “3% to 5% breakage, which means that cards are not redeemed”. “It’s a bit of a godsend for retailers, but it will also take time for them to finish.”
There could be fluctuations as retailers realize the benefits of buying Christmas gift cards over the next year, Simon said, pointing to the ongoing uncertainty surrounding Covid-19. When asked if retailers could have above-average sales in the first quarter, Simon replied, “They could and should.”
“If people still don’t want to get out, they may not be able to redeem their cards until the second quarter and it can happen later in the year,” said Simon. “But I think what we’re seeing in the increase in gift card shopping seems likely.”