Gift cards may provide after-Christmas boost

Gift cards have become very important to retailers business. Card sales are a key way for stores to drive traffic in the first quarter, a typically slow time of the year, and consumers typically spend more than the card's value. But the recession has been difficult for the gift card business for three reasons

• Reduced consumer spending has extended to cards
• Frugal shoppers are buying discounted gifts so they can stretch their budgets
• Card recipients will likely focus on deeply discounted items when they redeem them

To add to retailers problems, more shoppers are giving cash this season, because they couldn't get to the stores or they also want to be even more practical. It's estimated that about 75 percent of those dollars go towards paying bills or to restaurants rather than to stores.

Despite these headwinds, according to a consumer survey conducted for the National Retail Federation, gift cards still remain the most requested holiday item.

"Gift cards' popularity hasn't died, but the recession has changed the way that people give gifts," said Craig R. Johnson, president of Customer Growth Partners and Chair of Roulston Research's Consumer community.

Best Buy reported that gift card sales rose 40 percent in November, following a big drop last year as consumers cut their spending as the financial crisis escalated. Wal-Mart is extending holiday deals such as a selection of top Blu-ray movies for under $20. It's also offering a $50 gift card with an Xbox 360 purchase.