TowerGroup predicts gift card sales to rebound
TowerGroup, a Needham advisory firm focused on the financial services industry, a subsidiary of Corporate Executive Board, estimates that spending on gift cards for the 2010 holiday shopping season will increase for the first time in three years, reaching $91 billion in sales.
Aside from an improving economy, recent legislation and new federal regulations restrict expiration dates and nuisance fees for gift cards, and those changes have made consumers more willing to use gift cards, TowerGroup said. The proliferation of smartphones and social media is also projected to give gift cards a lift, the firm said.
"Breakage" is the industry term that describes the value left unused on gift cards.
TowerGroup said that it now expects that breakage will decrease by almost 50 percent, when compared to 2008, to 3.1 percent, or $2.5 billion.
In a statement, Brian Riley, senior research director of bank cards at TowerGroup, referenced the new law that imposes restrictions on retailers and other firms that sell gift cards to consumers.
"The new protections afforded to consumers under Title IV of the CARD Act have greatly increased consumers' willingness to use gift cards as a form of gift giving," said Brian Riley, senior research director, Bank Cards, at TowerGroup. "Additionally, as new technology, such as mobile and social media mediums, are used for electronic gifting, the gift card industry will position itself for long-term growth in both domestic and international markets."