In WSU study, a gift card disconnect surfaces

As Christmas Day approaches, many shoppers having a hard time finding the perfect present for that hard-to-buy-for person almost certainly will fall back on buying a gift card as a way out of their dilemma.

Although he is far from being a Scrooge, Weber State University marketing professor E.K. Valentin nevertheless has a message about those cards.

"From a strictly economic standpoint, [they] don't make a lot of sense," he said, and the manner in which they are given matters.

Valentin bases that view in large part on the "liquidity" given up once a gift card is purchased. The buyer, and by extension the recipient, are trading cash that can be used anywhere for a more restricted gift — a card that may have to be used at a specific store with a limited selection of merchandise.

Make no mistake, gift cards' popularity remains high. The National Retail Federation projects that shoppers this year will spend more than ever on such plastic presents and that 80 percent of shoppers will purchase at least one gift card this holiday season, with spending approaching $29 billion.

"Savvy shoppers know they can purchase a much-appreciated gift card with ease either in-store, online or through their mobile devices, and give their loved ones the option to buy something they really want or need," NRF President and CEO Matthew Shay said in a statement.

But Valentin counters that if nothing but economic value mattered, cash would be the ideal gift. "Recipients could spend cash on anything they want, and givers could save hours of shopping time."

Beyond economic value, though, a lot of other factors come into play when consumers decide what gift to give, and that's where disconnects arise, Valentin said. Many of those considerations were revealed in responses to a survey Valentin conducted with fellow professor Anthony Allred of WSU's John B. Goddard School of Business and Economics. They contacted 317 people in northern Utah for their "Giving and Getting Gift Cards" research, which recently was published in the Journal of Consumer Marketing.

Valentin and Allred's work suggested that cash-like gift cards (from Visa, American Express) that can be spent on everyday items held no more charm for many of the recipients than actual cash.

"Only 21 percent of respondents preferred to receive a cash-like card rather than a department store, electronics store or restaurant card," Valentin said.

Other findings:

• 49 percent of respondents indicated they preferred to give a gift card to a nice restaurant, but only 27 percent were thrilled to receive it.

• 33 percent were thrilled to receive a department store or jewelry gift card, but only 21 percent were likely to give them.

• Gift cards from a close friend were more appreciated when they could be redeemed for something special — perhaps because the recipients felt less guilty when paying for a personal luxury with a gift card rather than cash.

With that in mind, Valentin and Allred said it is advisable for merchants to tailor messages to fit the giver's motives and relationship with the recipient. "Promoting gift cards as time savers is likely to work when givers seek gifts for casual acquaintances, but not when they must find a gift for a dear friend," Valentin said.

Valentin and Allred's data suggest that department and jewelry store gift cards were considered by those surveyed as more personal than Target or Walmart gift cards, or cash.

"They entice recipients to purchase things they normally would not buy without a gift card, such as a bottle of expensive perfume or designer accessories," Valentin said. "Giving a gift card that allows the freedom to indulge without feeling guilty may be the best gift of all for a close friend." —

Gift card projections for 2012

Shoppers who will purchase at least one: 81 percent

Total spending on gift cards: $29 billion

Amount each shopper will spend on average: $156.86

Amount spent on each card: $43.75.

Source: National Retail Federation