Holiday season gift card spending expected to top $27.5 billion

A recent National Retail Federation study indicates that 56% of consumers will purchase and give away gift cards this holiday season – the second most commonly purchased item.

According to a recent study by the National Retail Federation in concert with Prosper Insights, clothing and accessories are the only category to rate higher than gift cards. About 61% of shoppers will purchase apparel and accessory gifts this holiday season.

“With more promotions to come, shoppers will have ample opportunities this holiday season to seek out the perfect presents — either for themselves or for others,” said Prosper Principal Analyst Pam Goodfellow. “The popularity of gift cards makes them an easy choice, but many consumers will still search online and in store, browse ad circulars and even login to Facebook to find inspiration for unique and memorable gifts for their loved ones.”

Goodfellow said shoppers are planning to purchase an average of three gift cards with an approximate value of $46 per card. Gift card expenditures are expected to rise 5.76% from last year. Gift cards purchases increased consistently from 2009 through 2014, where sales topped out at $31.7 billion. Last year gift card sales dropped 17.9% to $26 billion, the lowest level since 2010.

The NRF survey found 35% of gift card buyers will choose restaurant cards, followed by 33% of buyers who favor department store cards. The cash cards from Visa/American Express/Mastercard are the third most commonly purchased (22%) while one in five gift card purchases will be for a coffee shop. About 17% of gift card shoppers will purchase cards that offer some form of entertainment — Fandango, iTunes or a recreation venue.

Sentiment around receiving gift cards does not match the buyer sentiment, according to a recent survey by Bankrate.com. This survey found more than half of consumers plan to give at least one or two gift cards as holiday presents this year. But just 27% of consumers say they would prefer to receive a gift card over an actual gift during the holidays.

Younger millennials ages 18-25 were the age group most likely to favor gift cards (34%), but they also were the group most likely to prefer a tangible gift (57%).

Ben Jackson, an analyst with Mercator Advisory Group, said perhaps that’s because the younger generation “doesn’t trust Grandma or Aunt Millie to chose a gift they would like.” He said “perhaps people are more sure of their ability to buy, than they are of their friends’ and family’s ability to shop for them.”

By comparison, consumers between ages 62 and 70 were the least likely to say they want an actual gift (44%), and nearly half of them plan to give gift cards this holiday. Still, no age group favors gift cards as their go-to present. Just 11% of adults suggest most or all of their presents will be in the form of store-branded or general-purpose cards.

Critics of gift cards said they have gotten cards for retailers they don’t normally shop, and in some cases with higher-end retailer the card is often not enough for them to purchase something they want without having to also spend some of their own money.