At the Top of Most Wish Lists
Atlanta, GA September 29, 2015 ─ Gift cards and similar “currency” are the favorite gift on the holiday wish list of most people, according to the National Retail Federation and our prior surveys. And the wealthiest 10% of U.S. households indicate they will spend $24 billion on such gifts.
This estimate is based on the 27th survey of the original and only continuing series of tracking studies of the mood and spending plans of the affluent, as defined by net worth, conducted by the American Affluence Research Center.
Total December holiday gift card purchases by the affluent of about $5.6 billion are estimated by this survey. This will be less than a third of the total value of the cash and checks given as gifts, which is estimated to total $19.1 billion.
Average holiday gift card purchases of $470 are estimated for each of the affluent households in the survey, now titled the Millionaire Monitor, because it is representative of the 12 million U.S. households that now have a minimum $1 million net worth.
The survey indicates that retailers could capture a larger share of this market if they offered more of the “bonus rewards” that they do for merchandise purchases at other times of the year and as restaurant chains and others often do.
Most importantly, the gift cards lock in sales and revenue for the retailer without having to worry about some of the competitive challenges that gift shoppers often pursue. And the retailer has the opportunity to benefit from breakage, i.e. cards that are not fully redeemed or used.
With retailers fighting show rooming and online only retailers, consumers wanting the convenience of online shopping, and shoppers looking for discounts and deals, the environment is perfect for retailers to benefit by applying to December holiday gift cards a promotional concept that many are already doing at other times of the year.
Macy’s Money and similar “bonus rewards” from Kohl’s, Saks, and others usually take the form of gift cards that provide “store currency” that equals 20% or more of what the consumer spends on merchandise during certain promotions.
In the new Millionaire Monitor survey, about a third of the affluent said they would spend more in total for holiday gift cards if they were offered a $10 card for themselves (a variation of the popular self-gifting) for every $50 in gift cards they purchased. In other words, someone buying $100 in gift cards for others would receive a $20 card for their own use
Over 20% said they would spend more for gift cards at the stores that offered the $10 bonus reward for themselves.
Another attractive feature for the consumer is that gift cards can be easily offered for purchase and delivery online, a welcome convenience for shoppers. Starbucks has said they sell over 2 million gift cards just on Christmas eve.
To help the retailer’s bottom line, bonus cards could be structured with restrictions e.g. must be used in January or in certain departments or for clearance merchandise only.
Brands might join with retailers to create offers (the gift cards and/or the bonus rewards) specific to the brand, thus helping the brand to capture more of the holiday gift business and subsequent sales.
It may be that retailers are hesitant about pursuing such a promotional strategy because of accounting issues, i.e. when revenues and sales are recognized and how that affects the reporting of financial performance. It seems these issues could and should be resolved given the benefits to be gained.
The 12 million households represented by the American Affluence Research Center survey account for about 40% of total consumer spending. Additional data on the mood and spending plans of the affluent for 8 major expenditures and 17 products and services is available upon request.
About Us: Established in 2001 and with an exclusive focus on the affluent market, The American Affluence Research Center has become a recognized authority and a credible source of reliable insight and marketing information about the values, lifestyles, attitudes, and purchasing behavior of America’s most affluent consumers. AARC conducts the original and only continuous tracking studies of the mood and future spending plans of the wealthiest 10% of U.S. households, based on net worth and consistent with the latest research by the Federal Reserve Board, the best source of data on the distribution of wealth in the U.S.
The new survey is based on a national sample representative of the wealthiest 10% of Americans based on net worth of $1 million or more. Net worth has been shown to be a more stable indicator of wealth than income in studies by both the Federal Reserve Board and the Internal Revenue Service.