Certificates were once the mark of a harried or thoughtless giver.
By GETAHN WARD
Staff Writer - The Tennessean
Jack Lance remembers a time when giving someone a gift card instead of an actual present screamed laziness or a lack of effort.
Today, he says, the shifting of that mindset and the convenience of recipients being able to get whatever they want at the store have made gift cards a hot item.
Shoppers are expected to buy as much as $45 billion worth of cards this year, up 18% from last year, according to consultant Bain & Co. The cards typically come with $25 or more in purchasing power attached for use at department stores, bookshops, restaurants and other retail outlets.
That's good news for transaction processors such as Valutec Card Solutions of Franklin, a company Lance founded five years ago. [Valutec] markets gift card programs to merchants and helps the stores track use, earning a processing fee whenever shoppers use the cards.
''There was a mentality if someone gave you a gift certificate, you almost took it as meaning that they didn't really think much about choosing a gift for you,'' said Lance, Valutec's president. ''That mindset has totally shifted.''
For retailers and other businesses, the gift cards and related prepaid card products — such as promotional, loyalty or reward cards — have become a way to attract and retain customers.
''The retailers realize gift cards are a great way to get existing customers to use a product more often and introduce new customers to that brand or store,'' said Chris Moloney, the director of market development and strategy with Maritz Loyalty Marketing of St. Louis.
Bread & Co., for instance, hands out $5 promotional cards at events for people to use toward purchases at its area restaurants. It also sells meal plan cards to patrons at a discount. But as with some other gift cards, patrons face a $1.50 monthly fee if the card isn't used for a year.
Paper to plastic
Gift cards are replacing paper gift certificates. For businesses such as Bread & Co., they provide a more organized and efficient system of tracking use, said its President John Clay III. Paper certificates are more susceptible to copying fraud and harder to track.
The cards also are getting fancier.
Spokesman Mike Brewer expects more merchants to adopt brighter colors and vary card designs in the coming year. Retailer Target offers 15 to 20 designs that it rotates with the seasons, he said.
''They have a card … that doubles as a Christmas tree ornament,'' Brewer said. ''They're becoming novelty items and collectors' items.''
While [certain stored value suppliers target] larger merchants, Valutec focuses on small to midsize merchants. It expects to end 2003 with 5,000 companies on its system — more than twice as many as a year ago. Clients range from restaurants such as Bread & Co. to day spas and hair salons such as Carol G's Hair & Color Salon in Williamson County.
Other companies recently launching gift cards include Firestone Tire & Service Centers, the 1,600-location chain whose cards can be used for tires or car repairs.
While appealing to retailers from a sales perspective, the cards also create other issues. This week, retailer Wal-Mart for instance blamed its expectations that this month's sales will be at the lower end of its forecast in part on consumers buying more gift cards. Such purchases aren't counted as revenue until cards are redeemed, Wal-Mart said.
''Until the cards actually are redeemed, it doesn't show up as hard merchandise,'' said Brewer, the spokesman with Comdata. ''They're selling more cards at the same time. It's an interesting paradox.''
Read the fine print
Consumer advocates advise shoppers also to watch out for expiration dates and fees many merchants charge for not using the cards. Many merchants set a two-year expiration date on the cards and begin to charge a monthly maintenance fee until the card's balance runs out, said Vaden Landers, CEO of ProfitPoint, a Nashville company started last month to target smaller merchants.
''About 15% of the value of the cards are generally never redeemed,'' he added. ''That's money in the bank — an interest-free loan for the retailer.''
Clay of Bread & Co. said most of his cards are redeemed before fees are necessary.
He advises gift givers to keep a copy of the receipt from when the card was purchased so it can be replaced if it's ever lost. Consumers, meanwhile, can prevent any fees by simply tracking how much money they have on gift cards and using them promptly.
''Don't put them in the sock drawer; you're losing value if you do that,'' said Moloney of Maritz Loyalty Marketing. ''If the card's been given to you as a present from a friend or family member, they've already paid for it. You might as well get the full value of the card.''
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