Indecisive and time-poor Australian shoppers have bought up big on gift cards this holiday season, in what could be a welcome boost to the country’s ailing retail sector.
Antony Karp, the chief executive of major online gift card seller Prezzee, told The Age and The Sydney Morning Herald he’d witnessed a 246 per cent increase in sales for the month of December.
“It’s been phenomenal. There’s a real shift towards it this year … it’s been a quantum leap in terms of uplift,” he said.
A corresponding spike in pre-Christmas gift card purchases was also recorded at Australia’s largest shopping centre, Chadstone, with sales up over 20 per cent according to centre manager Michael Whitehead. Similarly, gift card sales at department store Myer were also up significantly on last year.
While gift cards were once viewed as the coward’s option for Christmas presents, experts believe the movement away from traditional physical gifts has seen them surge back to relevance.
Mr Karp, a former David Jones executive, attributed the bump to Australians moving away from buying “useless presents”, referring to a recent survey which suggested $400 million was spent on unwanted gifts last Christmas.
They’ve woken up on Christmas morning, realised Aunty Agnes is coming over and they haven’t got her a gift.Prezzee chief executive Antony Karp
“The great thing about gift cards is that the recipient is going to be able to buy something they actually want,” he said.
Prezzee also recorded a 300 per cent rise in purchases on Christmas Day itself, suggesting an increase in the number of time-poor consumers could also be contributing to the growing popularity of gift cards.
“They’ve woken up on Christmas morning, realised Aunty Agnes is coming over and they haven’t got her a gift or the online delivery didn’t arrive in time,” he said. “It’s those people who were caught short.”
But beyond being a good choice for picky shoppers, gift cards are also a boon for retailers, with any unredeemed value on gift cards flowing straight through to their bottom lines after a certain period of time, under an accounting convention known as “breakage”.
Electronics retailer JB Hi-Fi, a perennially popular choice for gift cards, recognised $253.3 million in current and non-current deferred revenue in its 2019 annual report, much of which relates to unredeemed gift cards.
Similarly, Wesfarmers, which owns Officeworks and Bunnings, reported $83 million of deferred gift card revenue for 2019. At Australia’s biggest department stores, such as David Jones and Big W, it’s understood around 10 to 20 per cent of sales occur through gift cards.
Recent changes to consumer law have moderated some of the breakage rates for retailers, with gift cards now required to have a minimum three-year expiry period.
But Gary Mortimer, a retail expert and associate professor at the Queensland University of Technology, noted retailers can also benefit even when customers remember to spend their gift cards.
“If you’ve got a $30 gift card, you buy a $25 item and $5 remains, they’re not going to give you change and most people won’t go back to redeem that final $5,” he said.
“So the company just keeps that money.”
A survey by comparison website Finder in 2018 estimated a total of $148 million per year is wasted by Australians on unredeemed or partially redeemed gift cards, or around 6 per cent of the $2.5 billion we’re estimated to spend on the sector each year.
And as shopkeepers face weak spending conditions and GFC-like consumer confidence, many would be crossing their fingers that these particular Christmas gifts remain forgotten.
Source: Thanks smh.com