This Season, Retailers Play Up the 'Gift' in Gift Card

(By Julia Ewan -- The Washington Post)
By Ylan Q. Mui
Washington Post Staff Writer
Thursday, December 21, 2006

The gift card made its mark as the all-purpose present -- functional but not that much fun. Until now.

This holiday season, retailers are rolling out gift cards that can light up like video games, laugh like Tickle Me Elmo, play music like MP3 players and double as DVDs.

And did we mention the one with two holes that works as a finger puppet?

The innovations are an attempt to address the love-hate relationship many shoppers have with gift cards. They are one of the most popular holiday purchases, according to the National Retail Federation, with more than two-thirds of consumers expected to buy at least one this year.

The hate part? They're impersonal. A piece of plastic with a magnetic strip and a note telling the recipient exactly how much you spent doesn't carry much emotional value. "It was kind of the lazy person's way to gift," said Robert Skiba, general manager of Comdata Stored Value Solutions, a gift card provider in Brentwood, Tenn.

So retailers have gotten creative.

Circuit City has one card that looks traditional -- but drop it into your computer's disc-drive tray and it works as a DVD. It includes a snowball-fight video game in which your character gives up and makes snow angels when it loses, as well as an offer for 50 free downloads from eMusic, holiday screensavers, wallpaper and printable gift labels.

Best Buy sells a SpongeBob SquarePants DVD gift card with games such as "Creature from the Krusty Krab," printable coloring sheets and a "Jellyfish Jam" music video. For the more practical customer, there is a sturdy card with a sharply ridged edge that can also be used as an ice scraper: "A dual-action gift!" the packaging reads.

Target has been one of the most creative retailers when it comes to gift cards. It has one inspired by Nintendo's new video gaming system, Wii, that glows with blue light at the touch of a button. Another Target card is scented and features its trademark dog wearing a wreath. There's a card with a close-up of the furry red Sesame Street character Elmo, who giggles with the press of a button.

The company also sells an MP3-player gift card, available only in the amount of $50. It's shaped like an Altoids container with pull-out ear buds and a USB connector, and can hold up to 15 songs. The player isn't as intuitive to use as an iPod, but it might impress the tweeners (and maybe a few grown-ups) on your list.

Stores aren't charging extra for these fancy gift cards. Skiba said retailers are willing to absorb the higher costs because of the anticipated future payoff: Shoppers tend to spend more than the cards' value when they are redeemed. For example, Target found that customers spend an average of $43 when they shop with gift cards -- $27 on the card and $16 from their own pockets.

"Retailers have been using these gift cards as a way to attract people to come back into their store," said David Herskovits, partner in the consumer business practice at consulting firm Deloitte and Touche USA. "That's a very smart use from the retailer's perspective."

Retailers are already plotting their designs for next year -- watch out for scratch-and-win gift cards and even more multimedia features.

Skiba said the message of the hyped-up gift card is: "You thought about it. You looked at it. You cared." But he notes that gift card sales represent just 5 percent of the expected $457.4 billion in total retail sales this holiday season.

"You're delusional if you think this is going to replace a Christmas present under the tree," he said.

Staff writer Rob Pegoraro contributed to this report.

© 2006 The Washington Post Company