December 28, 2012 2:35 pm

Mobile gift cards increase in popularity

Technology companies including Facebook are trying to grab a slice of the market for retail gift cards, whose popularity in the US this Christmas suggests they have shaken off the stigma of lacking a personal touch.

Facebook, Square and smaller start-ups such as Wrapp have recently launched products that aim to replace plastic gift cards for popular retailers with digital ones that can be stored, tracked and redeemed through consumers’ smartphones.

“When it’s in your mobile phone, you always carry it with you, and you don’t forget it in the drawer next to your bed,” said Hjalmar Winbladh, chief executive of Wrapp, a “social gifting” service that lets people send gift cards to their Facebook friends.

In a Christmas survey for the National Retail Federation, 81 per cent of Americans said they planned to give gift cards and 60 per cent said they wanted to receive them, higher figures than for all other types of gift.

Wrapp enables retailers to provide free $5 or $10 gift cards and its clients include the clothes stores Hennes & Mauritz and Gap, as well as the cosmetics chain Sephora.

By targeting on Facebook, retailers can limit the cards’ availability to women aged 28 to 35, for example, in order to lure the most sought after customers to their stores.

In many cases, a message about the gift is sent to people’s networks on Facebook to create more buzz for the retailer and, they hope, lead to more purchases.

Retailers introduced traditional plastic gift cards partly because they can be a means for loyal shoppers to pass on their enthusiasm for a particular brand to friends and family.

People who receive gift cards often spend more than the value of the card when they come in to the store.

Facebook launched its own gifts product in September, offering vouchers for physical gifts such as teddy bears and cupcakes, as well as digital gift cards for Starbucks.

While previous attempts to use Facebook’s social data for commerce have fizzled, the social nature of giving gifts could be a viable entrée for the company into the market for physical goods, said Denee Carrington, analyst with Forrester Research.

“We’ll see more commerce related to social, and gifting will be a huge part of that,” she said.

Total gift card sales in November and December are forecast by Mercator, a research group, to rise to $43bn from $41bn a year ago, but the majority will still be plastic rather than digital.

The most popular retail gift cards are Walmart, Target, Amazon, Home Depot, Lowe’s, Costco, eBay and JC Penney, according to GiftCardRescue.com, a website for exchanging cards.

Retailers’ hopes for a broad surge in holiday spending have dwindled since the traditional shopping frenzy around Thanksgiving. ShopperTrak last week downgraded its holiday forecast for year-on-year sales growth to 2.5 per cent.

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