Vision - January/February 2008 - (Page 6) The economisT analyzing future trends] • [ by shawn g. dubravac, cfa of the 1st quarter— cresting in February or March of each year, before declining until the final months of the year when another holiday season is upon us. Thus, while gift cards are given during the 4th quarter, they typically are not redeemed until months later. of gift cards For retailers and manufacturers, this means the holiday season is slowly slipping has important ramifications into the New Year. While gift cards in and of for the consumer electronics themselves won’t supplant 4th quarter holiindustry—impacting both day sales, the use of gift cards is growing as well as the mark they leave on holiday sales. retailers and manufacturers. Gift card sales during the 2007 holiday season were expected to surpass $25 billion. CEA research forecast that 22 percent of all gifts given during the 2007 holiday season would be CE products. Gift cards sold during the holiday season, but not redeemed until 2008 could easily represent several billion dollars in CE merchandise nationally. Manufacturers hoping to keep inventory ratios low within their assorted retail he holidays are over, the deco- perennial favorite. In 2007, 34 percent of U.S. rations are coming down, and adults expected to give gift cards to CE retail- channels will need to be aware of a robust the last of the in-laws have been ers and one in two expected to give gifts cards gift card effect within diverse retail channels. Similarly, retailers need to ensure dropped off curbside to catch to mass merchants. their flight home. The kids The increasing popularity of gift cards has they have inventory on hand for the hot are ready to head back to school, outfitted important ramifications for the CE industry holiday gifts—months after the holidays head-to-toe in new clothes and armed with that impact both retailers and manufactur- are officially over. Gift cards are appealing for consumers new consumer devices—from digital media ers. As gift cards become more popular gifts players and laptops to digital cameras and during the holiday season they influence because they work ubiquitously. This feature accessories. Millions of households important supply chain dynamics. likely gives nationwide retailers with broad across the country eagerly anticipate Under generally accepted account- brand awareness an advantage over smaller watching the Super Bowl on their ing principles (GAAP), gift cards sold retailers. But retailers and manufacturers to consumers show-up as liabilities alike need to be aware of how consumers are new HDTV—signs of a successful gift to retailers until they are redeemed using gift cards. For example, most consumseason. And yet, a growing holiday by the consumer. By examining these ers say they spend more than the gift card trend is just now getting underway. unclaimed liabilities over time, one amount. This suggests retailers have the The holidays are always imporShawn G. DuBravac can determine not only when con- opportunity of capturing additional sales tant for the consumer electronics (CE) industry. A third of annual sales come sumers are giving gift cards, but also when with the redemption of gift cards. in the 4th quarter, and a vital component they are redeeming them. This analysis sugAs the use of gift cards continues to grow, of these sales are holiday gifts. CE gifts rep- gests unused gift cards peak in the later part look for new and innovative business models resent just under 50 peraimed at influencing this cent of total 4th quarter CE Quarterly Consumer Electronics Sales lucrative market. Watch sales—one-sixth of sales for 40% for programs that help the entire year—captured in consumer’s trade gift cards 35% just a few short weeks. with each other or even 30% In 2007, three-in-four ones that allow consumers adults wanted to receive a 25% to buy “flexible” gift cards 20% to be used at the consumCE device as a gift during the 15% er’s retailer of choice. Both holidays. Among the devices manufacturers and retaildesired are a wide variety of 10% ers need to keep abreast products from televisions to 5% of innovation in this ever computers to video game 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 changing, and increasingly consoles. In recent years, the Source: U.S. Census Bureau gift card also has become a important, market. • The increasing popularity T The Gift Card Effect 6 January/February 2008 www.ce.org http://www.ce.org
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