Gift cards were once dismissed as the go-to gift for laggards or the lazy. But the humble cards have become a consistent driver of holiday sales, leading the nation's retailers to sink significant resources into catchy designs, displays and marketing promotions.
"Long gone are the days of a plain white gift card with a logo on the front of it," said Tiffany Milbrandt, strategic account manager for CardSource, a gift card manufacturer and fulfillment company in Eagan.
Gift cards remain the most popular item on consumers' wish lists for the 12th straight year, according to the National Retail Federation. More than 60 percent of people say they want one — even though the cards rarely rank high on the list of things gift-givers have in mind.
Holiday shoppers are expected to pony up $30 billion this year on cards, up almost 9 percent from last year.
In surveys, shoppers say they plan to buy an average of four gift cards, worth nearly $50 each.
This year, Best Buy is promoting gift cards printed on recyclable paper. Target has revamped its entire assortment into a single display it calls a "gift card mall." Whole Foods incorporates herbs into fanciful line drawings.
Trends of the season include vibrant colors with foil inlays and glitter, Milbrandt said, as well as cards made of wood, metal or even different thicknesses. Anything to stand out from the crowd.
"Gift cards level the playing field," said Marshal Cohen, chief retail adviser with the market research firm NPD Group. "It makes the little guy as powerful and potent in making a connection with consumers as the big guys."
Competition over gift card spending is more subtle than free shipping deals and doorbuster pricing, but it still plays a key role in retailers' holiday strategy.
"Larger retailers have their own teams thinking forward to next year's branding or color trends," Milbrandt said. "Marketing agencies wrap it into their TV and print ads or store displays."
Growing numbers of independent and smaller regional retailers come to CardSource for help with design and other services.
"They're thinking ahead and including it in their marketing budgets," she said. "It's no longer a panic two days before Black Friday to get some made up."
Another upside for retailers is that they don't come with processing fees, as credit cards do.
And because an estimated 2 to 4 percent of the cards never get used, retailers recoup about $3.5 billion in unused balances each year, according to the International Card Manufacturers Association.
Cutting down on fraud
But with their rise in popularity, gift cards also have become the most common way for scam artists to demand pay, according to an October report from the Federal Trade Commission.
Consumers lost $53 million between January and September this year, up from $40 million in all of 2017. That amounted to a median loss of $500 per incident.
Target, Best Buy and Walmart are among the retailers that have beefed up staff training and adjusted gift card programs to cut down on fraud.
Changes include lowering the purchase amount on store-branded cards, limiting how much can be loaded onto a card and not allowing customers to redeem a store-branded gift card to purchase another card.
"We want to strike a balance between being able to serve the guests who want to buy the gift card and being able to stop the fraudsters who are trying to do bad things with the gift cards," said Target's Jenna Reck.
In time for the winter holidays, Target overhauled its gift card displays at about 1,200 stores nationwide. Rather than a series of mini-displays and kiosks scattered throughout the store, the Minneapolis-based retail chain designed a central location at the front of its large-format stores.
The wall, which in larger stores spans 16 feet of retail space, holds more than 200 choices of third-party gift cards, including iTunes, Starbucks, Delta, Buffalo Wild Wings and Uber.
Target's internal creative team creates new designs every year for its own cards, spokesman Lee Henderson said. Past iterations have included cards that light up or move.
New this year, and only in Minnesota, are themed cards that include such images as Paul Bunyan and Babe the Blue Ox and cards in the shape of the state Minnesota.
Target sees gift cards as a way to promote exclusive brands, such as Cat & Jack children's clothing and the home decor brand Hearth & Hand with Magnolia. This year, with competition for toy sales at a fevered pitch, it also secured licenses to brand Target gift cards with images from such popular brands as Lego, Barbie, Hot Wheels and LOL Surprise.
Gift cards are an inexpensive strategy that helps businesses of all types keep their brand top of mind, retail experts say.
Physical cards serve as in-wallet advertising, and help retailers improve relationships with customers and strengthen brand loyalty.
They also get customers into stores, where six in 10 end up spending more than the gift card was worth.
"They can get consumers in for the first time who have never experienced your store before," Cohen said. "So it's important for retailers to put their best foot forward so they can get repeat business rather than a one-off."
It took Best Buy Co. Inc. six years to research and develop a more earth-friendly paper gift card to replace the traditional plastic designs.
The Richfield-based retailer began offering the new recyclable holiday-themed cards on Nov. 15, which use water-soluble glue and ink. The cards are printed on recyclable paper that has been certified by the Forest Stewardship Council as having been harvested from responsibly managed forests.
Best Buy figures that the shift to paper will divert 18 tons of plastic from the landfills, or the weight of about nine cars.
The move is what younger and environmentally conscious consumers have been asking for. But it also comes with a nice business upside, according to a Best Buy company blog: "The new cards are now cheaper to make than plastic."
While the digital cards still make up just 10 percent of the market, the future lies in making gift cards more personalized and integrating them with social media.
But no one expects the traditional cards to go away anytime soon.
"It's all about the convenience factor," Milbrandt said. "It's an easy gift"