For several years, holiday gift cards have been hot sellers at department stores, bookstores and big box retailers. Now, they're coming to fast-food restaurant counters, supermarket checkout lines and even online all to encourage year-round sales.
Next month, Baja Fresh customers will see a display of green, red, orange and yellow gift cards next to the register, while Panda Express customers can grab one with their takeout.
"If you are seeing them in the store, every time you come in and are thinking of a gift, there is more of a connection to our brand," said Suzanne Finne, a brand manager at Thousand Oaks-based Baja Fresh, a subsidiary of Wendy's International Inc.
This holiday season, consumers are expected to spend $248 on gift cards, compared with $223 in 2004 and $183 in 2003, according to Stored Value Systems Inc., a subsidiary of Brentwood, Tenn.-based Comdata Corp.
"People are pressed for time, and it is the one gift you know that people can use well," said Richard Giss, a partner at Deloitte & Touche LLP. "It may not be as personal as buying a specific article of clothing, but frankly, people recognize that they make as many mistakes as hits with that."
Despite all the growth, there are legal and accounting complications not the least of which is the liability of unused cards. That's been a hassle for companies that have liabilities on their records that go back years.
Some companies prefer gift card expiration dates. But many states, including California, prohibit such a practice. Deborah Thoren-Peden, an expert in gift card law with Pillsbury Winthrop Shaw Pittman LLP, said retailers with stores in several states run into problems if they set an expiration date that's not legal somewhere else.
"Some companies have no service fees and never expire under any circumstance. Obviously, those are going to have less issues," Thoren-Peden said.
Legal and accounting issues have led to the growth of third-party gift card service providers, which can help companies keep track of the latest rules. These third parties handle gift card processing and sift through information on gift card purchases.
Rosemead-based Panda Restaurant Group Inc., for example, brought on Stored Value Systems, and its minority partner Gift Card Solutions, to provide gift card services at its 750 eateries. Its gift card program allows patrons to buy cards between $10 and $100.
Businesses also are starting to sell their own cards in other stores, such as supermarkets. For example, gift cards have become hot items at Pleasanton-based Safeway Inc. stores so much so that Baja Fresh has been working to get in. "You have another outlet for your card, and then you have millions of people every week walking by your brand," Finne said.
The cash card-like use of gift cards is especially important to places like Coffee Bean and Baja Fresh, where volume drives revenue. At Baja Fresh, most gift cards are bought in $20 increments, the usual ATM withdrawal.
Last year, Coffee Bean gift card sales during the holiday season soared 57 percent over the year before. This year, Lisa Steinkamp, director of marketing at L.A.-based International Coffee & Tea LLC, expects sales to be strong as well. "Part of it is a natural shift in the way people shop. They are becoming more and more popular," she said.
At Coffee Bean, information is collected when a card recipient registers a gift card to ensure it will be replaced if lost or stolen. That information goes to the company's distribution list used to generate electronic blasts to patrons to advertise gift cards and other offers.
And like yesterday's fashions, it's pass & #233; to come out with retreads. So companies change their gift card look each year. At Forever 21 stores, this year's cards have a red background with white reindeers, penguins or hearts in the foreground.
"Forever 21 is about being new and changing. Every year, we do something a little different," said Larry Meyer, chief financial officer of Los Angeles-based Forever 21 Inc. "It is part of our overall strategy to make it known to the customer that we do have gift cards."
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