Oct 1, 2008 6:03 AM, PROMO P&I, By Amy Johannes

Gift card spending is expected to fall 5% to $25 billion during the holidays, the first dip in the category, a recent survey found.

According to the 2008 Holiday Gift Card Survey by Archstone Consulting, shoppers will spend less on gift cards this year in reaction to the faltering economy. Instead, they will shift spending toward other items, including groceries and gas, or small indulgences such as dining at restaurants.

The weak economy is only one factor that will contribute to the projected decline, Mike Unger, a principal at Archstone Consulting, said.

“The category itself has matured so it’s difficult to sustain that kind of growth,” Unger said. “Everyone wants to be part of the gift card game. That’s why we’ll see a dip at this point.”

The study also found that pre-paid bankcards will continue to be the most desired by recipients because of the flexibility to buy any household need, such as gas or food. Another top seller of gift cards will be restaurants and fast food establishments, Unger said.

Teenagers and post-college consumers will likely drive gift card sales this year, the report found. While the 13-to 24-year-old group has the least discretionary income, it spends more on gift cards than any other demographic, Unger said. Also, that demographic receives nearly 40% of all gift cards.

While spending may level off, the availability of gift cards won’t. More and more gift cards are for sale through outside locations, such as grocery, drug stores, banks and kiosks. In fact, the sale of gift cards outside store locations is expected to grow by 30% this year, the survey found.

“The importance of being able to buy a gift card outside of the retailer’s four walls has grown,” Unger said. “For companies that are not so brand obsessed, that’s the bandwagon to jump on.”

The survey polled 1,000 American consumers about their shopping habits.

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