Dec 12, 2007 6:01 AM, By Amy Johannes
Amy.Johannes@penton.com

Spending on gift cards is expected to hit $52.2 billion by 2012, up from $40 billion this year, according to a new Packaged Facts report.

Some 67% of people are expected to buy at least one gift card by 2012 compared to an estimated 62% this year, the report, “The U.S. Market for Prepaid Cards with a Focus on Gift Cards,” found.

What’s driving the growth? Gift cards are convenient thanks to the prevalence of gift card malls, or in-store kiosks that sell dozens of cards from brand-name companies. More online retailers are also accepting the cards as payment.

“Gift cards clearly have been accepted by the mainstream for an increasing variety of events in which gifts are normally exchanged and for an increasing variety of ways to spend those gift card funds,” the report said.

Close to 35% of people who bought gift cards over the last year said they planned to spend more on them over the next 12 months, the report said. Of that group, nearly 10% said they expected to spend “significantly more.” Just 5.5% said they would spend less.

The average yearly amount spent on gift cards is projected to rise to $326, up from $288 this year, the study said. The holiday season is the most popular for gift cards.

The report defines the types of gift cards sold, the field of competitors and their distribution models.

Though, all isn’t rosy. People are still concerned about expiration dates, fees and other hidden charges, the report said. Some 27% of recipients didn’t use one or more cards over a one-year period, Consumer Reports said last month.

Calling it a glitch, the magazine launched a campaign and took out a full-page ad in the New York Times warning people about the potential of losing money on gift cards. Analysts estimate that about 10% of the value of all gift cards go unused.

While a number of regulatory issues must be solved, some retailers are moving in the right direction to win consumers over when it comes to gift cards, Packaged Facts said.

“The industry, especially the retail sector, has taken steps to remove certain fees from their cards, and with time and consumer education, any harm done to product integrity may well be rectified,” the report said.

The report is based on research, including interviews with industry participants, and research including articles appearing in financial, marketing and trade publications, government business and financial regulatory agencies’ data, company literature, independent financial reports and product advertising.

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