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Surge in Holiday Gift Card Sales to Drive Retailers' Q1 2022 Results

As the fall and winter festivities draw near, the National Retail Federation (NRF) released a forecast Wednesday that holiday sales will increase 8.5 to 10.5 percent this year over 2020, reaching $843 billion to $859 billion.

NRF said it expects online and non-store sales to grow 11% to 15% to $218 billion to $226 billion.

However, unlike previous years, the U.S. retail industry is being severely impacted by supply chain delays and worker shortages this year.

As supply chain bottlenecks continue to plague retailers, three-quarters of consumers are concerned about product shortages, prompting them to start their holiday shopping earlier this year, according to a new report from Deloitte.

The Deloitte report predicts that holiday spending will increase 5% over last year to an average of $1,463 per household.

While upper-income households plan to spend an average of $2,624 per household, lower-income households are expected to spend less than last year, at $536.

According to this report, 40% of consumers still feel anxious about shopping in stores, down from 51% in 2020.

Even though shopping in stores is more comfortable, consumers expect to spend $924 online, up from $892 last year.

On top of that, and more importantly, there is a clear shift in consumer shopping behavior due to concerns about stores running low on inventory - more and more people are choosing to buy gift cards to hedge this risk, both to get a hefty shopping discount and to retain a wider selection of items.

A new survey by consumer research firm InMarket found that sales of gift cards have surged this fall and winter and will drive retailers' first quarter 2022 results higher.

The firm details the accelerating shift toward gift cards as holiday gifts amid supply chain woes, inflation and the lingering effects of the new crown epidemic.

The report found that consumers are spending on gift cards earlier than last year, with average spending up year-over-year.

The survey, which collected sales data for September and October of this year, found that Visa had the highest percentage of purchases among general business gift cards applicable to a wide range of products and services at 14.8%, with consumers spending an average of $106.87.

Second place belongs to Amazon, which accounted for 13.5% of total gift card purchases, up from 6.7% and $75.80 per person last year. MasterCard had a 1.3% share of gift card purchases, with consumers spending an average of $71.88.

In the fast-casual and casual dining sectors, Starbucks emerged as the company with the most gift card purchases by consumers. The coffee giant accounted for 11.7 percent of gift cards sold in September and October 2021. All of its fast casual competitors had less than 2.9% share.

Lowe's leads the home furnishings category with 2.4% of gift card purchases and an average spend of $77.84 per consumer.

Home Depot accounted for 1 percent of all gift card purchases and spent an average of $39.96 per consumer.

Here are additional findings from the report, including

- E-commerce gift cards accounted for 29.8% of gift card purchases, up from 19.6% in 2020.

- Comparing Week 35 to Week 41 (Aug. 30-Oct. 16), average spending per consumer increases by an average of 7.7 percent in 2021 compared to 2020 and by an average of 24.2 percent compared to 2021.

- Spending starts to rise in 2021: In Week 41 (October 10-16) InMarket measured a 22% increase in transactions per consumer in 2021 compared to the same week in 2020.

- While McDonald's (2.5%) trails Starbucks (11.7%) in terms of purchase share, McDonald's gift card buyers spend more on McDonald's gift cards than other fast food chains, averaging $34.90 per consumer.

- In electronics, Google had the highest share of total gift card purchases at 5.3 percent, with Xbox at 4.9 percent and Apple at 1.9 percent.

- In the video game wars of 2021, Xbox is gradually pulling away from PlayStation with a 4.9% and 0.3% share of gift card purchases.

"Tight supply chains and worker shortages have caused unprecedented shipping delays," said Todd Dipaola, CEO and founder of InMarket.

"As a result, Americans are beginning to adopt a 'buy the card now, shop with it later' mentality, turning to gift cards as they navigate a season filled with delays and frustration.

Retailers should prepare for the extended omnichannel holiday season and work to find ways to provide consumers with more value and choice as they look for solutions to this season's supply chain issues."

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