Gift cards a popular holiday option amid pandemic, supply-chain concerns

Fat Plant Farm in Regina gave its gift cards a Christmas makeover this year. Usually a plain card in solid black with the plant store’s name on them, they’ve been spruced up this season with a graphic of a classic winter scene: evergreen trees and a rolling snowbank against a pretty green background.

“We preordered specific holiday gift cards because last December we did see a huge increase in people purchasing gift cards from us,” store owner Kait Waugh said. “So we wanted to capitalize on that this year.”

In 2020, customers bought 79 physical gift cards and 37 e-gift cards – a substantial increase over 2019, when Ms. Waugh activated 38 physical cards. She plans to promote them on social media this month and is hoping for another boost in purchases this year.

Gift cards became a pandemic holiday staple last year as lockdowns across the country curtailed in-store shopping and global supply-chain issues made physical gifts hard to come by.

Marty Weintraub, national retail lead at Deloitte Canada, said the pandemic may have accelerated a broader trend in gift-giving toward more widespread use of gift cards. Though admittedly “not as good as a gift under the tree,” they’re easy to come by, ensure the recipient gets what they want, and are a win-win for consumers and retailers alike, he said.

Despite their reputation as the saviour of the lazy gifter, they’re also particularly well-liked by millennials: 75 per cent would prefer to receive a gift card than a physical present, according to payments processor Blackhawk Network.

Further, buying gift cards might be a good way for consumers to stick to their budget. Mr. Weintraub said Deloitte has found gift cards tend to be purchased more by those who describe themselves as feeling financially worse off, which he speculated may help them keep on track during the often-expensive holiday season.

Retailers have recognized that consumers’ interest in gift cards is rising. Among payments processor Square Canada’s customer base, the share of merchants selling physical or digital gift cards ahead of the holidays grew 21 per cent in 2021 between Oct. 1 and Nov. 30, compared with the same time last year.

“Consumers have always loved gift cards, but this holiday season is shaping up to be an even bigger year for them,” said Allister Barretto, product marketing manager at Square Canada.

The pandemic hit the supply chain hard, with global manufacturers and distributors facing labour and raw-material shortages, higher costs and COVID-19 outbreaks – all while consumer demand experienced a sustained surge, resulting in backorders and delays on everything from apparel to appliances.

“With inventory tied up, Canadian consumers are more likely to turn to gift cards to secure presents under the tree, [and] many retailers are preparing for increased gift-card popularity,” Mr. Barretto said.

Jeff Long, vice-president of sales and marketing at Long & McQuade, said supply-chain challenges have likely had some effect on gift-card sales, though the musical-instruments retailer hasn’t struggled as much this year to bring product to the store floor. Nonetheless, the company was on track for another above-average year in gift-card sales. From the beginning of October to late November, 2020, Long & McQuade recorded a “fairly substantial” 25 per cent increase in gift-card sales over the same time period in 2019, plus more in December. It has experienced roughly the same sales volume this year as in 2020, Mr. Long said.

Ikea Canada is also seeing holiday gift-card sales that exceeded previous years, spokesperson Lisa Huie said in an e-mail. The furniture giant, which in October said it expects supply-chain disruptions into 2022, has heavily promoted its gift card on its website.

How much Canadians actually plan to spend on gift cards this holiday season remains to be seen. Blackhawk Network estimated Canadians would spend roughly 37 per cent of their holiday budget on gift cards in 2021. The Retail Council of Canada, meanwhile, expects gift-card spending to drop slightly – to 16 per cent of consumers’ overall holiday budget, from 21 per cent last year. Michelle Wasylyshen, national spokesperson for the council, said in an e-mail that the predicted decrease was likely owing to shoppers returning to stores in person.

But Mr. Weintraub at Deloitte suggests the convenience means reopened malls won’t kill the gift card’s rise. “At the end of the day, it’s the easy way out,” he said. “I don’t think that’s going to go away.”