Predictions of slower sales growth might validate concerns that consumers are reticent to spend money this holiday season

By Chicago Tribune

Gift cards have become the wild card for this holiday season.

The National Retail Federation, a retail trade group, predicts sales of gift cards will rise a sober 6 percent this holiday season, to $26.3 billion, outpacing the overall industrywide forecast of 4 percent holiday season retail growth but paling against a breathtaking 34 percent climb in card sales for the same period last year.

The forecast, based on a consumer survey, adds fuel to predictions that consumers are reticent to spend money this holiday season. It could also signal a dose of gift-card fatigue.

Sales of the decorative plastic cards rose 6.5 percent in 2005 before the big jump last year. Analysts pointed to new technology, wider distribution and savvy marketing strategies behind last year’s growth. This year, retailers are looking for new gimmicks, but the economic environment is making it more difficult.

“At some point, you just reach a ceiling,” said Phil Rist, vice president of strategy for BIGResearch, the Worthington, Ohio-based consumer intelligence firm that conducted the survey for the retail trade group.

Consumer Reports executive editor Greg Daugherty said his publication has experienced an increase in letters from readers complaining about gift cards, frequently citing hidden fees or complaining about expiration dates or lamenting what to do about a lost card.

The number of gift cards forgotten, tucked away in dresser bureaus and desk drawers, appears to be rising as well, he said.

The consumer watchdog group found in its own survey that 27 percent of gift-card recipients still have yet to spend gift cards from holiday 2006, up from 19 percent the same time last year.

“Gift cards seem to be an increasing source of aggravation among the people who write to us,” Daugherty said.

That said, gift givers find gift cards an easy and timesaving present. And, with the economic downturn taking its toll, it is a socially acceptable way to help a friend or family member pay for groceries, gas or phone service, said Mandy Putnam, vice president of TNS Retail Forward, a retail research and consulting firm.

“We see this whole shift toward more practical gift buying going on at the moment, because people are nervous about rising gas prices and the housing market weakness,” Putnam said. “It’s not as crass as handing someone a $100 bill.”