As it develops, the year-end selling period was a stronger one and a longer one for many retail channels than had been anticipated just a few days ago.
A longer one? So it seems, and upon that development hangs the reason why it was a stronger one. Let's take a closer look at what's going on for broad-line retailers and for supermarkets.
First, let's define what is generally meant by the "year-end selling period." Up to now, it was considered to be the period between the Thanksgiving and Christmas holidays. As was widely reported last week, retailers ended the Christmas week reckoning that the selling period had been something of a bust. But then, to the surprise of many observers inside and outside the industry, sales picked up thereafter. So the year ended with respectable numbers.
What happened? The season was elongated past its traditional end on Christmas Eve by a number of factors, such as markdowns, advertising campaigns and, most notably, gift certificates. Indeed, it seems as though the newfound power of gift certificates -- in the form of stored-value plastic cards -- is the chief reason many consumer dollars found their way into retailers' tills after Christmas, not before. One example: Wal-Mart Stores said in a statement last week that there was a "significant" increase in gift-card redemption in late 2004 against late 2003.
Gift certificates have long been offered by department stores, but in recent time, most retailers shifted to the stored-value plastic approach. That energized sales, apparently because consumers perceive them as being a more sophisticated and acceptable form of gift giving. Many stored-value cards can be reloaded and used repeatedly.
It seems a bit counter-intuitive, but the stored-value concept has found its way to food service. It's working, too. Some 11% of Starbucks' fiscal 2004 sales were transacted by way of stored-value cards. That awoke many other quick-serve feeders to the possibilities. Now, chains such as McDonald's, Dunkin' Donuts, Jack in the Box and Chili's are experimenting with cards in test markets, or have rolled them out. Chili's cards can be bought in Safeway stores, which brings us to supermarkets. (First this: I am indebted to a news article in USA Today for the preceding information about restaurants' card programs.)
Numerous supermarket chains now offer some sort of incentive or gift-card program. Gift cards seem poised to be the biggest winner in upcoming years. Consumers are well atuned to the idea of using stored-value cards, even at restaurants, so few will see anything strange about receiving a supermarket gift card.
Cards seem destined to thrive at supermarkets because they represent a way to give a gift that's really needed. Not only can card recipients obtain food, but they might opt to tank up the car using a supermarket gift card. Moreover, when made available on the Internet, cards present a method for consumers to transmit value across great distance at no shipping cost.
