Ominous Signs for Gift Card Tuesday

We all know about Black Friday -- the day after Thanksgiving where people finally buy enough to put businesses in "the black." In recent years we have had Cyber Monday (the Monday following Thanksgiving in which people make most of their holiday online purchases) and I have been talking about Gift Card Tuesday both on the radio and online.

On the first Tuesday of February 2009, retailers will announce how much they made from gift cards sold in November of this year. Companies don't know based on the cards sold, ironically, but from the purchases that comes from the cards. Gift Card Tuesday will not be very pretty this time I am afraid.

This is due to several reasons. The first reason is obvious -- spending has reached a new low for consumers on this holiday season. People are extremely fearful about their finances and are reducing costs at every opportunity.

A second reason is closely associated with the first and that is the concern about the large number of retail businesses that are going under. There is sense that many more will go under right after Christmas and people will be stuck with cards that have little to no value. What could keep these companies in business -- an influx of new customers buying cards -- may not happen because consumers believe these business may become history. One of those interesting paradoxes of business. Because of this paradox, many more businesses may join the ranks of Circuit City (see video above) that are now out of business.

With the many other more urgent and pressing headlines, we haven't seen much about the economic impact of gift cards lately. I am sure we will in February.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Expect a New "Benchmark" Day: Gift Card Tuesday

Most people are familiar with Black Friday (the Friday after Thanksgiving when retailers finally go into the black because of the huge Christmas sales) and Cyber Monday (the Monday following Thanksgiving in which people make most of their holiday online purchases), now get ready for "Gift Card Tuesday." Tuesday was the day that I first heard reports of the impact all the gift cards sold in November was having on the economy (stores report the dollars in cards redeemed, not purchased). Those results were huge and actually turned the financial picture around for several retailers. This day was chosen by me because that is when I started to see stories on the impact; the economy watchers may connect the gift card impact to another day of the week. Regardless, this day will become huge in sizing up the economy's performance.

For decades the only measure of holiday sales that mattered was Black Friday. With the advent of the Internet we have seen the rapid rise of Cyber Monday. Gift Cards is now the new major player. Over time I believe gift cards are going to become the biggest factor, followed by Cyber Monday (with many purchases paid for with those cards) and then Black Friday. The Internet will continue to turn the economy -- and the world -- upside down.

Cyber Monday and the Continued Decline of Traditional Businesses

All the analysts are trying to size up what we are learning from the current holiday season when it comes to business. At first we were told that happy days were here again because the huge volume of sales on Black Friday (the first day most retail businesses go in the black, which is the day after Thanksgiving). Now we are told that the large volume was due to ridiculous sales that came too early (in the opinion of analysts), indicating a lack of confidence in consumers by retailers.

Regardless of what conclusions people want to come up with, this much I feel confident in saying: the traditional business is in serious trouble and days couldn't be happier for businesses on the web. According to Business Week, sales on Cyber Monday (the first Monday after Black Friday when people make purchases on the web on a large scale) grew an impressive 26% since last year, showing the continued shift from traditional stores. Why are we seeing the continued growth of online shopping?

I think it can be attributed to several reasons, including the fact that one can do it when he or she wants and people can do it largely how they want. Also, it doesn't interfere with work, which is often the case with traditional stores (many people often don't have time to go in the evenings either, the Web is far more convenient). Shopping online is becoming increasingly safer, especially physically (I haven't seen a computer mug anyone yet). Furthermore, there are no lines, which I know I despise.

However, I think the most important factor is that the brick and mortar businesses are trying the same kind of techniques they used to much less sophisticated consumers in decades past. They want us at their stores at midnight, or the sales are only for short time increments, or some other ridiculous treatment that doesn't meet the needs of the accumulators that are largely driving the economy today. In a recent interview Rupert Murdoch put it best when he said, "people want what they want when they want it." The Internet does just that. Sure there are still sales online, but they are typically measured by days, not hours. Treating consumers like animals who will jump hoops didn't work well in years past and it certainly doesn't work now. In stores, it feels as though businesses rule. On the Web, people feel like they rule. We shouldn't be surprised by the shift.