Retail Notebook: Plastic makes perfect gift this holiday season

Retailers stocking their shelves for the holiday rush may have to wait for the merchandise to fly. This Christmas, record numbers of shoppers are choosing to wrap up gift cards instead of Game Boys.

For the first time, gift cards and certificates have trumped the sweater-and-socks gift as the No. 1 pick for holiday shoppers across America. Here in Seattle, the thin plastic cards are giving traditional sales a run for the money, and everyone from Bon-Macy's to Whole Foods is cashing in.

"It is a win-win-win situation," said Dick Outcalt of Outcalt & Johnson Retail Strategists. "It's a win for the gift giver, because it relieves the pressure, and it is a win for the recipient because they can choose what they want and when they want to buy it."

The retailers, of course, benefit from all this winning.

Outcalt said that holiday sales are expected to rise this year and that "with the economy up, with employment up, we are in for a better season."

For many Seattleites then, the question is not whether to buy, but what to buy. In increasing numbers, they are opting to give loved ones the chance to go shopping for themselves.

"I have given gift cards to my whole family," said Autumn Tooley, 28, a massage therapist who lives in Everett. "I am never good at picking out things for people, but the cards make the gift-giving process a lot easier and much less stressful."

Tooley's modesty aside, she began giving out the cards after her repeated efforts to find that special novel for her book-junkie friends failed time and time again. "If I were to pick an author they loved, chances are they would already have it. It's hard to keep up."

Gift cards are the retailers' answer to the harried consumer, who may feel overwhelmed by the onslaught of holiday advertising and goods and would rather not waste time making the wrong choice.

"There has been a shift of responsibility," said Patricia Johnson, partner to Outcalt. "Frankly, choice is the curse of the modern age. We are afflicted by it. So when we are trying to buy gifts for other people, it is tempting to make that choice theirs. It transfers that obligation."

But this trend is about a whole lot more than passing the buck.

Gift cards, which under new Washington law can never expire, are also slowly reshaping companies' earnings reports. Companies get the benefit of holding consumers' money before they've had to provide any merchandise. And, unlike gift certificates, which count as sales and therefore revenue come tax time, gift cards only show up as sales when they are redeemed.

That means holiday spending will continue beefing up the earnings reports of gift card-promoting companies such as Starbucks, Best Buy, Nordstrom and Bon-Macy's well into 2005.

And while some shoppers will use the cards to stock up on sale-priced items, retailers already have begun anticipating the change in spending patterns. As a result, the post-Christmas markdowns that have set many mouths watering since before Halloween may be drying up.

"Savvy retailers have been cleansing their inventories before Christmas, so that after the holiday, there is less residue to be marked down severely," said Johnson. "Traditional January sales during the last few years have been less dramatic because stores know that money is being carried around on these cards."

Returns, like that hideous dress that Aunt Mae handed over with a treacly smile, anticipating her clutching hug of gratitude before the gasp of dismay had risen from the entire family, will dwindle with the ascent of the gift cards. Since 22 percent of clothing sold in gift form is returned, the standard fare for post-holiday clearances is in danger. Not enough to induce the fight-or-flight syndrome from die-hard clearance table dwellers, but still significant to the strategy of shoppers and retailers alike.

Now, buyers don't even have to choose a brand. Malls from Tacoma to Everett are offering gift cards redeemable at any store within their walls. American Express has recently unveiled a gift card that can be used at any U.S. store that takes the American Express credit card.

Still, the trend toward "stored value" cards isn't likely to leave the region's stores desolate over the next two months. Retailers and analysts alike are cautiously optimistic about this year's holiday season in Seattle, though they flatly reject the idea that the $1 billion in cash dividends slated for the region's Microsoft shareholders will appear in the local retail economy. All of the shareholders who spoke to the Seattle Post-Intelligencer said they planned to reinvest their dividends in the stock market, as some economists had suggested.

The passage of a state sales tax deduction is expected to leave less than a ripple in local retail waters, according to analysts and retailers, but some say it will have a graduated effect after consumers see it in their tax returns.

Even with Internet sales edging out department stores as the preference for Seattle's holiday gift buyers, the shopping experience still makes the season for some.

At Bon-Macy's, gift cards come to only 3 percent of holiday business, according to Jack Arndt, senior vice president of marketing. Though he still expects a double- digit increase in gift cards this year, the bulk of sales are in the stores.

There is still nothing like squeezing a stack of cashmere sweaters or admiring a stack of pots casting your reflection into fun-house curves. And smaller businesses, such as Capers home decoration stores of Fremont and West Seattle, whose technology will not support a gift card system, rely on a unique product and store feel to keep customers coming.

But they do offer paper gift certificates.

"Many of our customers have been with us for 20 years, so I don't think they'll be turned off by it," said Mary Summers, a store manager for Capers, joking that, "Even in our Fremont store, which caters to a more technologically advanced crowd, hopefully they'll see the paper certificate as quaint and charming."

Gift cards as a modern method for spreading holiday cheer may not have been what St. Nick had in mind when he first began loading up his sleigh, but it's going to allow people to stuff their own stockings. It's a sure bet walnuts and oranges won't be rounding out the toe.