I was looking for some articles about the retail results from Black Friday and how things were going to be worse from here, when I realized that I don’t need a complicated chain to demonstrate that this will be a bad Christmas for retailers. There’s only one relevant data point: gift cards. CNN Money has the article (this is an old article) Fewer gift cards this holiday season:

Gift card sales will fall almost 6% this holiday season to $24.9 billion, down from $26.3 billion last year, according to the National Retail Federation’s sixth annual Gift Card Survey, conducted by BIGresearch.

Fewer shoppers plan to purchase gift cards this year - 53.5% compared with 56.6% in 2007. And if they do purchase gift cards, shoppers are going to put less cash on them, according to the survey. The average amount that shoppers plan to spend on gift cards in 2008 fell to $147.33 from $156.24 in 2007.

A newer article is here, but it cites the same survey.

This behavior obviously makes sense, with retailers like Circuit City declaring bankruptcy before the holiday shopping season. Retailers like Limited Brands (Express) are not far behind. Saks Fifth Avenue started liquidating excess inventory before the holiday shopping season. Aside from Saks, consider that retailers rely on after-Christmas sales to move inventory. If gift card sales are down, you can expect after-Christmas sales traffic to be down as well. That means that, for the most part, this holiday season is all that retailers will get. Furthermore, the traffic before Christmas should be artificially inflated because customers are buying “stuff” instead of gift cards; you can buy gift cards at the grocery store. You have to go to the store to buy “stuff”.

Retailers typically book the sales of gift cards once they are sold—as opposed to when they are redeemed, so the numbers may look similar (though I doubt that). However, excess inventory problems will be a much bigger problem this year than in years prior. Expect spectacular after-Christmas sales as a result, and give cash instead of gift cards. Seriously, in what way is cash tacky but a gift card acceptable? Note: I’m done with my Christmas shopping except a gift for my father. I didn’t buy gift cards and I’m not giving anyone cash.

Bonus

While looking for an article like the above, I found this: Target Holiday Gift Cards Are Proving Hard To Track Down. Some genius at target decided to make gift cards inconvenient and easier to accidentally throw away:

Target Corp.’s (TGT) three new “Wow” designs for its holiday gift cards - including a digital camera - may be more difficult to find than seasonal shoppers.

“Target’s gift cards sound like they have a little bit of fun to them in a year where there is little fun to be had,” said Janet Hoffman, global managing director of the retail practice at consulting firm of Accenture.

But success lies in execution, Hoffman said. “Our best performing retailers understand and anticipate what their customers’ experience will be. In this case, the experience doesn’t sound like it will live up to what customers expect.”

While most gift cards are shaped like credit cards and are swiped at the cash register for redemption, Target’s “Wow” cards have bulkier shapes and are stamped with a bar code that is scanned for redemption. Target introduced the ” Wow” line in 2004 and this year there are seven different cards, the company said.

In addition to the camera, Target has highlighted to analysts and large investors a handheld “Holiday Sweet” card that contains M&Ms and one in the shape of a small 1950’s style jukebox that plays three seasonal tunes.

Eat the candy, and throw away a $50 gift card. What a fantastic idea! I wonder how they decided against the “singing fish” gift card?