There may be more spending on gift cards this holiday season, which could help spur sales next year, said Bill Simon, former President and CEO of Walmart SA, to CNBC Thursday.
Payment service Blackhawk Network discovered in a survey that customers expected to spend, on average, around $ 313 on gift cards around the holidays. That represents a 19% increase on the 2019 average. In addition, 52% of survey respondents said they were likely to buy more gift cards in 2020 than before .
In an interview with “Closing Bell,” Simon said that the increased consumption of gift cards could have a negative impact on first-time retailers, who are already embracing the riots that caused the whole disease. -dissolved coronavirus.
“Gift cards are earned … because you don’t recognize the sale when the buyer buys the card. You recognize the sale when it is exchanged,” he said. “So, as you try to measure a holiday sale, you get this burden on the balance that it’s not a sale, even if the sale was made.”
However, the impact of gift card purchases could be much more favorable as we look ahead to next year, explained Simon, who was president and CEO of Walmart US from 2010 to 2014.
One reason is when recipients are going to buy, they tend to spend more than the face value of the gift card. “It’s about 20% to 30% more than the gift card you see, overall,” he said.
The second reason is that there can be around “a 3% to 5% break, meaning cards won’t be deducted,” according to Simon. “Eventually it will be a real disaster for the retailers, but that will also take time to cycle through. “
There could be volatility as retailers begin to see the benefit of buying a holiday gift card next year, Simon said, reflecting the uncertainty surrounding Covid-19. But asked if sellers would see stronger than normal sales in the first quarter, Simon replied “they could and should. “
“If people are still willing to find out, they may not repurchase their cards until the second quarter, and it may drop in during the year,” said Simon. ‘Thinking from what we’re seeing in an increase in gift card purchases, that seems. “