Soldiering Through the First Quarter Blues
It’s the day after Christmas in the States and the malls and stores are full again, this time with people returning gifts, but also people spending the gift cards they got yesterday.
Gift cards, or stored value cards, are a growing Christmas gift trend in North America. Before the holiday, the National Retail Foundation projected gift card sales would balloon to $24.81 billion in 2006, a $6 billion increase over 2005’s $18.48 billion.
Consumers like gift cards because they maximize their choices. Retailers love them because “Unused Gift Cards Give Retailers $8 Billion Boon,” to quote a recent headline from the E-Commerce Times. That is, one-third of the value on those gift cards is never redeemed and falls to the retailers' bottom line. Nice, eh?
So it’s something of a curiosity that Home Depot ran this cause-related marketing ad in a flyer that came with the local newspaper on Saturday, December 24.
Here’s the offer. Use a Home Depot gift card between now and January 28, 2007, “and we’ll donate 5% of the gift card value (up to $1 million) to help build and maintain USO centers. These centers are vital to maintaining the morale of our service men and women stationed so far from home.”
[I assume they mean that they'll donate up to a total of $1 million to USO, not that if someone had a $1 million gift card Home Depot would donate 5%.]
The USO is a private nonprofit organization that builds and operates more than 130 centers in the United States and abroad meant to build the morale of the 2.6 million men and women in the armed forces.
With only a few exceptions, cause-related marketing is a strategy meant to induce people to do something, usually buy something. But in this case, the sale is already taken place. So why is Home Depot trying to induce people to spend their card?
I honestly don’t know the answer. The story in the E-Commerce Times suggests that the gift cards represent great potential for an upsale because they feel like 'found money' to consumers. That is, if someone has a $200 card, but the item(s) they want total(s) $250, the consumer feels like they're only spending $50.
Given that first quarter sales in U.S. retail are typically the worst of the year, a cause-related marketing promotion makes a lot of sense right now.
I expect that the E-Commerce Times has Home Depot's motivations nailed. But if someone has a better answer, please share it with us all.