Retailers try gift cards to lure shoppers

Retailers are trying a new tactic to lure you into stores for this holiday season: gift cards, or gift card promotions. Their goal: get people to spend money without offering the deep discounts offered last year.

We share MSN Money columnist Liz Pulliam Weston’s distaste for gift cards, and were particularly annoyed that our recent rebates from Verizon and Sears came in the form of Visa gift cards rather than checks we could deposit in the bank. We coped as best we could by immediately spending them on groceries.

Normally retailers expect gift cards to be used in the weeks after Christmas and Hanukkah. But this year they are hoping gift cards, or gift card promotions that offer discounts, will lure shoppers before the holidays, The Wall Street Journal reports.

Complaints about fees and expiration have already dulled the luster of gift cards, and the recession has also cut into their popularity. The National Retail Federation expects shoppers to choose discounted merchandise over gift cards this year.

"In a recession, people are looking for merchandise on sale," Ellen Davis, NRF vice president, told USA Today. "Instead of buying a $50 gift card, many will opt for a $50 sweater that's on sale for 35 bucks."

• Bing: Black Friday deals for 2009

Retailers are hoping to combat this with gift card promotions that include discounts. Target has created $25 cards that double as toys, the WSJ reports. Costco is offering cards that function like coupons. A current promotion offers $50 in Jamba Juice cards for $39.99. A Best Buy promotion offering a $50 iTunes gift card for $40 is already sold out. According to the WSJ, Neiman Marcus Group is giving free $50 cards to thousands of shoppers, and Target plans to hand out cards worth $10 to shoppers who spend at least $100 before noon on Black Friday.

The best holiday deals are unlikely to show up before Black Friday, SmartMoney reports, and the discounts probably won’t be as deep as we saw last year. Last year, retailers discounted items by as much as 80%, Marie Driscoll, a director in Standard & Poor’s equity research department, told SmartMoney. This year, most holiday sales won’t knock more than 40% to 60% off the original price, she said, and there won’t be as many deals.

Will these gift cards deals lure shoppers into the stores for early holiday shopping? We can see how they would appeal to the stores, since by giving you a gift card for making a purchase, they ensure you’ll return to spend it. But will consumers take the bait and start their holiday shopping early?

Related reading:

• Gift cards are not gifts
• Trade in those unwanted gift cards
• It’s looking like a frugal holiday