Oct 16, 2007

Consumers Use Gift Cards to Avoid Commoditized Retailing

Without a "must-have" item or stellar shopping experience, consumers wait for a price deal. And desperate stores are resorting to earlier and earlier holiday start dates to make up for what is essentially an industry wide outbreak of so-so brands and ho-hum services.

"We have to recognize that part of the sluggishness of the consumers isn't just the economy. The industry isn't doing enough to get the consumer excited," said Marshal Cohen, chief industry expert at the Port Washington, N.Y.-based NPD Group Inc. in a Chicago Tribune article.

Perhaps most telling is the rising popularity of gift cards, easy presents for those who can't figure out what to buy or don't want to navigate commoditized retail environments. The Tribune article goes on to report that gift cards for the first time ranked as the most sought-after gift, with 54 percent of shoppers putting it on their wish list. Once considered an impersonal present, gift cards have risen in status, and their ascent means more consumers are spending little time in stores, or no time at all, if they buy gift cards online.

The implication for branded product manufacturers is encouraging. It's only a matter of time - and likely soon - that dominant retailers will be forced to abandon a long era of commoditizing sourcing and pricing decisions and return to their roots as merchants. Retailers looking to be pre-emptive and stake out new in-market differentiation with consumers will soon be striking deals with strong, branded product manufacturers to provide support.

We welcome the emerging opportunity, and encourage the new generation of branded product leaders to use this window as an entree to refreshed partnerships and tighter collaboration.

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