There is probably no retail innovation that seems so widely bemoaned and yet which has such a huge future as gift cards. The people who buy them seem to accept they are the “no-imagination gift,” the people who receive them don’t seem to get that excited about them either (about one in five are never redeemed), and retailers seem to view them like a walk in baseball — you don’t get the chance to show your stuff. Yet technological advances mean consumers can now buy and send gift cards from almost anywhere, whether it’s via a smart phone or from a website (even a Facebook page) and then deliver it in an e-mail or as a piece of code over Twitter. The physical cards can be customized, loaded with photos, programmed to make music and even scented to give them a “scratch-and-sniff” capability. 

There seems to be no holding gift cards back. And retailers seem to be realizing this. In her blog on the Retail Industry on About.com Guide, Barbara Farfan tells of a recent experience that illustrates the rise of gift cards:

When my niece had to work on Thanksgiving this year, I decided to send her a gift card that she could redeem for a nice dinner to make up for the family eat-a-thon she was missing.  The restaurant that I found on the internet was a single location, not a big national chain.  They did offer gift certificates, but not e-gift certificates.  So I called the restaurant, talked to the manager, and told him that I specifically wanted an e-gift certificate sent to my niece via e-mail.

The easy answer would have been, “Sorry, we don’t do that.”  But this restaurant manager seemed keenly aware that he is competing with every multi-unit national restaurant chain with big technology budgets, and if he didn’t fulfill my request, he knew I would be taking my dining dollars to one of them. With little hesitation he offered to scan one of his regular certificates and send it to my niece via e-mail within the hour.  He got the business, she got the meal, and I got off the hook after procrastinating about the whole thing until Thanksgiving Eve.

As Barbara says, the gift card got her “off the hook.” To be sure, gift cards are not without their benefits for a merchant — customers don’t haggle over the cost, they bring new customers into the store, they allow data mining, they act like an interest-free loan until the recipient buys something and then there is always the chance they will never be redeemed at all. In the next few months, INSTORE will be taking a look at some of the innovations in gift cards. If there were any trends or revelations you picked up about their use during the 2010 holiday season, please let us know.