Consumers fell in love with electronic strip gift cards this past holiday season. Sales rose an estimated 18%, to $43.5 billion for the entire year. And gift cards are expected to gain momentum throughout 2004 and morph into stored-value cards, as consumers buy them for themselves rather than just as gifts. And that means more year-round revenue for retailers.

Retailers are making it worthwhile, offering discounts — such as a $50 card for $40 — and other incentives to prepay. Such deals pay off in the long run for the retailer because they not only create traffic but also lead to bigger tickets. Many consumers spend more than the face value of their cards.

Starbucks’s gift card already doubles as a stored-value card that can be replenished regularly, and the chain has found more and more customers coming back with cards in hand, preferring to prepay and avoid a scramble for cash for their morning lattés. Starbucks reports that 10% of all transactions involve a stored-value card.

Several convenience store chains have also found success with stored-value cards that customers can replenish on a regular basis, says Tara Weiner, national managing partner of Deloitte’s consumer business practice, which conducted a survey of 3,658 shoppers concerning their holiday shopping habits. “This holiday season, the gift-card purchasing phenomenon was a matter of choice,” she says. “But convenience was also a big factor, and it will continue to gain in importance for consumers.” One in 10 shoppers bought a prepaid gift card for his or her own use in 2003, she adds.

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