The Evolution of Gifting and Gift Cards

Caveman at computer with Hard Rock gift card

Since the first cave man showed loyalty to his fellow hunter by sharing an antelope drumstick, man has felt the need to give gifts. From the exchange of those early humble haunches, humans have evolved gift giving into a science, resulting in the time and money saver known as online gift cards. Today, we're going to examine the history of this handy-dandy piece of plastic and the impulse that spurred its creation.

Many historians believe we owe our entire civilization to the gift-giving instinct: It's the groundwork of bartering and the basis of our modern economic system. Land passed from one generation to another was considered a gift, while the Romans and Greeks believed good luck to be a "gift" from the gods. Rulers, gods and religious leaders had long received "tributes" from their underlings, whether in thanks or fear of their domination. (Come to think of it, this tradition continues into modern times.)

Even a casual consideration of gift giving reveals this tradition is a surprisingly complex and important part of human interaction, helping to define relationships and strengthen bonds. In fact, psychologists say it's often the giver--rather than the recipient--who reaps the biggest psychological gains from a gift.

Since not everyone in modern society cares about reaping this psychological gain (studies show males in particular fit this category), cash gifts became a popular method of avoiding shopping. Merchants and restaurants, however, became concerned when they realized cash could be spent anywhere and not necessarily at their place of business, whereas a piece of paper representing a pre-established amount would bring the gift recipient back to their establishment.

And so was born the Gift Certificate (cue horn fanfare).

The first paper cash equivalents (aka "gift certificates") were created by major department stores in the 1930s. Clerks were directed to hide the gift certificates behind store counters and sell them only to select customers upon request. In the 1970s, the ever-innovative McDonald's introduced its Christmas gift certificate program. Other restaurants, merchants and malls soon followed suit.

A problem arose, however, in that the paper certificates took managerial time to issue and redeem. Tracking the sequentially numbered certificates was critical as the near-parallel invention of color copiers meant they could easily be forged and distributed.

There's some discussion as to whether Mobile Oil Company or Neiman Marcus created the first gift card. In 1995, Mobile introduced a plastic card that could be used for gas fill-ups and phone calls. Borrowing technology from prepaid phone cards, a customer's balance was stored in a database and reflected on a number in the card's magnetic strip.

A Washington Post blog gives founding credit to Neiman Marcus but said the merchant's cards didn't catch on because, "Perhaps foolishly, Neiman Marcus positioned the cards as novelty items and kept them behind the counter."

But no matter the date, the groundwork was laid and so were born the first self-tracking gift cards. (Cue bigger horn fanfare.)
 
As added advantages, the convenient, logo-emblazoned cards created brand loyalty and served as ever-present advertisements each time a consumer looked into their wallet.

Pure genius!

Later in 1995, Blockbuster Entertainment pioneered the modern form of gift cards in Ft. Lauderdale, Florida. The cards were publicly displayed and held no value until activated by store clerks upon payment, making the transactions much faster, easier and more secure.

JC Penney followed suit in 1996, but fancied things up by offering nifty designs on their cards. This started a trend of card designs as less explanatory and more elaborate.

One year later, Kmart was the first discount retailer to hop on the bandwagon, adding an extra twist through a partnership with AT&T. Customers could also use the Kmart Cash Card as a phone calling card.

Target, never one to sit out a dance for long, began selling gift cards in late 1997. By the end of the century, gift card sales reached the $19 billion mark.

Starbucks' introduction of reloadable cards in 2001 created many a latte addict and built previously unseen loyalty. Nearly one in seven transactions at the company's U.S. stores are now made with a Starbucks card.

By 2002, gift card sales grew to $37 billion and merchants soon began fighting to differentiate their products. Consumers now can choose from a wide variety of store-offered artistic designs or build their own cards using photos, company logos or custom graphics.

Other clever marketing strategies have emerged. In previous years, Best Buy offered built-in headphones and speakers. Home Depot made a card that was also a tape measure. Target trotted out toys that doubled as gift cards.

In the latest trend, once-naked cards now come in a variety of holders that are more ingenious than the gifts they can purchase. This year, consumers can buy Home Depot cards encased in miniature toolboxes, a paint bucket or the store's familiar orange-tinted apron. Bass Pro Shops even offers a tin holder that can later be used to store fishing lures.

Today, racks spouting gift cards can be found everywhere from supermarkets to convenience stores. Rectangular plastic cards are giving way to gift card codes for online purchases, while some consumers are beginning to enjoy the convenience of virtual gift cards they can download to their smart phones. According to Internet Retailer, online gift card sales alone are expected to grow at 29 percent for the next four years and a stunning 41 percent of consumers say they've used gift cards online in the last year.

Entire websites have sprung up, allowing shoppers to buy, sell and trade discount gift cards in every possible category. They can even easily check gift card balances online.

According to the National Retail Federation, gift cards have been the single-most requested item on holiday wish lists since 2007. Nearly every major retailer in the United States now offers a wide range of gift cards, fueling the explosion of once-novelty plastic into a $100 billion annual industry.

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