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Why Retailers Want You to Redeem Gift Cards

CBSNews -- Shoppers, many armed with gift cards, are flocking to stores in the days after Christmas to redeem them and return unwanted presents. There are more bargains to he had as retailers try to clear their shelves to make room for their spring lines, according to Bill Martin, founder of ShopperTrak, which tracks sales in bricks-and-mortar stores.
Shoppers, many armed with gift cards, are flocking to stores in the days after Christmas to redeem them and return unwanted presents. There are more bargains to he had as retailers try to clear their shelves to make room for their spring lines, according to Bill Martin, founder of ShopperTrak, which tracks sales in bricks-and-mortar stores.

"Today is the number 7 shopping day of  the year," he said in an interview Thursday. "It's important...They will be heavily promoting this weekend."

 Retailers are eager for shoppers to redeem their gift cards because they don't count as revenue until that occurs. Many retailers such as Wal-Mart ( WMT) and Target (TGT) were expecting a tough holiday season and early indications are that's what happened. Data from MasterCard Advisers estimates that U.S. holiday sales rose 2.3 percent this year, a growth rate that the company considers to be "decent." 

While that's better than last year's 0.7 percent gain, it lags the 3.9 percent increase forecast by the National Retail Federation. The two surveys measure sales differently and that may account for some of the discrepancy. A MasterCard spokeswoman had no comment on the NRF's numbers. MasterCard estimates total retail sales rose 3.5 percent. The NRF couldn't be reached.

"Having 6 fewer shopping days between Thanksgiving and Christmas, as well as bad weather in some parts of the country for the final two weekends clearly had an effect on sales," says Sarah Quinlan, a MasterCard, senior vice president, in a press release. "Yet holiday sales were a clear improvement over last year's weaker numbers."

Jewelry was a bright spot and was one of the few categories to post a gain over last year while apparel saw most growth, according to MasterCard. Luxury items and electronics were flat and apparel saw modest growth.  E-commerce sales posted a double-digit gain as Amazon.com (AMZN) reported what it called  its "best ever" holiday season.

IHS Global Insight economist Chris Christopher, whose calculations are identical to the NRF's, is expecting a 3.2 percent gain as retailers were forced to offer steep discounts to move merchandise. That would be the weakest growth since 2009.

"The retailers are taking a hit on per-unit margins," he said in an interview, adding that consumer prices for goods excluding food and energy have been declining for months.

Though there have been plenty of headlines about stores opening on Thanksgiving and not closing their doors in the days leading up to Christmas, most experts have said that these gimmicks don't cause shoppers to spend more than they would have otherwise.  Instead, they are pushing already-expected sales earlier.
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