"Bad Sign: Shoppers use gift cards for groceries"

[dvcgirl]

If you're following retail sales numbers, the numbers for January have been the worst for that month since 1970....that's saying something. The article below comes from WalMarts results reported yesterday in which they are seeing gift cards being used for necessities instead of gifts.

Here's a blurb, entire article below.

"Here's a sign of how shaky the economy has become: Wal-Mart says its shoppers are redeeming their holiday gift cards for basic items — pasta sauce, diapers, laundry detergent — instead of iPods or DVDs.

Merchants had hoped shoppers armed with gift cards would provide a lift after a dismal holiday shopping season — partly because shoppers tend to spend even more than the value of the card. But that didn't seem to happen last month, and retailers are feeling the pain.

On Thursday, the nation's retailers turned in their worst January in almost four decades as high gas and food prices, a slumping housing market, tighter credit and a tougher job market pushed consumers to the edge."


http://www.msnbc.msn.com/id/23046118/

 

[sarahlovesmickey]

Interesting!!! thanks for sharing...

 

[bnorm27]

If you had a Wally Mart gift card and needed groceries, why would you pay cash? I don't think this is abnormal at all. Gift cards do not necessarily have to be used to buy "gifts". The "gift" is the card itself, not what will be purchased with it.

 

[dvcgirl]

If you had a Wally Mart gift card and needed groceries, why would you pay cash? I don't think this is abnormal at all. Gift cards do not necessarily have to be used to buy "gifts". The "gift" is the card itself, not what will be purchased with it.

WalMart tracks these kinds of things, and so in the past they've seen that gift cards have been used to purchase gifts for the most part, and not necessities.

WalMart is important to follow because they are the retailer of choice for lower and lower-middle income Americans. These are the folks who are going to be hit the hardest in the current economic environment. And they are also the sector who will feel the current credit crunch in day to day life. Credit will be less available to them than it has in the past. Without credit they'll be forced to cut back in their consumption. This gift card thing is just another sign that they're feeling it.

 

[LisaNJ25]

I have done that plenty of times. I have even received grocery store gc's for birthday and holiday. As a family of 6, that more exciting and helpful to me than running out and buying the newest gadget.

 

[hhartill]

I would use a gift card first, my family knows how frugal I am. I have gotten gift cards for birthdays, mother's day etc. and used them to buy gifts for Christmas! I have been doing that for as long as I can remember.

 

[bettyann29]

I am also one who has used my walmart giftcards for groceries.. Ive always done this.. I dont think its out of the ordinary at all...

 

[JoanneNC]

Sadly - things still have worse to get before they improve

 

[kfeuer]

I'm not surprised. DH and I were in Target on Wednesday having to get prescriptions filled (we've both been sick) and I can't remember the last time I've seen Target so deserted in the middle of the day. It was almost eerie.

 

[mrsmom]

My kids got give cards from walmart for Christmas and didn't want anything from there so i gave them the money and used their gift cards for my groceries.
Kim

 

[fkj2]

I am also one who has used my walmart giftcards for groceries.. Ive always done this.. I dont think its out of the ordinary at all...

I'd agree with dvcgirl on this one.

If you--and I mean "you, the American consumer" strictly in the most general sense--received a gift card to Best Buy, Penneys, etc., you'd be restricted to buying only merchandise. The intent on the part of the gifter would be that you buy something that YOU would like to receive if he/she had purchased an actual "gift" for you.

That more people are using "gift" cards to purchase groceries and day-to-day staples--instead of a personal and long-lasting item--is a telling sign for the consumer overall.

 

[KariC]

How does that account for some grocery stores, though, that use gift card programs for school fundraisers? Our school gives out giftcards (with zero balances ), that we all refill over and over to use at Krogers for groceries or gas. Parents have them, grandparents, aunts, uncles, etc.....there is no limit to the number of gift cards a school can link to. It's a great little fundraiser, and has no bearing on any families' financial need.

 

[sarahlovesmickey]

I have also used a Walmart gift card for groceries. Sure I would have loved to have spent it on other things, but groceries was what I went with.

 

[kimsuenew]

If you had a Wally Mart gift card and needed groceries, why would you pay cash? I don't think this is abnormal at all. Gift cards do not necessarily have to be used to buy "gifts". The "gift" is the card itself, not what will be purchased with it.

I agree totally.

Both my husband and I always spend gift cards we receive on neccesities.

Giftcards, (MI/FIL often give us each at least $100.00, has been $200.00 before, depending on what else they buy) on a Sams CLub/Walmart giftcard, as they know that SC is where we always get our gas, and a lot of what we buy food-wise comes from there! We also get giftcards from various other family members/friends and spend those the same way! It help us out, and pay for needed groceries and gas!

The funny thing is it never has occurred to us to buy "things" (material possessions) with these cards we just always buy the necessities!

 

[DVCLiz]

The point is not what a small number of DIS budget board posters would do. As dvcgirl said, WalMart tracks how gift cards are USUALLY spent, and if there is a major difference between this year's purchases and those in previous years, that's a significant trend.

 

[DVCLiz]

How does that account for some grocery stores, though, that use gift card programs for school fundraisers? Our school gives out giftcards (with zero balances ), that we all refill over and over to use at Krogers for groceries or gas. Parents have them, grandparents, aunts, uncles, etc.....there is no limit to the number of gift cards a school can link to. It's a great little fundraiser, and has no bearing on any families' financial need.

That's a completely different program, and it's not tied to how major retailers can track their gift card users.

I agree, it's a good fundraiser!!!

 

[dvcgirl]

I'd agree with dvcgirl on this one.

If you--and I mean "you, the American consumer" strictly in the most general sense--received a gift card to Best Buy, Penneys, etc., you'd be restricted to buying only merchandise. The intent on the part of the gifter would be that you buy something that YOU would like to receive if he/she had purchased an actual "gift" for you.

That more people are using "gift" cards to purchase groceries and day-to-day staples--instead of a personal and long-lasting item--is a telling sign for the consumer overall.

I think that the key here is the "trend" that Walmart is seeing. Clearly, this isn't something that Walmart has seen in the past (in big numbers) or they would not have reported it in their quarterly earnings report.

Again, January retails sales were the worst in since *1970*. Every investor watches Walmart very closely in this kind of economic environment because they get the shoppers who "trade down" and shop there when they normally wouldn't....to save money. And so when Walmart only sees sales increase 0.5% over last January, that's not good news.

 

[binny]

I have done that plenty of times. I have even received grocery store gc's for birthday and holiday. As a family of 6, that more exciting and helpful to me than running out and buying the newest gadget.

me too. We have a family of 5 and I ask for gift cards. I also cashed in my rewards points for Target gcs. Did I buy expensive stuff? Nope, I bought neccesities on clearance after Christmas and new Years ( their cleaning items that were winter themed etc)


Why spend my cash on it if I have other ways? I dont see that as a doom and gloom kind of thing.
I see it as smart budgeting.

 

[hhartill]

I agree, no need for doom & gloom yet, every year these places say Christmas was not as big as last year, if things keep going down how are these places still open...

January is always slow, I work in a restaurant and I keep track of my tips every day. I made more this year than last year. Maybe people are going out to eat instead of buying "stuff" at Walmart.

 

[CajunDixie]

I can see the points of both sides of this.....I know it wasn't posted as a debate but we're seeing opposing views all the same.

Several of us that do pennypinch or do reward sites have learned to take what you can get for free such as a WalMart card and use it for necessities then either save the amount of the giftcard for something else like vacation expenses or paying down debt or just plain helping out budgets. If I'm going to blow $50 I'd rather it be on something for vacation like a TS restaurant. But I'll spend my $50 WalMart card on groceries then take that $50 and stash it for something fun.

On the other hand right after Christmas I did see many people that were using their WalMart cards and pre-paid Visa cards to pay for stuff like diapers, formula, and basic groceries that looked like they really needed it. In fact the store I went to was having trouble with so many people all trying to use giftcards at the same time. Maybe it was a bit of computer/register overload. My sons used his for an IPod and it literally took like 15 minutes to get 1 of the cards to go through.......he had 3 cards! The checkout at the front of the store was the same way. The cashier commented on how many people were using their cards for basics.

If the stimulas plan makes it through it will be more telling to see where that money (not as easily trackable I know) is spent than how a card for a specific store was spent. Same for tax refunds......with the economy as it is will people spend their refunds on gas & groceries, save if for the "big depression" or blow it on luxury items. Once we see where that money goes we can start worrying.