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3Qs: The market for gift giving

Photo by istockphoto.

Whether you celebrate Christmas, Hanukkah or Kwanzaa, gift giving is a part of most holiday traditions this time of year. Many factors go into selecting and purchasing holiday gifts. We asked Tony Gao, assistant professor of marketing in the College of Business Administration, to explain some gift-giving trends and what motivates consumers’ gift-buying behaviors. 

What consumer-behavior trends have you observed in recent years related to gift giving? 

Certain things rarely change when it comes to consumer gift giving. Two examples are the enduring tendency for people to give gifts to commemorate important holidays and occasions and the annual evolution of what constitute the hottest holiday gift items. In the meantime, a few emergent trends have been evident in recent years, including the negative impact of the recession on consumers’ holiday shopping behaviors and consumers’ increased use of gift cards in lieu of physical merchandise.

What role does marketing by the retail industry have on gift purchases or gift giving traditions in general?  

The leading reasons why consumers buy gifts include expressions of love, care, appreciation, companionship and support; as well as deep needs for commemorating important life and career milestones. Many consumer goods companies and retailers design marketing messages that speak to these very emotions and motivations. Indeed, some observers have emphasized the large role of the media and marketers in creating and perpetuating gift-shopping rituals among the consumers.

Given the current economy, have holiday gift returns and “re-gifting” increased? Have they made any noticeable impact on retail businesses?  

The sober economic conditions in recent years have not been kind to retailers, as many companies have seen consumer spending cuts, rising discounting pressure and spikes in merchandise returns all at the same time. According to a report by the National Retail Federation, as much as 10 percent of all holiday purchases in recent years have ended up in merchandise returns. While buyers’ remorse may explain why some consumers return products bought out of a shopping impulse, many merchandise returns in the holiday shopping season fall into the category of gift returns. Many consumers have also increasingly resorted to re-gifting as a way to economize during the holiday gift-giving season.

Holiday gift returns, and to some extent, re-gifting, could spell reduced revenue and worsened bottom-line for many retailers, but smart companies could use gift returns as an opportunity to build goodwill and loyalty among shoppers and non-shoppers. Indeed, generous gift-return policies, such as those introduced by Macy’s and Kohl’s in recent years, have received praise from customers and earned free positive publicity for the companies.