I just finally got around to reading the new Kiplinger magazine and I found an interesting article that looks at the economics of gift giving. The basic premise of the article is that consumers waste billions of dollars each year on gifts that people aren’t interested in. The data was pulled together by Joel Waldfogel, an economics professor at the University of Pennsylvania.
He said that in the U.S. we waste about $13 Billion over the holidays by purchasing gifts that aren’t valued by the recipients at the same level as what the giver spent. He explains, “When I buy for myself, I spend $100 only if I see something that’s worth at least $100 to me. But if I buy gifts for other people, how do I know what they would have spent for them?”
He continues, “…surveys that I’ve conducted over the years show that recipients value gifts at about 20% less than what was spent. That’s about $13 Billion a year wasted.”
So what is the solution?
According to Waldfogel, the answer is to give gift cards instead of guessing at what someone might want. While this might make good economic sense, some people find gift cards to be a little impersonal and would rather take the “risk” of getting the wrong gift for the chance of getting the perfect gift.
And even with the argument for using gift cards, you could argue that giving a Visa gift card that can be used anywhere would be better than buying a gift card from a particular store. And if you wanted you possibly top that argument by just giving cash. Or what if, at Christmas time everyone just does a mass money transfer from and to each other’s bank accounts – I mean it doesn’t get any easier than that – right?
If you can’t tell, I am being a bit facetious, I hope it never comes to that! I do gift gift cards as gifts from time to time and appreciate having them as an option. But, as a giver, I love the thrill of trying to pick out the perfect gift, and while the process might not always be as efficient as giving gift cards, I don’t think it will ever go out of style.
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I know that I prefer to GET them.
My mother: Don’t you think Ron would like this sweater?
My wife: No, he hates that color. How ’bout a gift card instead?
My mother: Really? I think he will like it despite the color.
My wife: Let’s just get him a gift card so he can choose the color himself.
My mother: Nah, I’m buying this one…
@ron
that is pretty funny – at least you can take it back – right?
You asked “Do you think everyone should only give gift cards because it makes better economic sense?”
IMHO the answer would be no because when giving sometimes is is still the thought that counts. I would say this is especially true of those you are closest too.
For others you may be more distanced from…gift cards would be ok
Gift cards are great. I always do a holiday sort of secret santa with family and my mom just tells me what I want, I tell her what gift card I want, and it’s done and simple. Works great, I like receiving them.
The problem with gift cards is that you are locked into a particular store, unless you go the visa route and then I’ve always found that I never have enough for something I want from there so end up adding my own money as well. Well played retailers. There is no replacement in my mind for a thoughtful gift given from someone you love. I also take a lot of pleasure in finding that gift for them, I think of it as an act of love.
I think gift cards need to be tailored to the receiver’s interest. We give a Bass Pro gift card to my fisherman bro-in-law,,it never disappoints. Give me a Barnes & Noble gift card and I’m in hog heaven. Know what the person likes.
I personally am giving gift cards to my grandchildren, 8 of them, along with a small gift. Ages 6 to 12 I really do not know what to buy them and this way they can go get what they want.
My wife’s family thinks it’s incredibly boring to give gift cards or cash. One year I just asked for cash to go towards a new set of golf clubs. Even though they disliked the idea, they bought a bunch of random items and strategically hid dollar bills in them. It was a win-win situation. They had the ultimate enjoyment in watching me search and search and search, and I got exactly what I wanted.
“Do you think everyone should only give gift cards because it makes better economic sense?”
Some people are easy to buy for–for every one else, there’s gift cards!
As Paul @ Fiscal Geek points out, gift cards lock you into a particular store, and I’d add that we probably tend to buy gift cards for others to the stores we like to shop in. That may not work for the recipient.
Apart from that however, I think they work in most instances. We have a lot of teenagers and young adults in our extended families, and buying gifts, however thoughtful from our own perspectives, may not be terribly appreciated. Cash, on the other hand, is kind of cold–like a gift without thought. In those situations, gift cards make great sense.
In an article titled Fed Targets Gift-Card Fees dated 11/17/2009 and posted in The Wall Street Journal it was reported that Americans spent $88.4 billion on gift cards in 2008, but left $6.4 billion unused, according to TowerGroup, a consulting firm. That was less than in 2007, when $97 billion in gift cards were purchased and $8 billion was left unused.
I am not a big fan of gift cards, especially those which are from a specific store. I like giving them to teens, but not to adults.
Who could enjoy spending time looking for gifts on pre-selected days of every year… every birthday… every step up in someones life… I mean, doesn’t life have enough activity as it is?
If I want to give a gift to someone (and I don’t mind spending), it should be because *I* really want to give someone a gift… on my schedule, when I think it’s right. To be pressured by society every turn to buy a damn gift is out of control.
If you think you’re taking the high road on this one, good for you. I find the whole thing trite and a product of excellent marketing year after year.
The more people you know, the more weddings… birthdays… graduations… give me a break. It’s just another way to make ya feel like a jerk if you’re not “in” to the gift giving thing.
Get real. If ya gotta do it… 9 times out of 10 I’d prefer a gift card to select precisely what I need. Not someones inane perception of what I want or need. They don’t live with me and my mind every day, and therefore are gonna miss the mark unless they *truly* want to give me something and it’s on their schedule rather than Hallmark’s.
One commenter mentioned that cash is pretty thoughtless. I know quite a few cash-poor teenagers that would beg to differ and would like nothing more than cash. Like any other gift, it just depends on the recipient. But if you have to chose between cash and a gift card to give someone, unless you know the gift card you are giving them is to a place they LOVE TO SHOP AT, you are just giving them cash with many strings.
Personally, I would love cash much more than a gift card, and make a point to purchase something with that cash for myself, and remember who it is from.
The one exception is if a gift card happened to be for somewhere I frequent, like Peet’s coffee. But then again, that would require someone to actually know me and think about what they are getting me, just like a real gift.