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by Alex Palmer | August 30, 2016
The amount of cash loaded on to retail gift cards fell 9 percent in 2015 during the same period that the Employee and Partner Incentives segment was the only one to see growth, a new study finds. 

Titled "Retail Gift Card Trends in the United States: 2015 in Review," the report, from payment research firm and consultancy Mercator Advisory Group, attributes this drop in spend on gift cards in part to a sluggish holiday season last winter.

But the report also holds positive news for the incentive market: the Employee and Partner Incentives segment saw positive growth. 

"In the employee and partner incentives space, prepaid remained easy to deliver and relatively effective, so I think the prepaid spending there continued to grow," Ben Jackson, the director of Mercator Advisory Group's Prepaid Advisory Service and author of the report, told Incentive. "It may also be that incentive program managers found they had more funds to shift to employee and partner incentives since consumers were being incented in different ways."

"Retail Gift Card Trends" tracks the amount of dollars loaded onto retailer-branded -- or "closed-loop" prepaid cards -- as well as apps and other retailer-issued access devices. It charts the average reported percentage of total loads for each retailer, both directly purchased by consumers and those provided as corporate incentives. The drop in cash loading last year represents a reversal from the year before, when Mercator reported a double-digit increase in spend. 

Jackson suggested this shift grew out of a change in focus from retailers. Instead of incentivizing consumers with gift cards and giveaways, retailers emphasized selling merchandise by offering discounts and sales.

"[W]hen trying to win customers, retailers were focused on getting people in the stores through the incentive of low prices," said Jackson. "Retailers tell me they also saw less manufactured spending. Customers will sometimes load up gift cards as a way to build point balances, particularly for gas rewards programs. But because gas prices were low, there was less of this."
 
Mercator found that virtual cards continue to take a growing share of total dollars spent on closed-loop cards, and that reloads remain consistent (at above 10 percent). The report also includes details on the distribution channels used by retailers -- finding that card malls, business-to-business, and retailers' own websites are where they are seeing some of the strongest load volumes. 

The full report can be purchased here.