The gift card you sell in December is a January customer you haven't met yet

2026-10-05

Most gift cards sold this Christmas will be spent in January, by someone who never chose your brand themselves. That visit behaves unlike almost any other, and the decisions that shape it get made around now.

• Ecommerce
• CX
• Gift Cards
• Retail

Gift cards rarely make the agenda of an ecommerce trading meeting. They live in the finance ledger as a liability, in the customer service queue as balance queries, and on a product page somebody built years ago that nobody has opened since. With Q4 plans being signed off around now, that's worth questioning.

A card bought in December is mostly spent in January, by someone who didn't choose your brand themselves. They arrive with money that isn't quite theirs, no particular product in mind and, very often, a sale running on the homepage. What they buy, how much they add from their own pocket and whether they ever come back are all shaped by choices the retailer makes before the card is even sold.

The behaviour behind those choices is well documented. Some of the evidence is old, some of it comes from people selling gift card programmes, and one strand of it argues against the usual industry enthusiasm. I'll go through all of it.

Why gift money gets spent differently

Richard Thaler's idea of mental accounting explains how people divide up their money into labelled jars and then spend each portion according to the rules that apply to it, even though one pound is just one pound; a retailer's gift card is probably the clearest example of this. The money is linked to a particular shop, it came as a present, and the person in possession of it handles it in the way expected.

Helion and Gilovich, in the Journal of Behavioral Decision Making in 2014, tested this three ways. In hypothetical choices, people preferred to put the gift card towards the indulgent item and cash towards the practical one. In a lab store, participants who were paid partly in gift card spent a larger share on hedonic goods. In transaction data from a campus bookstore, gift card purchases leaned towards hedonic items more than credit card purchases did. Their phrase for it is green-lighting: the card gives permission to buy the thing you'd otherwise talk yourself out of.

Reinholtz, Bartels and Parker, in the Journal of Consumer Research in 2015, added a second effect. A card for a specific retailer creates a spending goal tied to that retailer, and people tend to use it on the products most representative of the shop. The card nudges the recipient towards what the brand is known for.

The two papers are over ten years old and therefore it would be unreasonable to base an argument on them without verification. The more up-to-date evidence that I have come across supports the general trend. Kadiyala, Özer and Şimşek, in their article in Manufacturing & Service Operations Management in 2024, carried out a study with a large US department store that sent out email promotions for gift cards to its online customers. Those who received the offer made more purchases, shifted towards more specialised categories and higher-end brands, and spent more each time they returned to redeem the card. The email itself had a positive effect on spending, even among people who never accepted the promotion. There is, however, one point to note: in this case the gift cards were obtained by making purchases, which is not the same as someone buying a card for a friend. The mechanism is similar, although I would not go so far as to say that it is identical.

The UK figure most people quote comes from the Gift Card & Voucher Association. In its 2024 State of the Nation research, 61% of shoppers said they had spent more than the value of the card when using it. It's a survey answer, and people are poor reporters of their own spending, so I read it as a direction rather than a measurement.

The redemption visit is a trading decision

Put the two effects together and you get a customer who arrives in January primed to treat themselves and inclined to buy whatever your brand is best known for. That is close to the ideal profile for full-price new season stock. It also tends to arrive in the week when the deepest sale of the year is on the homepage.

What will happen next will depend on where the redemption journey takes them. In the case where the balance email, the account page and the homepage all lead to the sale, the card will be used to buy discounted items. Although the permission to indulge remains, it will be applied to stock that has already given up its margin and the amount of the top-up above face value will decrease since all the prices are lower. When new season items are displayed first, the same customer spends the card on products that have full margin, and it is more likely that the gap between the card value and the basket value will have to be filled from their own pocket.

The majority of platforms are already capable of carrying out this procedure. Someone has to determine that a gift card holder should be regarded as a different type of customer from a regular shopper and then direct them accordingly by providing a landing page designed for redemption, sending a balance reminder that highlights new arrivals, and including a checkout process which clearly displays the remaining balance, thus turning a leftover amount of £7.40 into a motive for adding more items. The commercial effects are evident in three areas: the gross margin per redeemed card, the full-price sell-through on the first new season, and the average order value for redemption orders.

Denominations quietly set the basket

The amounts printed on the card end up doing more than they appear. A pre-set amount of £25, £50 and £100 fixes the giver's choice, and the amount they select then serves as a benchmark for the recipient. Since the card sets a target amount for spending in your shop, a balance that is only a little short of the usual price of an item tends to result in a top-up. In the case of a balance that is just enough to buy a complete item with some change left over, the recipient has to make a second, smaller decision regarding the remainder, and it is with these small remainders that breakage occurs.

The only figures I can find on top-up behaviour come from vendors. Blackhawk Network's US research published early in 2026 reported that nearly 60% of shoppers would spend beyond the card's value, with an average top-up of $73. It's a US survey from a company that sells gift card programmes, so I treat it as an indication at best. The practical version doesn't need the number anyway. Lay your denominations next to the price points of your best-selling full-price lines and look at where the gaps fall. A £50 card against a hero range priced between £58 and £65 invites a top-up. The same card against a range clustered around £45 leaves a £5 remainder that may never be spent.

Expiry, breakage and what finance actually sees

UK law sets no minimum validity period for gift cards. A retailer can set its own expiry as long as it's clear at the point of sale, though an unreasonably short or hidden expiry can be challenged as an unfair term under the Consumer Rights Act 2015. When the House of Lords debated the issue in January 2020, the government said it strongly encouraged at least two years and had no plans to legislate. That answer is now more than six years old, and I haven't found anything since that changes it.

Short expiry raises breakage, and breakage is real income. Under IFRS 15, paragraphs B44 to B47, a retailer that expects some cards never to be redeemed recognises that expected breakage as revenue in proportion to the pattern of redemptions, rather than in one lump when the cards expire. Where breakage can't be estimated reliably, it waits until redemption becomes remote. Either way the income is genuine, it is usually modest, and its cost never appears next to it on the same report.

In most cases, the reason for the breakage is that the person who was supposed to receive the gift card didn't turn up. According to GCVA research, this is significant: 63% of the people who had received a gift card the previous year said that it had introduced them to a new brand, and 22% said they then became regular customers. Once again, these are self-reported figures with the same warning as earlier, but the trend is difficult to overlook. The value of a visit by someone who wasn't reached by your marketing is usually greater than the amount of money that would have remained unspent. The same research showed that 99% of consumers typically redeem their gift cards within a year, which means that the breakage avoided by the short expiry period was never going to be substantial.

Where the evidence cuts against the enthusiasm

Gift cards aren't automatically incremental. A 2017 study in the Journal of Retailing and Consumer Services surveyed people redeeming gift cards at a US casual dining chain and asked how the card had changed what they did. Many would have spent the money there anyway. When the authors modelled cards sold through third parties at discounts of up to 15%, revenue rose in every scenario, profit came out much lower than expected, and in the worst case it turned negative. It's a restaurant and the study is nine years old, but the logic transfers to retail without much effort: a discounted card bought by an existing customer is a discount on a sale you'd have made at full price.

There's a quieter problem too. Most of the attractive numbers in this area come from surveys by organisations that benefit from gift card growth, and the strongest independent field study is about promotional cards. That doesn't make the mechanism wrong. It does mean the most convincing way to make the case internally is to measure your own redemption orders against your own baseline, rather than quoting somebody else's average.

What this changes for Q4 planning

The card itself is a small line in the peak plan. The January customer it creates is a bigger one. Before the first card of the season is sold, I'd want three decisions made by someone who owns online trading: where a redeeming customer lands, how the denominations sit against full-price price points, and how long the card lasts. Each of them moves margin, full-price sell-through or retention by more than the face value of the card suggests.

None of these is a technology project. They are trading decisions that happen to sit in places trading teams don't usually look, which is exactly why they tend to be left on last year's settings.