Minnesota retailers say gift card bounty not reaching all of them equally

Margaret Bedor of Robbinsdale rarely purchased gift cards for holiday gifts in years past. The pandemic changed that.

"I bought gift cards this year partly because of COVID and partly so people won't have to return them," she said while picking up items at West End in St. Louis Park Wednesday. "I bought eight at Christo's restaurant in Minneapolis and a few more at Crystal Cafe in Crystal. It's important to me to support those businesses."

Gift card sales — the present described as a lazy afterthought by some and a versatile, safer cash substitute by others — are expected to surge this holiday season as a result of the pandemic.

Gift card sales increased by fourfold in September and October, according to InMarket, a marketing platform and app developer based in Los Angeles.

"Shoppers migrated toward the convenience and flexibility of gift cards during the pandemic," said Todd Dipaola, founder of InMarket. "Gift cards are no longer a last-minute gift. They add optionality in uncertain times."

Truth be told, many of us have spent little to no time with gift recipients since March and we may not know what they may want or need.

"There's a mystery of how we've lived over the last nine months which makes gift cards a great gift this year," said Marshal Cohen, chief industry analyst with the NPD Group.

Consumers see gift cards as a safer way to shop since they can order them online or do curbside pickup. But in an uncertain economy and nearly half of small businesses reporting they need relief funding to stay in business, many may close permanently before gift cards can be cashed in.

It's a concern some consumers are already heeding.

Edina-based Parasole Restaurant Holdings, which owns and operates concepts such as Manny's, Salut, Pittsburgh Blue and Good Earth, expects its 2020 gift card sales to be about 30% of last year.

"We're going to lose ground because historically we see gift card sales happen in our restaurants in the two weeks before Christmas when folks are partying and in a generous mood," said Kip Clayton of Parasole. "With many of our restaurants shut down, I'm not particularly bullish of coming anywhere close to 2019 sales levels."

Hell's Kitchen restaurant in downtown Minneapolis has seen sales of online merchandise up 800%, but its gift card sales remain steady compared to last year.

"People are hesitant to buy gift cards because they don't know if we will survive," said co-founder Cynthia Gerdes. "But we've already shipped 150 orders just of our sausage bread. We're here and we will survive."

Gift card sales at Patina gift shops around the Twin Cities are seeing double-digit increases this quarter over last year, in part because the retailer introduced online-use only gift cards.

Supermarkets such as Kowalski's and Lunds & Byerlys have all done well as essential businesses. Their gift card sales have shot up from 12 to 20%.

Minneapolis Craft Market, which represents more than 250 local artisans, pivoted from pop-up shops to digital gift cards sold at Mplscraftmarket.com.

"We've seen a huge increase in gift card sales since we went online," said founder and CEO Hayley Matthews-Jones. Similar to Etsy, if one of the businesses closes up shop, there are hundreds others to patronize.

It's safer to choose a gift card that can be used at a variety of different businesses, according to Matt Schulz, a credit expert at LendingTree.

A Gap gift card can also be used at Banana Republic, Old Navy and Athleta. A card from a mall can be redeemed at nearly all of its stores. Gift cards from Parasole.com can be spent at any of its five Twin Cities restaurant brands.

Gift cards can also be purchased from Visa, Mastercard, and American Express valid at any business that accepts the card, but there are fees of $3-$7 to purchase them.

Experts suggest a number of ways to shop safely for gift cards.

Be careful about buying gift cards from businesses most affected by the pandemic. Fashion stores, restaurants, gyms, spas, and travel related companies are all suffering, said Cohen.

Those who want to support local or small businesses that are struggling may still want to take a risk. Schulz from LendingTree suggests telling the recipient that you're concerned this company might close and recommend that they redeem the card sooner rather than later. "If the business is a favorite of theirs, that shouldn't be too big of an ask," he said.

Bedor of Robbinsdale said even if a small business closes and the gift card becomes worthless, she's OK with that. "I want to support them now in hopes they have a future," she said.