Restaurant gift card competition ramps up

With the shopping season kicking into high gear this week, restaurant chains are aggressively competing for gift card sales, offering buyer incentives and increasingly inviting guests to send gifts via mobile devices.

The National Retail Federation predicts that 81.1 percent of shoppers this year will purchase at least one retail gift card of some sort, spending an average of $156.86 – the highest amount in a decade. Total spending on gift cards will reach $28.79 billion this year.

According to an NRF survey released in October, close to 60 percent of respondents said they would like to receive gift cars this year, up from 57.7 percent last year. When asked what kind of gift card they planned to buy this year, those offered by restaurants were among the most popular: More than 33 percent of respondents said they planned to give the gift of a restaurant meal during the holidays.

Others are even more optimistic about gift card sales. In a recent report, research firm CEB TowerGroup predicts gift cards will reach $110 billion in card loads before the end of the year, an increase of 10 percent over last year. Restaurant gift cards will be particularly strong, projected to top $19 billion before the end of 2012, the report said.

Virtual gift cards on the rise

Increasingly popular this year is eGifting — giving virtual gift cards that can be sent by email and used at checkout with a mobile device.

In its recent report, CEB TowerGroup calls eGifting a “fledgling component of gifting,” saying such virtual gifts are projected to reach $3 billion in sales this year, about $1 billion lower than previously expected, as mobile payment trends have been slow to take off.

New to the eGifting game this year, however, is Orlando, Fla.-based Darden Restaurants Inc., which is offering both traditional and eGift cards across its primary brands, including Red Lobster, Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52 and The Capital Grille.

Frozen yogurt chains Red Mango and Pinkberry are both offering eGifting for the first time as well, following the launch of their mobile apps earlier this year.

“People use their phones and computers for almost everything these days, so a virtual gift card is the perfect option for gift giving,” said Dan Kim, founder and chief concept officer of Red Mango Inc.

Through Dec. 31, those who buy $25 in Red Mango gift cards receive a $5 bonus, which can also be rewarded digitally — no need to bring a plastic card to the store. Guests can simply open the gift on a mobile device at check out.

“I think you’ll see a lot more eGifting and more integration of mobile payment,” predicted Kim. “We’re really geared toward mobile becoming the primary process for gifting.” He added that one benefit of eGifting is that guests can accumulate rewards through the Dallas-based chain’s loyalty program, and those can also be shared as gifts.

With the popularity of gift cards, a growing number of websites are popping up allowing people to sell or trade cards they don’t want. Some restaurants are taking steps to discourage consumers from buying gift cards through these third-party sites.

Chipotle Mexican Grill, for example, is offering a free burrito, bowl, order of tacos or salad to those who buy $30 in gift cards before Dec. 31. The free food can be redeemed with the original receipt from the purchase, but it doesn’t count if the cards were acquired online or through a third-party site.