Chinese Happily Buying into Gift Cards

on May 4 2011 | in Lifestyle Trends | by | with No Comments

Landmark Mandarin Oriental, gift cards, China, hongbao

To the West, Chinese consumer patterns often seem strange. As a nation, Chinese discourage ostentatious shows of wealth and encourage thrift. But on the individual level, Chinese seem obsessed with luxury products, and, compared to the more mature luxury culture of the West, Chinese fashion preferences can be showy.

And then: enter the gift cards. Chinese spend about $153 billion on gift cards annually, compared to a British annual average of about $5 billion. And while the sheer size of China compared to Britain may seem like this statistic is comparing apples to oranges, per capita rates show the real impact of this. Based on World Bank population estimates for China and the UK (1.3 billion and 61 million, respectively), per capita annual gift card sales average out to about $118 per person in China and only $80 in the UK. Gift card sales in China make up an estimated 15 percent of revenue at shopping venues such as malls.

So what spurs the Chinese enthusiasm for gift cards? One answer may be the balance between national values of thrift and personal desire for consumer products. Chinese have a cultural tendency to save cash. Gift cards, which often have an expiration date, cannot be saved or spent as freely as cash. This concept likely makes it easier for Chinese to justify their spending.

Gift cards also play a cultural role: in China, giving money as gifts is an old tradition. Traditional cash gifts, called hongbao, are presented in decorated red envelopes, and are given for any special event: holidays, weddings, births, etc. Gift cards offer a modern alternative to this tradition.

Another, more unusual, instigator of the Chinese gift card craze is Chinese industry. Companies frequently give employees gift cards as gifts or in place of direct payments. Many suspect that this is a strategy for companies to evade taxes.

Regardless of the root, this gift card culture is a boon for retailers. Gift card sales add significant extra income for retailers immediately—and pay off long-term, too. By purchasing gift cards, consumers are automatically taking on the burden of inflation.

Will the gift card craze continue as China matures into a true consumer powerhouse? That waits to be seen. For now, however, Chinese seem happy to pay in advance for their shopping sprees—perhaps the telling first steps in the transition from a conservative culture of thrift to a nation of strong consumers.

 

 

[global times]
image credit: matt weibo

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