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Drawing a Full House

Paper or plastic? When it comes to gift certificates, most consumers prefer plastic. In fact, almost 51 percent of shoppers say they want a plastic gift card for Christmas, an increase of more than 10 percent in two years, reports the National Retail Federation.

They're so popular that 139 million people have received at least one in the past 12 months. The gift card industry is expected to grow by 10 percent in 2005, according to Laura Lambeth, a spokeswoman for payment processing company Paymentech. Research. The Tower Group estimates that gift card sales will total $90 billion by 2007, a $64 billion increase from 2003.

Mall owners are rushing to cash in. Mills Corp.'s plastic gift cards will be available online by Nov. 1 for any of its 28 malls. CBL & Associates Properties also has introduced gift cards for shopping this year at half its 65 malls. The remaining malls will accept gift cards by winter 2005.

Simon, General Growth Properties, Westfield and Rouse already have the cards. Simon says its gift card sales were running 30 percent ahead of last year through September. Customers spent $340 million on Simon gift cards in 2003.

“There could be a perception that if you don't have gift cards you're behind the times,” says Mike Nelligan, director of sales and marketing for MidAmerican Gift Certificate Company.

While plastic gift cards with a magnetic strip are still new at shopping centers, they may one day be replaced by the next generation of gift cards: Smart cards, with embedded chips that hold data on individual shoppers, are already used in Europe.

Smart cards are faster because they don't need to be processed by a larger system like magnetic cards. But most U.S. retailers don't have the technology to handle them. “I think some kind of smart card will eventually be a product introduced into the marketplace,” says Nelligan. “But we are still years away.”

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