Even gift cards are on sale

A gift card has typically been the one item that holiday shoppers had to buy at full price.

But after a slump in spending on the cards last year, retailers got out the red markers and started slashing.

Buy $100 in gift cards for any of eight retailers at Kroger and you pay only $90.

At CVS this week, spend $50 on iTunes gift cards and get a $10 credit to use the next time you shop there.

A few retailers, including CVS, tied promotions to gift cards last year, but this is the first season such offers have been widespread.

Restaurants from Outback to Applebee's also have gift card bonuses and discounts this year.

"It's a direct result of [retailers] listening to their customers who say, 'Hey, I really can't afford to give $50 out of my pocket this year,' " said Kathy Grannis, spokeswoman for the National Retail Federation.

Gift cards still remain the most requested holiday gift, according to the retail federation. But the industry group has projected a slight drop in gift card spending, with the average shopper spending $139.91 on gift cards instead of the $147.33 from last year.

That, coupled with the projected overall 1 percent drop in holiday spending this year, means that retailers have to work extra hard.

This is the second year L.L. Bean has offered a gift card bonus. But the clothing and outdoor gear retailer has sweetened its offer from last year. Shoppers get a $10 bonus when they spend $25 rather than the $50 required last year.

Must be bold

"Consumers are always looking at what's the differentiator," said spokeswoman Carolyn Beem. "You've got to step out there a little and do things that are a little bold."

Larger retailers that boast a variety of gift card options are negotiating deals to offer bigger discounts.

At Kroger stores through Sunday, shoppers get a $10 discount at the register when they buy $100 in gift cards from Best Buy, Applebee's, iTunes, Pottery Barn, Sears, Bass Pro Shops, Spa Finder and Bath & Body Works.

It's the first time the chain has offered the promotion, said Kroger Mid-Atlantic spokeswoman Anne Jenkins. The participating retailers fund the discount, she said.

Shoppers can repeat the deal up to five times per household, and, "we've had quite a few people max out on the reward already," Jenkins said.

Why they work

Such promotions are smart for retailers for several reasons, said Kwame Kuadey, a gift card analyst from Maryland and founder of the gift card swap site giftcardrescue .com .

"Last year, there was a lot of media coverage about companies going bankrupt and gift cards becoming worthless," he said. "Gift cards took a hit last year as a result of that, and I think that retailers are trying to get consumers to warm up to gift cards again."

Selling a "bonus" gift card helps drive repeat business after the holiday, Kuadey said. "... And people who use gift cards spend more than the value of the gift card."

Builds good will

There's no doubt the promotions build good will with customers. Henry Brathwaite, spokesman for Goodberry's Frozen Custard, said the chain has let customers pay $10 for $12 worth of credit since 1988. Before the proliferation of plastic gift cards, customers bought booklets with $12 in "custard currency."

"People looked forward to it every year," he said.

This spring, the company sold $50 gift cards for $25.

"We offered it for about four days and we sold hundreds of them," Brathwaite said. "The response surprised even us."

Such deals may be what it takes to get shoppers to spend.

Ann Ledford, an accounting consultant from Raleigh, considers herself a bargain shopper. She sees these gift card deals as a good way to stretch her holiday budget.

"Your money just goes further and you can cover more people," she said.