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The Gift-Card Economy

Shoppers put $90 billion on gift cards last year. A few entrepreneurs saw an opportunity.

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This story appears in the November 2009 issue of Entrepreneur. Subscribe »

As the holiday shopping season kicks off--and merchants brace for another lean year--a small group of online entrepreneurs is setting up shop around one of retail's only bright spots: The gift card.

Yes, the gift that says "I put almost no effort into this" has morphed into a $90 billion industry, according to the TowerGroup, a Massachusetts research and consulting firm. Sales of gift cards--that is, any card issued by a merchant redeemable for goods and services--jumped to $97 billion in 2007 from $57 billion in 2005. While the dollar figure dipped in 2008, First Data, a retail tracking service, found that shoppers actually bought more gift cards than the year before; they just loaded less money onto them.

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