The Card That Keeps on Giving

Dan Brames
Group Executive – Retail Payments Group
Posted on October 11, 2016

Benefits of gift card programs

As we approach the holidays, it’s time to think about what else you can do with your current gift card program to boost revenue. Or, if you don’t yet offer gift cards, what’s preventing you from participating in this revenue stream?

It’s been more than 20 years since gift cards were introduced, ranging from Neiman Marcus at one end of the spectrum to Blockbuster at the other. Today, the card that keeps on giving is so ubiquitous that it’s considered to be table stakes for competing in retail. Nearly every major retailer offers a wide range of gift cards and mid- and small-sized retailers have adopted programs to keep pace.

With the holiday season rapidly approaching, now is the time to act if your store or ecommerce site has yet to offer gift cards, or to refresh it, if you already have a program.

Retailers without gift card programs miss out on important benefits:

  • Gift card market – About three-quarters of consumers purchase at least one gift card during the holiday season, according to Prosper®.
  • Last-minute shoppers – The biggest gift card sales days are December 23 and 24, according to Google.
  • Drive business – Seventy-two percent of shoppers also do some shopping for themselves when they buy gift cards for others, according to cardcash.com.
  • New customers – Gift cards support new customer acquisition. Many retailers employ $5 or $10 gift cards as part of their customer acquisition programs. Retailers also reap the benefit of acquiring some new customers when recipients use their cards.
  • Increased cash flow – FIS statistics show that, on average, a one-location merchant will retain $5,000-7,000 in outstanding gift card balances a year later. That money can be used to boost cash flow for purposes such as restocking or hiring seasonal help.
  • Consumers spend more – Retailers enjoy a 20 percent lift in the ultimate ticket from a gift card purchase according to cashcard.com. Nearly three-quarters of gift card recipients will rationalize spending more than the face value of the card.

As the benefits of gift cards have expanded, obstacles associated with programs have diminished. Today’s gift card programs are easier and less expensive to implement than ever before. The three- to four-month cycle that it once took to launch a gift card program has been reduced to two to eight weeks, depending upon the retailer’s size and creative demands. Meanwhile, gift card programs don’t require a lot of dollars to create awareness among consumers, and familiarity and high demand make them easy to promote through counter displays and store signage.

Retailers can begin a program by either reaching out to one of the three major gift card companies or looking to their processors for a quick and cost-effective solution. The advantage of turning to a processor for a solution is the swiftness at which any technical problem that arises can be resolved. And it only takes one call to one provider to sound an alarm.

When inquiring about a gift card program, ask if the vendor has the connections to sell your gift cards into alternative distribution channels, such as general merchandisers and grocery stores. Retailers that once only accepted national retailer gift cards in their displays are adding local merchants’ cards to support “Go Local” campaigns. The vendor providing your gift card program should also have an eye on your future needs – for example, the ability to offer e-gift cards when the time is right.

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Dan Brames
Group Executive – Retail Payments Group

Dan brings over 20 years of financial and payments industry experience to FIS through senior marketing and management roles. Most recently, he was a management team member at Valutec which was acquired by Metavante in 2007 and FIS in 2009.