Sources: Macy’s, Best Buy
Does Macy’s or Best Buy have a better approach to gift cards?
By all indications, gift cards are a booming business. The National Retail Federation’s (NRF) 2021 holiday survey found 56 percent of respondents wanting a gift card as a present, up from 54 percent in 2020 and the most requested holiday gift for the fifteenth straight year.
In 2020, NRF found gift givers planning to purchase between three and four gift cards, with overall gift card spend expected to reach $27.5 billion, or about 3.5 percent of overall holiday spending. The cards also support non-holiday occasions. Blackhawk Network found that they have been more popular as birthday presents.
At Macy’s, the only gift cards available are those linked back to purchases at the retailer. Best Buy, in contrast, offers not only its own gift cards but those for Macy’s, Amazon.com and more than 150 other retailers, restaurants and entertainment businesses.
Macy’s is not alone in its approach. Other department stores and retailers, including Gap, T.J. Maxx and Williams-Sonoma sell only their own gift cards.
Best Buy promotes a wide range of cards near cash registers in stores in addition to offering an extensive selection online. Options include gaming cards (Xbox, Roblox, Nintendo), travel cards (Delta Air Lines, Hotels.com, Uber), movie/music cards (Netflix, Spotify, AMC) as well as more than 60 restaurants and retailers, including a potential competitor in Amazon.
Big box chains, grocers, drug stores and c-stores are best known for selling a wide variety of gift cards.
Both Target and Walmart offer a wide range of third-party cards but have a limited selection of retailer cards for competitive reasons, refraining from selling cards from Amazon or Macy’s. Walmart doesn’t sell cards from Home Depot and Lowe’s, but Target does. In softlines, both sell Nordstrom gift cards, but Walmart also offers Gap, Saks, Foot Locker and DSW.
Costco only offers four retail gift cards beyond its own: Build-A-Bear, Fanatics, Instacart and Jiffy Lube.
Most grocers sell gift cards from Target and Amazon, despite being food competitors. In 2018, H-E-B decided to pull Amazon from its gift card mix. The Texas grocer said at the time, “H-E-B does not merchandise the Amazon gift card due to limited space in a competitive gift card set where we are offering more local gifting options per customer requests.”
- Earlier Start to Holiday Shopping Season Embraced by Consumers – National Retail Federation
- NRF says 2020 holiday sales grew 8.3 percent despite pandemic – National Retail Federation
- Do retailers need to jump on the e-gift card bandwagon? – RetailWire
- Consumers Plan to Spend More and Gift More This Holiday Season According to Blackhawk Network 2021 Holiday Forecast – Blackhawk Network
- Best Buy Gift Cards – Best Buy
- Target Gift Cards – Target
- Walmart Gift Cards – Walmart
- Costco Gift Cards – Costco
- Amazon Gift Cards Participating Retail Store – Amazon.com
- Kroger Gift Cards – Kroger
- H-E-B No Longer Sells Amazon Gift Cards – Facebook
Discussion Questions
DISCUSSION QUESTIONS: Would you encourage retailers to sell only their own gift cards, offer a curated mix or sell as many gift cards as possible? What’s your view on selling gift cards from a direct or peripheral competitor?
Poll
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Meaghan Brophy
Senior Retail Writer
Nikki Baird
VP of Strategy, Aptos
Offering gift cards like what Blackhawk offers is more akin to renting out floor space and taking a cut than it is anything to do with gifting, competitive or otherwise. I don’t really see Best Buy as a destination for gift card shopping, even as I have gone to Target or my local grocery store to pick up a restaurant or a Playstation gift card as a last minute gift. For Best Buy in particular, it’s almost an impulse purchase kind of buy.
And it ignores the rise of digital gifting. I feel like all of those displays of gift cards are more anachronism than trend. While it’s always nice to have something physical, especially for kids, the reality is it’s far easier to buy a gift card online and print it out than it is to go anywhere to physically get one. I think those gift card towers are going to go the way of the change machines and carpet cleaner rentals – still there, but dusty and mostly forgotten, making just enough money that it’s not worth getting rid of them.
The more, the merrier! Since retailers get a fee for every gift card they sell, why wouldn’t they take advantage of the moment where they’ve captured the customer’s attention?
I would encourage retailers to sell a wide range of gift cards. Gift cards aren’t usually a trial moment for a new brand, they’re typically a gift for someone who’s already loyal to that brand. So offering a competitor’s card shouldn’t threaten your brand in the gift card space. The way the whole retail industry is going, competitors will need to embrace each other’s presence everywhere because all the world is a one-stop shop now with omnichannel capabilities. Brands fearing competition by being next to each other is an outdated perspective for a retailer to have.
Selling gift cards is a big money maker for retailers. Aside from the fact that the bearer usually spends more than the face value of the card, many shoppers require more than one trip to the store to spend it.
I’m with Macy’s: Sell only your own gift cards and keep that business. Why would a retailer knowingly send a customer to a competitor’s store to purchase something they could likely get from you?
If there is a direct correlation to the brand (e.g. gaming cards at Best Buy) it is smart to offer options like that to the consumer. We did a study on gift cards this year and while the segment is growing, there is a disconnect between retailers preferring legacy physical cards and consumers who want the ability to add gift cards to their digital wallets. The space is ripe for disruption – and just adding more and more cards from disparate retailers isn’t going to win in the end.
I’ve participated in many a debate about this in my merchandising years. Customers clearly like the ability to buy gift cards from a number of retailers, restaurants and entertainment providers in one stop. At the same time, it somehow feels like not a great plan to send revenue to your competition, while they’re in your store. I remember a debate when my employer stopped selling the Amazon Kindle because of competitive issues. It seemed inconsistent that we still had Amazon gift cards at the check lanes. My recommendation is to offer a curated selection of gift cards that leave out direct competitors. In my experience, I think a bit of curating would also make these presentations easier for the customer to shop.
For Macy’s, selling gift cards that drive shoppers to competitors makes little sense. Though selling gift cards for restaurants and non-competing chains is somewhat more logical. Best Buy and specialty retailers have fewer direct competitors so the range of gift cards they can sell is much wider.
It depends on the store’s target audience and what the customer demand is. Retailers looking to be a one-stop shop can achieve that goal better by offering a broad selection of gift cards. Shoppers can pick up a forgotten birthday gift along with their normal shopping, or holiday shoppers can get most of their gifts from one store.
Gift cards take up such little floor or counter space, the cut retailers get for the sale makes it worthwhile.
For grocery and box stores, offering an array of gift cards makes sense. For Best Buy, I can see the gift cards being an add-on or impulse purchase. Like an iTunes gift card to go with new headphones or a Nintendo gift card to go with a new gaming console. However for specialty shops or higher-end stores, there’s not a real need to carry other retailers’ gift cards, let alone competitors.
Good point, Meaghan! Best Buy + iTunes makes sense. But Best Buy + Amazon? Nope.
Gift cards continue to be a hot item and it’s no surprise to see them as “most requested” yet again. The choice of which gift cards to sell — their own or a mix — is dependent upon the habits of a retailer’s shoppers and the opportunity to increase revenue.
Regardless of their decision, I would encourage retailers to make sure that they take precautions to safeguard the value in their branded gift cards from fraud. Our data showed that gift card cracking expanded in 2020 to cover nearly all holiday shopping seasons, beyond Cyber5, and we expect this trend to continue.
Gift card cracking is a variation of payment fraud attacks where cybercriminals use brute force to enumerate gift card numbers to figure out valid combinations. They then use the valuable card balances themselves for purchases or resell them on the Dark Web. Since, gift cards don’t typically have the same level of protection as credit cards, they are easier targets. Additionally, many retailers provide a separate page for gift card balance checking, a feature that is widely abused by card cracking bots. In order for retailers to really see increased business as a result of whatever gift card decision they make, putting in appropriate security is critical.
I think the two approaches represent the evolution (devolution? … I’ll not repeat here my perpetual rant against them) of cards: originally one actually shopped at a specific retailer, but if they were unable to find what they wanted, the card was given in its stead, a placeholder, if you will, for the actual gift. Now that cards have become the (actually less useful) replacement for giving a check (i.e. a showing of how little effort one has put into the effort) the Best Buy approach makes more sense: retailers should sell what people want … however much
MissMr. Manners may disapprove.Selling customers your competitors’ gift cards because you want to sell … more gift cards? How does that help the store? Do yourself a favor and go to the National Retail Association study on gift card redemptions. Any retailer after reading that study will promote THEIR CARD rather than any competitor cards. I know I would!
Why would you want to sell the gift cards of direct or retail competitor? I realize the income potential of selling gift cards, but why competitors’ cards? Offer curated or complimentary gift cards, but not competitor gift cards.