Are retailers maximizing gift card sales?

Discussion
Nov 16, 2015

The holiday’s most requested gift — gift cards — continues to be promoted by retailers, but not too loudly. Becoming more acceptable as gifts every year, easier to use and safer, they continue to increase in popularity.

According to the NRF’s "Consumer Holiday Spending Survey," 58.8 percent of consumers celebrating the holidays indicated they would like to receive gift cards, marking the ninth straight year gift cards topped the list of most requested items.

Gift cards are becoming safer because of card security protections. According to Bankrate.com’s survey of 60 widely used gift cards, half offered the ability to add a security code, which helps protect the balance on a lost or stolen card. That was up from 35 percent in 2014. Seventy-two percent had some form of loss and theft protection, up from 68 percent.

Bankrate.com also found that just 13 percent of cards had any kind of purchase fee, down from 17 percent last year; and only eight percent had any kind of expiration.

Gift cards

Source: Retail Gift Card Association

Online options are making gift cards easier to use. A survey of more than 1,000 consumers by the Retail Gift Card Association (RGCA) found a third were "very comfortable" using e-gift cards, and only 29 percent have never used one. Further, less than half (46 percent) of consumers insist on using physical cards with the other 54 percent open to using mobile wallets, a 27 percent increase from last holiday season.

Also, 71 percent indicated it was important that the recipient can use the card either online or in person, a convenience that supports retail omnichannel efforts.

The number one reason shoppers like to give or receive gift cards is that they safely allow the end users to purchase what they want while also offering convenience to the gift giver, according to RGCA.

Other findings from the RGCA survey:

  • Most shoppers still prefer to give physical gift cards;
  • Seventy-three percent planned to give at least one gift card this holiday season, a slight increase from last season;
  • Seventy-three percent of shoppers who purchase gift cards also do some shopping for themselves, a 12 percent increase from last year. Of this group nearly three quarters will spend more than $20 in addition to the gift card.

 

Should gift cards be called out more in retailers’ holiday campaigns? What are some ways to make gift card purchase and redemption easier for consumers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think most gift-givers look at gift cards like a pointsettia — a fallback gift. It’s nice enough but in the end it kind of says, "I took two minutes to buy this while waiting to checkout at Kroger, hope you like it.""
"The e-gift card is even worse as it suggests the giver couldn’t even be bothered to wait in line at Kroger! That being said, I think a major barrier to purchase is being solved with improved security."
"Gift cards are still considered by many to be the "last resort" gift. There are exceptions like online music gift cards which appeals to the teenagers. For many retaiers, it is about moving products off the shelves, selling gift cards is really a secondary sale."

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8 Comments on "Are retailers maximizing gift card sales?"


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Bob Phibbs
Guest
6 years 6 months ago

I think most gift-givers look at gift cards like a pointsettia — a fallback gift. It’s nice enough but in the end it kind of says, “I took two minutes to buy this while waiting to checkout at Kroger, hope you like it.”

The other problem with gift cards is many times they are not refundable like a pair of shoes would be.

Frank Riso
Guest
6 years 6 months ago

Gift cards appear to have two great features that help the retailer. The first is that they extends the holidays into January. People using gift cards spend up to and many times over the amount on the gift card. Secondly, but sadly, many gift cards go unused because they are lost or forgotten by the consumer. That is also in a way good for the retailer’s profit.

A retailer may want to treat gift card holders much like an airline treats its frequent flyers and give them their own checkout line or other perks so that they feel it is not only a gift but gives them a “special shopper” feel.

Ralph Jacobson
Guest
6 years 6 months ago

Surveys have shown that gift cards are very much still in demand for that quick gift need and so many other gift-giving situations. Retailers should have ad “footers” suggesting gift cards as much as they have the same placements for their social channel presences.

Redemption of these gift cards continues to improve via newer security measures and other consumer-focused services. Collaborative gift card programs via frequent shopper/loyalty programs also helps drive redemption.

Gordon Arnold
Guest
6 years 6 months ago
The single largest reason for the technical abandonment of non inventory sales by store front-line management is because it is non inventory sales. Experienced long-lived store managers are intrenched in their belief in high margin, fast-turn sales. Looking at an investment of time for training and prospecting from a depleted staff for the purpose of posturing for future sales is not acceptable from their private perspective. A survey of store employees that are properly equipped and knowledgeable in the sale of financial service items such as company charge cards, extended warranty and/or support agreements and, of course, gift cards, will find scant if any at all membership. What we can extrapolate from these findings is further proof that the company must own and maintain the understanding that everyone is a customer. This includes any and all employees for more than what is viewed as the normal customer transaction. As retail pulls further away from sales and marketing as a primary means to attract and educate the consumer we leave it to them to find their… Read more »
Kelly Tackett
Guest
6 years 6 months ago

With certain exceptions (namely teens who ask specifically for giftcards), I agree with Bob Phibbs. The e-gift card is even worse as it suggests the giver couldn’t even be bothered to wait in line at Kroger!

That being said, I think a major barrier to purchase is being solved with improved security.

Martin Mehalchin
Guest
Martin Mehalchin
6 years 6 months ago
Gift cards are often seen as merely time-shifting when a sale is made, but this is a limited view of the role gift cards can play for a merchant; they should be seen as opportunities to generate incremental revenue and customers. Almost 2/3 of gift cards are redeemed in transactions for more than the gift card balance (this is known as “lift”). When you buy a friend a $50 gift card, he may go spend $75 at the merchant, driving $25 in sales beyond the value of the initial gift. Fairly often, the gift card recipient is actually a new or infrequent customer to the merchant, which also makes gift cards a useful customer acquisition tool, particularly if the merchants provides a great experience or enrolls the customer in a loyalty program. The shift to mobile wallets may help make gift cards even more valuable to both merchants and customers alike. For the customer, gone are the days when gift cards pile up in a drawer, only to be forgotten when rushing out the door… Read more »
Kenneth Leung
Guest
6 years 6 months ago

Gift cards are still considered by many to be the “last resort” gift. There are exceptions like online music gift cards which appeals to the teenagers. For many retaiers, it is about moving products off the shelves, selling gift cards is really a secondary (I can’t figure it out therefore I am going the card route) sale. I think gift cards push is better for online shoppers who are doing a lot of gift shopping and shipping (people know when they are getting a gift from Amazon with a digitally signed card) anyway… Also for college students without a big mailbox, gift cards are lot easier to deal with on the receiving end.

Dan Frechtling
Guest
6 years 6 months ago

Retailers first need to get more shoppers to buy gift cards. Gift-card-with-purchase works because promotions prompt unplanned visits and purchases. Free or discounted gift cards make great gifts or get the original purchasers to return to the store after the holidays.

Gift cards also make a great last minute shopping option. Cards are instant and avoid shipping delays. They avoid the embarrassment of leaving someone off your gift list.

Second, retailers need to get more shoppers to use cards. They can remind users of unused balances with promotions to capture incremental purchases. This is another benefit of digital and mobile forms. They should never, ever change a dormancy or inactivity fee (fortunately, few do)

Breakage is bad. Retailers can’t view unredeemed gift cards as a “win.” It’s empty margin that depresses future sales. If you’ve ever lost or not used a gift card (which happens to 1/3 of the time), you’re less likely to give one next time.

wpDiscuz
Braintrust
"I think most gift-givers look at gift cards like a pointsettia — a fallback gift. It’s nice enough but in the end it kind of says, "I took two minutes to buy this while waiting to checkout at Kroger, hope you like it.""
"The e-gift card is even worse as it suggests the giver couldn’t even be bothered to wait in line at Kroger! That being said, I think a major barrier to purchase is being solved with improved security."
"Gift cards are still considered by many to be the "last resort" gift. There are exceptions like online music gift cards which appeals to the teenagers. For many retaiers, it is about moving products off the shelves, selling gift cards is really a secondary sale."

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