Do retailers need to jump on the e-gift card bandwagon?

Sources: The Home Depot, Starbucks, Apple, Amazon, Best Buy
Jan 05, 2021

Gift cards were among the big sales successes of 2020 as they were in high demand by Gen Z consumers and Millennials. Expectations are that the conditions that led to a 19 percent year-over-year gain last year, per Blackhawk Network, will carry on in the next twelve months.

While gift cards were once considered to be impersonal or a means to a quick and easy last-minute gift, that is no longer the case. Usage, particularly in e-gift cards, is growing rapidly through the use of smartphones, digital wallets and mobile apps.

Gift card providers, including, Apple, Google and Starbucks, are leading the way on the digital front. Selling cards is a smart sales move because cardholders nearly always spend more than card face value. They also provide the added benefit of making recipient contact details known to retailers, unlike anonymous physical cards.

Here are three ways retailers can adapt and use e-gift cards to grow sales, profits and loyalty in 2021.

  1. Implement digital systems as e-gift card adoption continues to grow in popularity. Develop digital gift card capabilities across all storefronts. Make sure they are easy for customers and associates to use. Collect, interpret and leverage data to connect with customers, improve assortment and improve promotions.
  2. Stock fresh merchandise. Stock new (full price) merchandise for sale when shoppers are ready to cash in their holiday gift cards. Phase in new merchandise and promote existing inventory through the first quarter. Find a clever way to hold “treasure hunts” featuring returned items or “final few” items.
  3. Launch compelling campaigns. Engage with purchaser and recipient cohorts. Identify channel(s) and create content and actions for each step on the path to purchase, focusing on education, awareness, research and post-purchase satisfaction. Offer “Buy x get another smaller gift card” or “10% off if using a gift card.” Provide balance and reminder information to recipients to spur sales and goodwill. Look for ways to cross-market or co-promote with other nearby businesses as many cards were given to support local small and medium businesses.

The pandemic has forced all retailers to offer new online services to shoppers. E-gift cards present retailers with a highly qualified new stream of consumers and revenue. Smart retailers are taking advantage of the insights yielded by these new digital initiatives to implement new merchandising and marketing programs that drive sales and loyalty.

DISCUSSION QUESTIONS: Do you see a growing opportunity for gift cards, particularly digital versions, to boost retail performance in 2021? What can retailers do to fully leverage the opportunity upfront and following purchases made with gift cards?

Please practice The RetailWire Golden Rule when submitting your comments.
"If I buy you a gift and you like it you have no reason to go that store, but if I buy you a gift card then you have to visit the store (or the retailer’s website) to redeem it"
"Once we come out of the pandemic I feel that gift cards, although convenient, will be thought of as impersonal by many."
"As retailers increasingly leverage this revenue opportunity, it is critical that they implement advanced solutions to identify anomalous behaviors and malicious bot attacks."

Join the Discussion!

15 Comments on "Do retailers need to jump on the e-gift card bandwagon?"

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Suresh Chaganti

Gift cards are an expensive way to build sales and I don’t see any evidence using them will increase loyalty. Costco sells several $100 gift cards for 80$, which are great for customers, but it is expensive for businesses to take a 20 percent hit on margins.

Even so, they can be good for small brands to drive awareness and traffic, so they should be seen as a marketing expense and as a part of the holistic marketing budget.

Georganne Bender

Do I see a growing opportunity for gift cards in 2021? Absolutely! If I buy you a gift and you like it you have no reason to go that store, but if I buy you a gift card then you have to visit the store (or the retailer’s website) to redeem it.

Studies show that it takes multiple visits to redeem the value of the card and the majority of the cards are redeemed for more than face value. It’s a win-win and e-gift cards are a natural extension. I sent a bunch of e-gift cards this Christmas. Click. Done. Easy!

Perry Kramer

E-gift cards are a good way to continue to grow a customer base. An e-gift card has the advantage of allowing a retailer to have two consumers visit their omnichannel experience in a single event. They have the ability to capture and market to the contact and loyalty information for the purchaser and for the recipient when they shop. Additionally, the concept of offering promotions to get new customers in a store (virtual or physical), is foundational to a retailer’s growth and success. Almost any retailer would be willing to offer 10 percent or 20 percent off of a $50 purchase to get a brand new customer to shop with them. That is what e-gift cards offer. Once they are in the store/on the site it is up to the retailer to win their loyalty.

Gene Detroyer

I believe from a gift-giving POV and from a business POV gift cards make tremendous sense. A gift card rules out a potentially poor choice of present for the giver and receiver. For the retailer, they win on the breakage (in 2019, $3 billion was left on the table).

I don’t understand why retailers aren’t promoting gift cards really big time. They are likely to be the most profitable endeavor the retailer can undertake.

Brandon Rael

The great COVID-19 acceleration has fueled the need for seamless digital experiences. Gift cards may have once seemed like impersonal gifts, however they are welcome in a world where the smartphone is the start of most shopping journeys.

While physical gift cards for major retailers are offered at your local CVS, Walgreens, and supermarkets, investing in a digital-first option enables retailers to scale and extend their reach beyond the physical locations. Gift cards are an excellent way to drive engagement with both existing and new customers. Studies have shown that customers tend to buy full price items and tend to spend more than the gift cards’ value.

Bob Amster

Branded gift cards are only good for the retailer. As a consumer, I would neither purchase nor give a store gift card. I prefer to purchase a generic gift card such as an AmEx card which the consumer can spend wherever the consumer wants.

Dave Bruno

Gift cards can – for sure – be a double-edged sword, but if we think of them as a marketing opportunity versus a revenue opportunity, they suddenly become highly effective. Why? Because they convert. Plain and simple, gift cards are pretty much the highest-converting marketing tool at our disposal. They bring people to the brand, which is exactly what we want our marketing investments to do for us, right?

Ralph Jacobson

This is yet another revenue stream for retailers of any size. Capitalize upon it!

Steve Montgomery

Gift cards are a win/win/win. The giver only has to decide which retailer to buy the card from, making it a very easy purchase to execute with no worries that they picked the wrong item, color, size, etc. It’s a win for the receiver in that they get to decide what they want rather than what someone wanted to give them.

It is also a big win for the retailer. As other posts have pointed out, the card’s receiver generally spends more than the card’s value and then they also get any breakage that occurs.

David Adelman

Once we come out of the pandemic I feel that gift cards, although convenient, will be thought of as impersonal by many.

As consumers are welcomed back to safe brick-and-mortar environments, I believe personalization will be the key to maintaining a long-term relationship with your brand, which gift cards do not offer.

There is still a place for e-gift cards, but I feel there are much better ways to spend your marketing budgets as everyone must focus on sharpening their online platforms.

There will definitely be some stickiness leftover from easy repetitive buying habits during the pandemic, but thoughtfulness will take over again with customized suggestions once customers return.

Brian Cluster

Yes! Consumers have become more digitally enabled and capable this past year and many may prefer an e-gift card vs. a physical copy. By having both types, you are serving your customers and staying relevant as they have also likely already used e-gift cards from Starbucks/Apple/Amazon.

Coincidently I was on the Sephora page last night and they have built out this capability for e-gift cards with a nice feature to be able to buy now and send the email to the recipient with the gift card at a future date with a personalized message.

By offering gift cards in-store and online with both digital and physical versions, retailers can generate more interest and revenue than your basic gift card program that has been in place for years.

Kim DeCarlis
Online purchases of gift cards more than doubled in the first two quarters of 2020 versus the previous period. Driven by the pandemic, smaller and boutique retail brands are increasingly looking to online gift cards as a way to encourage shoppers to buy gifts for friends and loved ones without shopping for or sending physical items. This is potentially great for retailers and for shoppers, but it brings with it the risk of increased digital fraud. Hackers love to steal online gift cards and gift card balances because gift card security is less comprehensive than the deeper scrutiny facing credit card transactions. Gift card account owners are less likely to notice changes to their gift card balances. In addition, security measures on unactivated gift cards are not well defined. In fact, during the recent Cyber 5 period, 25% of all e-gift card requests were malicious bot attacks. This growth in attacks on e-gift cards is not surprising, given the rapid growth of online e-gift card purchases and the ease with which simple pin codes normally… Read more »
Mel Kleiman

My question is, why would retailers not jump on the gift cart wagon? Look at some of the benefits:

  1. Money in the bank without the sales of merchandise.
  2. Interest-free loan.
  3. Some cards will never be used.
  4. Bring new shoppers in to store to redeem cards.
Craig Sundstrom

Ah, a new year, so I guess it’s time for me to make my annual rant … er, statement: if you want to give someone a “gift” that requires them to do (almost) all the work — and you to do practically none — then why not just send them a check? It’s actually better, since it’s completely flexible.

But alas, until these foolish mortals listen to me, retailers will have some opportunity (for the unclever to be even less so: they don’t even need to visit the store they’re giving on behalf of!)

Harley Feldman

Retailers should get on the gift card bandwagon. Gift cards are immediate sales without having to select a product, and they typically result in a complete value or larger sale when the receiver spends the funds. The digital versions are easy to buy and send to the receiver which makes them even more convenient to buy and send. Retailers should add these e-cards to their websites to readily purchased when buyers come to the site. The buyer can be tracked from time of purchase, and the redeemer can be tracked at time of redemption. This is data reflecting two potential buyers instead of one with a direct sale.

"If I buy you a gift and you like it you have no reason to go that store, but if I buy you a gift card then you have to visit the store (or the retailer’s website) to redeem it"
"Once we come out of the pandemic I feel that gift cards, although convenient, will be thought of as impersonal by many."
"As retailers increasingly leverage this revenue opportunity, it is critical that they implement advanced solutions to identify anomalous behaviors and malicious bot attacks."

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