Consumers Love Gift Cards. Should You?

Gift cards continue to grow in popularity, with huge potential for businesses that understand how to promote and manage strong gift card programs.

Consider the following:

  • 51% of respondents say a gift card has prompted them to visit a store more often than they would have otherwise.1
  • $23.41 is the average amount consumers spend beyond the original value of the single business gift card they receive.2
  • 80% of all consumers planned on purchasing a gift card in 2014.3 There has been a 71% growth in electronic gift card sales in the U.S. from 2012 to 2013.4
  • According to the National Retail Federation, gift cards were the most requested holiday item for the past seven years in a row.5

The Benefits of a Well-Run Gift Card Program

Drive sales and revenue: Businesses experience sales uplift from gift cards. Customers spend an average of $23.41 more than the amount loaded to the gift card they receive. Additionally, over 30% of shoppers said they bought an item they did not plan to or bought a more expensive item because of the gift card they received.6

Increase brand loyalty: Gift cards not only bring new customers into stores, but when businesses encourage card reloads through marketing and incentives, they can also increase the frequency of customer visits.

Attract new customers: 38% of consumers say that receiving a gift card prompted them to visit a store that they otherwise would not have visited.7

Get higher margins: Over 30% of gift card receivers say they are more likely to buy a full-price item rather than an item on sale when using a gift card.8

Decrease merchandise returns: According to the National Retail Federation, 15% of holiday gifts will be returned. Because gift card recipients choose their own gifts, gift cards may reduce returned merchandise and the high costs associated with handling returns.9

Increased security and stronger reporting: Gift cards are more secure than gift certificates, and they enable you to use many of the same reporting tools and practices as your credit card program.

Gift Card Market Trends

We all know there are many factors that impact consumer purchases of gift cards. Key insights into recent gift card trends:

  • An evolution of gift card strategy links payments and loyalty in a unified retail experience: The dramatic impact of the omnichannel shopper (i.e., a shopper who uses mobile, e-commerce, social media and physical stores) requires businesses to reevaluate their gift card strategy. A new generation of gift cards that act as spending cards links payments and loyalty in a unified retail experience. Businesses offering gift cards as the cornerstone of their retail experience generate the highest gift card activations, redemptions and reloads.
  • Mobility is key to success: The widespread adoption of mobile technology has triggered a fundamental shift in how people interact with gift cards. Over 55% of consumers are interested in using an app to store their gift card information. As mobile adoption grows and consumers continue to be more comfortable using a mobile device to buy and send gift cards, businesses will need to offer mobile gifting solutions that fit their customers’ needs and wants.
  • Loyalty is becoming a key component to a successful gift card program: Incentives, loyalty and rewards drive sales, and 32% of consumers noted that even though they were not planning on making a purchase, they did so because a gift card incentive was being offered. Over 40% of respondents noted that they spent more than planned because of a gift card incentive being offered.10
  • The economic outlook for gift cards is good: Mercator Advisory Group In-Store Gift Card Segment Closed-Loop Forecast shows an increase in loads from $85.8 billion in 2013 to $96.6 billion by the year 2017.11

12014 First Data Prepaid U.S. Consumer Insights Survey

2Ibid

3Mercator Advisory Services, First Data and Mercator webinar, “Happier Holidays Ahead,” September 2014

4Mercator 2015 Forecast, November 2014

52013 NRF Holiday Returns Survey

6Mercator Advisory Services, First Data and Mercator webinar, “Happier Holidays Ahead,” September 2014

72014 First Data Prepaid U.S. Consumer Insights Survey

8Ibid

92013 NRF Holiday Returns Survey

10Mercator Advisory Services, First Data and Mercator webinar, “Happier Holidays Ahead,” September 2014

11Mercator 2015 Forecast, November 2014