Gift Cards on Most Holiday Shopping Lists
Figuring out what people want for the holidays might not be that difficult
after all. According to recent research, consumers ranked gift cards as the
number one most requested gift for the fourth straight year.
The National Retail Federation’s (NRF) 2010 Gift Card Consumer Intentions
and Actions survey, conducted by BIGresearch, found Americans will spend
an average of $145.61 on gift cards this year, up from $139.91 in 2009. Overall,
sales of gift cards are expected to reach $24.78 billion for the year when
all is said and done. Nearly three-quarters of consumers are expected to
purchase at least one gift card.
Consumers are not only going to buy more gift cards this year, but they will
also spend more on those they buy. The average amount spent per card, according
to the research, will jump to $41.48 this year versus $39.80 in 2009.
The top category of gift cards will be for department stores (39.2 percent),
followed by restaurants (33.4 percent), bookstores (23.7 percent), consumer
electronics stores (19.0 percent), entertainment venues such as movie theaters
(14.1 percent) and coffee shops (13.9 percent).
"This holiday season we expect Americans to gravitate toward both sale
and non-sale items, including gift cards, which in recent years have been passed
up for heavily discounted merchandise," said Matthew Shay, president and
CEO of NRF, in a statement. "With people focusing less on price and more
on value this holiday season, Americans may choose to buy gift cards due to
their convenience and popularity among gift recipients."
Discussion Questions: Considering the increased demand in the market, what
can merchants due to increase the sale of their gift cards this holiday season?
Have you seen gift card promotions that work particularly well?
Retailers could start promoting gift cards, debunk the myths that they lose value, make the presentation of a gift card special and use them promotionally. Example: Buy three gift cards get $10 cash to spend on yourself, etc. After all retailers it’s cash in hand NOW.
Gift cards are so easy all many people need is a little nudge to give them reasoning why to go that route.
Part of the opportunity for retailers selling gift cards this season is to both integrate them into the broader customer experience and to consider viewing them beyond just their transactional value.
Gift cards as a stand-alone item are a great business for retailers with desirable brands (i.e., those with gift cache or at a minimum, gift utility). Many retailers still look at them as no more than plastic gift certificates, which leads to at least two areas of opportunity.
1. Integrating gift cards promotionally whereby purchases above a certain threshold–for customers who do NOT usually reach such a threshold–receive a gift card as a bounce-back.
Another example that has proven successful is also threshold-based, where there is a bonus gift card for the purchaser when purchasing multiple gift cards for others (and/or purchasing above a certain amount).
2. Leveraging gift cards to build relationships and sustainable value from the customers, both the givers and the recipients. Most retailers do not want to deal with even offering gift card registration, due to the desire to exploit breakage from unused and/or lost cards. In our view this is often short-sighted and based on false economics.
The long-term or lifetime value of customers is often exponentially higher than the breakage lifted from unused amounts on gift cards. Further, gift cards often generate higher-than-average spend, which more than makes up for lost breakage. The incremental spend coupled opportunity along with addressability and the potential for personalization is what will lead more far-sighted retailers to innovate around gift cards. Otherwise the growth that’s been seen will not necessarily be seen in the future.
Easiest way to increase gift card sales is to offer them at a discount. Since the retailer receives two major benefits from gift card sales they don’t get any place else, this makes a win/win situation for everyone.
1. A good percentage of gift cards are not redeemed. Estimated in the restaurant industry to be close to 20%.
2. A free loan from the consumer. The retailer has the use of the money at no cost.
If the consumer wants to give you free money and than never ask for some of it back, why would you not promote the HELL out of them?
As Mel points out, gift cards are a no-brainer. Basically free money for the retailer with a good chance that it will never be redeemed.
The first, and simplest, thing that most retailers can do is cross-merchandise displays of gift cards throughout the store. Too often, gift cards are displayed at the check-out. The customer has already decided on a purchase by the time they get to check-out, so this is probably the worst place in the store to put the cards. Secondly, call attention to the positives attributes of the cards–“Don’t know what they want?, Not sure if it fits?, Person is very picky?, etc, etc. I have yet to see any of these kinds of messages.
Let’s face it; gift cards are the ideal gift to purchase and give away, mostly for the gift giver. Gift cards are easy to mail, postage friendly, and they don’t presume to know exactly what the gift receiving person wants. Oh, and for those of you who can’t decide what to send your business development consultant, hmmm, a Starbucks gift card will be just fine!
Call me old-fashioned, but I still like gifts — both giving and receiving them. The only gift card that I’ve received that I truly enjoyed was and is Starbucks because that is a ‘gift’ more than a card. But that’s me. On to the real question.
Most importantly, retailers have to consider their own gift card a valuable sale. Sure, all the discussion is correct on cross-merchandising, discounting, other offers and the like. The largest problem I’ve found is not finding them at all! And, yes, even at Starbucks! While most Starbucks is better than most retailers at displaying them and having stock, I have been to a few that have been out of stock. Now, I can see being out of stock on a particular product, but out of stock on gift cards? Come on! They’ve even been out of coffee at times, but no one should ever be out of cards!
I shouldn’t have to look or ask for this item at any retailer of any kind. They should be the most prominent item for sale – period. They do very little for you at all behind a counter, in a drawer, invisible and no where to be found.
I think, for any retailer, I’d start there. All the other stuff is great but if I can’t lay my hands on one seconds after entering a store, then you haven’t gotten first things first.
I agree with Mel Kleiman’s comments. Gift cards to some means free use of money with nothing asked in return. Because of this, retailers should take advantage and promote them possibly at a discount to make them even more attractive. The profit margin might be only slightly affected. Gift cards are easy to shop for and easy to send. It doesn’t cost the $10.90 the USPS charges for a medium sized package — $10.90 vs. the cost of a stamp whatever that is today, 0.44 I think. Market the cards with a discount or special offer on the purchase for the buyer.
Having been in the gift card industry my whole life, we have seen an increase in the efficacy marketing yet it is usually through third party aggregators (Incomm / Blackhawk) and others.
Is there a way to market an “omnibus” gift card, good anywhere for anything? The major weakness I see in the gift card industry is that the givers dictate to giftees where they must shop or dine, etc. That’s because they want the giftee to look at a purchased item or remember a superb dining experience and think of the gift and the giver. That’s reasonable, of course. But to make gift cards truly useful, why not offer some that are just like currency?
Can you use a gift card to buy a different gift card for something you prefer more? Like using a Macy’s gift card to buy a gift card for iTunes downloads (from a checkout display in a Macy’s store)?
Also, how about expanding gift cards for day-to-day products and services? Gasoline? Groceries? Electricity? Phone minutes?
I liked it better when Grandma sent me cash inside my birthday cards.
I disagree with the comment that consumers are not focusing as much on price this year as last. We will see, I believe, consumers holding out again to the last minute to get the best bargains, and the holiday season more compressed than ever.
To drive gift card sales, retailers should consider adding value to the card, such as an extra 10% of the purchased value when they buy the card. That approach has worked very well this year with local market gift cert sales, where a restaurant will offer a gift card at a substantial discount to drive trial and increased frequency of their venue.