Retail TouchPoints: Digital Gift Card Services Increase Loyalty, Create Seamless Exchange and Redemption Process

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Dec 08, 2011
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Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.

With the increased adoption of mobile commerce, digital gift cards are a new tactic to drive in-store traffic and loyalty without focusing on discounting strategies such as coupons and daily deals. In turn, start-up companies such as Wrapp are establishing themselves in the e-gift card space.

Wrapp is a social gifting service designed to allow users to purchase gift cards via mobile and web, and then send them to friends. The Wrapp application can be downloaded for the iPhone or Android, or linked to a customer’s Facebook account. Once a gift card is purchased, the company sends a customized message to the receiver via Facebook and/or the Wrapp app for redemption.

Through the Facebook integration, Wrapp allows retailers to “connect the dots” between mobile, social loyalty initiatives and the in-store experience, according to Hjalmar Winbladh, CEO of Wrapp. “The most common wall post on Facebook is when someone says ‘happy birthday’ to a friend. We think that’s nice, but there’s a major gap between just saying ‘happy birthday’ and being able to include a gift seamlessly. We’d like to make giving a gift card as easy as posting a simple communication.”

One benefit of having the gift card directly linked to the smartphone is that consumers have it with them at all times, he said. When shoppers walk into a store, they simply press ‘Redeem’ on the Wrapp app to receive a barcode that can be scanned at point-of-sale. E-gift card receivers also can enter a unique voucher code to redeem gift cards via the web.

But Mr. Winbladh anticipates that digital gift cards can help retailers increase loyalty and in-store traffic. “Big retailers and merchants tend not to like couponing sites and daily deals mainly because they’re training the customer to look for a deal,” Mr. Winbladh said. “Discounts and coupons also don’t drive loyalty. Our goal was determine how retailers can build loyalty and bring people in-store without driving the process with discounts and pricing. Wrapp is all about giving things to each other, and having that value in-pocket at all times.”

The application currently only operates in Sweden but consumers worldwide can buy and share digital gift cards with friends and family who reside in the country. Wrapp is expected to expand to retailers in the U.S. and UK during Q1 2012. Founded in the first half of 2011 by a group of serial entrepreneurs, Wrapp is based in Stockholm, London and Silicon Valley.

Discussion Questions: What do you think of digital gift card services as a sales mechanism as well as a tool to drive in-store traffic and loyalty? Do you agree that digital cards appear to be a natural for Facebook?

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8 Comments on "Retail TouchPoints: Digital Gift Card Services Increase Loyalty, Create Seamless Exchange and Redemption Process"


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Ian Percy
Guest
9 years 5 months ago

If I have this right, the idea is to attach a gift card when you wish your friends on Facebook Happy Birthday. Whoohoo! I can hardly wait. If I got a gift card along with every birthday wish on Facebook I could retire to my yacht currently moored in Monaco. Oh wait, 90% of my “friends” on Facebook I wouldn’t recognize if they were standing in a phone booth. I don’t think they’re going to go for it.

And again this loyalty thing. Mr. Winbladh is right about coupons not building loyalty but dead wrong in thinking that somehow gift cards do. “Loyalty” has its roots in Old French: “an oath of faithfulness.” Gift cards can do that? I don’t think so. It’s pretty hard to find “faithfulness” anywhere these days!

Loyalty (faithfulness) is a spiritual, ecological commitment based on relationships. Anything short of that is just a gimmick.

Max Goldberg
Guest
9 years 5 months ago

Digital gift cards are a good idea, because they are easy to send and use. Retailers that offer them should see higher traffic in-store and online as they are redeemed. I’m not sure they will build loyalty, unless a consumer uses a card at a retailer that he/she has not visited before and comes away with a positive experience.

David Slavick
Guest
David Slavick
9 years 5 months ago

In a word — brilliant. Gift cards are the perfect gift, giving the recipient choice and avoiding the hassles of returns. In U.S. alone $6B in gift card value goes unredeemed. New rules in recent years on escheat prevent the seller from recouping those funds as readily as they once were able to. Wrapp is at the cutting edge of mobile commerce with this service, but I look forward to devices that have a mag strip for ease of browsing and checkout in a secure way. The comments shared in the article about discounts and pricing not building loyalty are “bunk.” I doubt giving a friend a gift card to celebrate their birthday triggered from a Facebook post is all that effective at engendering loyalty. Nice to be thought of, though!

Nikki Baird
Guest
Nikki Baird
9 years 5 months ago

I guess where I get hung up on this is, why would a retailer want a third party to be an intermediary in this? Why not just offer digital gift cards directly? I agree that gift cards are an increasingly important part of gifting. NRF said more people are going to buy gift cards this year over last year, and I’ll be one of those. But the element that gets overlooked isn’t the loyalty aspect of it, it’s the gifting aspect! It’s the ability to turn something that is relatively impersonal into something that feels much more personal — through customization and personalization of the card. The purchase channel and the delivery channel will be irrelevant, eventually. The hard part will be letting consumers redeem cards via their mobile phones — then we’ll be getting somewhere.

Camille P. Schuster, PhD.
Guest
9 years 5 months ago

Gift cards may get consumers into a store. Building loyalty depends upon what happens next. The credit card size gift cards are easy to purchase, easy to wrap or send, and easy to put in your wallet. However, if the mail service gets more restrictive maybe the digital gift cards will become even more popular.

Craig Sundstrom
Guest
9 years 5 months ago

Hmmm, let’s see: I want to get someone something, but I don’t have the time and/or ambition to get them a real present, and I think cash looks too much like I don’t have time and/or ambition, so…I know! I’ll give them something that’s less useful than cash, and requires them to troop to a specific store — which may or may not be convenient — and pick out their own gift; and now I don’t even need to leave my chair to either buy it or send it…perfect!

Of course this QOD is from the perspective of the merchant, and with plenty of clueless and “busy, busy, busy” people around, I’m sure it will find a ready market.

Ralph Jacobson
Guest
9 years 5 months ago

Max Goldberg read my mind with his comments. I couldn’t have said it better nor more concisely.

Mark Price
Guest
Mark Price
9 years 5 months ago

As the smartphone becomes more ubiquitous, more and more capabilities are being transferred to this single device. Those capabilities provide consumers with convenience and improved features vs. paper or plastic. Simply put, providing gift cards on smartphones reduces the number of things the consumer must carry, and makes it easier to use.

One key issue is “breakage,” which is the percent of gift cards purchased that are not redeemed at all, or not redeemed in part. Breakage provides retailers with additional revenue. I am not sure that retailers will flock to digital gift cards that can be redeemed at retail for this reason.

However, integrating gift cards into Facebook is a natural.

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