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Canadian Gift Card Market Report (2012)

Retail Category Consultants conducts and distributes an annual Canadian gift card market report to help retailers identify trends and benchmark the market. Working with Mosaic Research, we surveyed retailers offering prepaid, B2B and B2C gift cards in a variety of retail verticals, including:

  • Grocery/Drug/Convenience
  • Department/Mass Merchandise
  • Specialty
  • Hospitality/Travel/Gas
  • Retail Mall
    Canadian Gift Card Market Trends

Overview of the Canadian Gift Card Market

As observed in 2010 and 2011, the Canadian gift card market continues to be significantly under developed relative to the US. However, many trends are materializing within specific gift card segments, such as gift card mall, B2B, and B2C.

Growth Decline
Sales of gift cards through gift card malls grew to 20% of total sales (increased from 15% in 2011) Gift card business growth is 10% (down from 25% in 2011)
Average amount loaded increased by 30% ($57.50, up from $45 for the past two years) Online gift card sales is 3.6% of total sales (dropped from 2011)

 

It’s interesting to note that while sales through gift card malls have grown to 20% of all sales, retailers with gift card malls in their stores are split on whether the mall has cannibalized sales of their own gift cards.

Consumers Choose to Buy Gift Cards From A Retail Location

At 66%, most consumers favour purchasing gift cards in physical retail stores. When gift card malls are included, in-store purchases encompass 85% of all gift cards sold. Consumer purchases represent 75% of total online gift card or e-gift card sales, suggesting that retailers can influence purchasing behaviour through targeted social media and content marketing that extol the convenience of purchasing or receiving e-gift cards. Since online gift card purchases represent less than 2% of all gift cards sold, this is still a developing segment.

Consumer Loads Are Above Most B2B Gift Card Categories

While only 10% of consumers choose to reload their prepaid gift cards, consumer load amount is still higher than B2B gift card categories. This is consistent with data from 2011. Retailers should therefore encourage customers to reload their gift cards through loyalty or reward programs, and by finding ways to incorporate the gift card into their reoccurring activities.

Most Prepaid Gift Cards Are Completely Used

Gift card breakage is less than 4% for most issuers but has grown from 3% in 2011. Breakage varies widely for different gift card categories and retail verticals. Recently, the Ontario Government has proposed an Unclaimed Property Program to address unused or lost gift cards, which we summarized here.

B2B Gift Card Clients Are Less Expensive To Service

The B2B segment is expecting 15% annual growth over the next 3 years. While smaller than the B2C segment, business clients are less expensive to service due to the size of the B2B gift card market. Marketing efforts for both B2B and B2C supplement each other, with loyalty and gift card mall driving a large potion of B2B gift card growth (60% of B2B sales). Retailers are split on offering custom card designs, though most B2B clients skip due to the added incremental cost.

Loyalty Programs Represent The Largest B2B Card Loads

B2B clients load over $50 on average through loyalty programs, though this varies by retailer vertical. Typically, the broader the product range offered, the lower the average amount loaded. B2B clients are not allowed to work directly with the card provider and all gift cards must be loaded through the retailer. With discounts being the norm in the B2B market, most retailers offer 1-5% but specialty brands typically offer higher rates.

Going Forward

Retailers will be focusing on marketing efforts in the next 18 months, specifically on providing added value to customers using a gift card at point of purchase or point of gift card use.

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