Retail Category Consultants conducts and distributes an annual Canadian gift card trends report to help retailers identify trends and benchmark the market. To identify Canadian gift card trends for 2013, we surveyed retailers offering prepaid, B2B and B2C gift cards in a variety of retail verticals, including:
- Department/Mass Merchandise
- Retail Mall
Overview of The Canadian Gift Card Market In 2013
Compared to the US, the Canadian gift card market is more optimistic. Despite a declining growth forecast over three years from 15% to 10%, growth is still higher than US projections, which range from 6—8% over three years. A major source of growth has been in the Gift Card Mall segment, which was 22% of total gift card sales in 2013. Average load for gift cards used in promotions has increased from $12.50 to $18.50. Third-party sales for retailers that have been participating in the gift card mall category over several years have also started to level off.
While overall average load decreased to $42 (down from $57.50 in 2012), there were some bright spots. For example, average load for gift cards used in sales promotions increased, which suggests that consumers are getting rewarded more, but may need to spend more to get their rewards. Average load is still highest in the loyalty segment at $46.
All respondents offered some sort of discount incentive program for bulk purchases, with most of them providing a scaled volume discount.
Looking at the split of gift card sales regionally across Canada, the proportion of sales in Ontario has dropped 3%, the difference being made up in the Quebec market. Retailers should review their bilingual creative and overall card design offerings for this market.
Gift Card Features
Many retailers offer between 2-5 different card designs which are updated annually, but just as many offer between 6-10 and 10+ designs, most likely to market niche gifting opportunities such as Chinese New Year, and Administrative Professionals’ Day. Of the 50% of retailers that offer reloadable gift cards, 85—100% are reloadable, with more consumers having reloaded cards in 2013 compared to 2012 (14% VS 10%). This is good news for the production of plastic gift cards and may indicate higher brand loyalty.
While 80% of respondents offer a complimentary gift card holder, for many retailers, this is a seasonal offering.
Retailers that do sell open loop gift cards felt less threatened by them in 2013 than they did the previous year, not feeling that sales of their own gift cards have been cannibalized by open loop.
Probably one of the more surprising findings this year has been the shift in timing of sales. Sales in October-December have dropped to 48% of annual sales. Meanwhile, sales in April – June went up a remarkable 16%, and sales in July – September were up 12%. As a result of the increased sales occurring in the April – June period, redemptions in July – September have gone up 19%. This is a positive indication of consumer acceptance of gift cards as a year-round gift, and presents an opportunity for retailers to market them as such. For example, Starbucks created a “Class of ‘14” gift card for graduation gifts.
Within the B2B segment, sales in October-December dropped to 42% of total sales (down from 50% in 2012), while sales in April – June went up 39%. For B2B, the drop is likely due to fewer businesses giving a year end or holiday “thank you” card to employees or customers. Businesses rewarding customers are moving to rewarding them during slower periods. 75% of respondents do not offer customizable designs for B2B clients and do not allow clients to load cards directly with their card provider.
Online/Electronic Gift Cards
Despite predictions that e-gift card offerings will be a significant market opportunity in the next few years ($10 billion US by 2016, according to CEB Tower Group), we have not seen much traction in this segment for 2013. Only 10% of retailers participated in a digital wallet application, and the outlook appears to still be very cautionary. In the meantime, online sales of plastic gift cards increased in 2013 to 2.5% from 1.2% in 2012.
Marketing will continue to be a key driver to grow sales.
- 80% of respondents are feeling very likely to implement a gift card that has a value-add offer at point of purchase. Most are still sitting on the fence with regards to price discounting gift cards. As with discounting on any product, there is the risk of having the customer wait for discounts and promotions, diluting year-round sales.
- 80% of respondents do not intend to implement multi-packs of their own gift cards, but half would consider a multi-pack with another card brand. However, most of these respondents indicated a Low to Medium probability of implementing this over the next 18 months.