Holiday gift card sales in the U.S. over the 2013 holiday season were estimated to be $29.8 billion, up 3.3% from 2012. This growth was driven by a combination of existing and emerging digital and traditional trends in the gift card category. Read on to see if your gift card program measures up!
Technology has given retailers more ways to customize an e-gift and add entertainment value at a much lower cost than customizing a physical gift card. Amazon’s partnership with JibJab offers customers the ability to garnish their e-gift cards with personalized videos. From adding video, music, and personalized messaging, e-gifts enhance consumer experience for both the recipient and sender.
Seasonal Gift Cards
Merchants have also learned that consumers want seasonally appropriate cards for gifting. Target offered special holiday cards that attracted droves of customers during the winter season due to value add and exclusivity. Gift cards are often seen as a last minute cop out gift, but by offering some seasonal cards as a limited edition, Target gave their cards a ‘trophy value’ that enhanced their value to the recipient.
Online shopping is still going strong. Cyber Monday sales rose by an astounding 21% in 2013, a third of which is accounted for by mobile traffic. With more customers preferring online and mobile shopping over traditional shopping channels, retailers can expect exponential growth in e-gift card sales for 2014, especially as customers rush to send last-minute e-gifts.
Use Gift Cards For Promotion
More retailers are recognizing that gift cards are a more profitable extension of their loyalty program. Consumers using gift cards typically have a larger basket and purchase higher margin products. It is no wonder that some retailers have started to offer value adds and promotions to encourage purchase of their gift cards.
Companies like Subway that offer a free sandwich with the purchase of a $25 gift card are seeing growth in cards for both gifting and self use. They recognize that to get the best ROI, the gift card sale needs to drive repeat purchase. The value of the card is set to ensure that the majority of customers must return several times in order to spend it. The marginal cost of the value add is significantly less than the value of the loyalty bought through repeat visits by an existing or new customer.
B2B Gift Card Opportunity
In addition to e-gifts, retailers should also assess how their corporate – or B2B – sales of gift cards performed. With the B2B gift card market estimated at $22.5 billion (US), it’s not a revenue segment that can be ignored. Traditionally used as employee incentives, gift cards are now increasingly being seen as an effective channel or partner incentive in certain industries.
There are also opportunities within fundraising, promotions and loyalty. These other corporate customer segments can also help to even out the sales curve throughout the year instead of putting added sales pressure during the holiday season.
Don’t Neglect Smaller Businesses
For regional or national retailers with multiple store fronts, consider opportunities for smaller bulk purchases by local businesses around your stores. There are unique gift card packaging concepts that exist that can accommodate bulk activation at point-of-sale, thus minimizing store labour.
Many retailers today will accommodate a bulk purchase, but a cashier has to activate each consumer gift card one by one, which impacts productivity targets. By simplifying the in-store process for bulk sales, retailers can now also get a truer picture of corporate sales opportunities at store level.
Gift cards will continue to dominate as perfect last-minute holiday gifts for retailers, but it’s not too early to set the stage for holiday 2014 by establishing sales targets and a marketing plan for e-gifting, seasonal offers and B2B sales. Use a well-planned strategy to ensure that you do not miss out on your share of holiday card sales in 2014.