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Running A Successful Gift Card Program & Trends (2011)

Gift Card Trends Canada

Following the success of Retail Category Consultants’ research in 2010, a follow-up survey was created and distributed by Mosaic Research to further understand prepaid gift cards trends in a broad range of retail verticals, including:

  • Grocery, Drug & Convenience
  • Department & Mass Merchandise
  • Specialty
  • Hospitality, Travel & Gas
  • Retail Mall

Our retail participants answered questions pertaining to their consumer, B2B, and overall prepaid card business. The collected data was used to identify trends in the Canadian gift card market and create more effective business strategies.

Canadian Gift Card Market Summary & Trends

Overview

In Canada, gift cards continued to surge in popularity in 2011. On average, survey participants saw growth from 14% to 25% in their overall gift card business from their 2010 results. Similar to 2010, gift cards continue to remain around 1% of total sales. Sales of cards through gift card malls have grown since 2010 and now encompass nearly 15% of all sales. Most retailers offer non-denominational gift cards, which range from $10 or less to $1000 or more. The average amount loaded on a gift card remained unchanged from 2010 at approximately $45 but, this number varies widely across the different retail verticals.

Geography

Ontario’s gift card sales are overdeveloped compared to the rest of Canada.  Like 2010, regional gift card sales mirror the split of the Canadian population by region.

Breakage

Most prepaid gift cards are completely used by their holders. A majority of surveyed retailers experienced less than 3% breakage.   For retailers who experience weekly or more frequent shops, this result is not unexpected.  But, this could also be a reflection of the economic times.  However, it is effected by the reloading of cards, at statistic that we see growing significantly year over year.

Redemption

On average, nearly 40% of gift cards are redeemed almost immediately.   The seasonality of redemption is similar to the seasonality of purchase.

Online

Online gift card sales have grown to an average of 1% across all surveyed retail verticals, a trend that has not changed significantly since 2010. Surprisingly, consumer online sales growth lagged in-store sales growth significantly. While few surveyed retailers offer online gift cards, retailers that do receive most of their business from the B2B market.

Seasonality

Almost 50% of gift card sales to consumers occur in the 4th quarter. In the B2B market, this represents almost 2/3 of sales.

Consumer Trends

While most prepaid gift cards are reloadable, only an average of 10% of consumers choose to reload their cards. This is a significant change from 2010 where only about 6% of consumers chose to reload their gift cards. Approximately 60% of all consumer gift card sales occur through in-store or online consumer channels. When gift card malls are included, however, consumer sales rise to almost 75%. Consumer gift card loads are above most B2B categories, but still below the average amount loaded onto gift cards.  With the growth of gift card malls offering gift cards of fixed value, we believe that the average consumer load is driven by this lack of flexibility in setting the card value.

B2B Trends

In 2011, growth in the B2B market was driven by the loyalty and gift card mall segments. Approximately 60% of B2B sales came from loyalty programs and gift card mall sales. Loyalty programs represent the largest B2B card loads at an average of over $50 per load, but the specific load amounts vary widely per retail vertical.   Retailers with broader product offerings tend to see a smaller average card load in this segment.  However, we see stronger sales for employee incentives and sales promotions from these retailers.

How To Run A Successful Gift Card Program

While our research shows that gift cards continue to surge in popularity in Canada, running a successful gift card program requires the constant management of any other business process. Here are 4 tips to get you started:

1. Build your card strategy.

Your gift card strategy should be a reflection of your marketing strategy and also an extension of your loyalty program. Any time you sell a gift card, you are building customer loyalty as customers are taking currency that can be used anywhere and converting it to a currency that can only be used in your store. Understanding that a gift card is a chance to build customer loyalty and/or gain a new customer means that you want to ensure your card strategy is aligned with your marketing plan.

2. Ensure a first class customer experience.

Gift cards build loyalty.  As you build your program, you want to ensure that the customer experience from sale through redemption and any other customer service touch points is excellent.  Before launching, think about such topics as:

  • How to purchase cards – Will cards be sold only in your store?  Online? Via a gift card mall?
  • Values offered – Will customers want specific denominations or will they be happy with non-denominational cards?
  • Designs – Will your customers expect seasonal designs?
  • Activation – Immediate or is there a delay?
  • Checking balances – Can customers do this online or by phone?  What about mobile?

3. Inventory management and back-end processes.

Failed sales transactions due to inventory shortages not only neglect the customer but also the brand. Invest in good inventory control systems to manage demand, costs, and services. Use safety stock to prepare for gift card out of stocks.

Particularly in the B2B market, make sure that you have easy to use processes for ordering, fulfillment and activation of cards.  As well, with these large customers, customer service is critical.  Ensure that there is a dedicated support team who can assist these important customers should they have questions.

4. Monitor customer behaviour.

Use in-store and online metrics to track and organize customer behaviour by environmental, marketing, and buyer characteristics.  When you can track your gift card purchasers and users through your loyalty program, it allows you to build a more customer focused and valuable gift card program.  Customer behavior metrics reveal your program’s most profitable segments, identify areas for improvement, and set the foundation for more effective marketing campaigns.

These tips contain important components of a successful gift card program, but not all of them. Merchandising, continuous feedback, and employee involvement all contribute to a gift card program that is adaptable to market trends and sustainable in the long run. Remember, your gift card program is about increasing customer loyalty. Put the customer first, and everything else will fall into place.


To learn more about how we can help your retail business achieve success, visit our retail services page or contact us for further information.

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