2009.50 | Gift Card Ubiquity

Gift cards become very visible at Christmas during the time of giving.  What’s driving the deluge of cards in Canada?  As always, there have be benefits to all parties to give a phenomenon momentum.  For consumers:

  • the elimination of gift card expiry dates in Ontario by law (and other provinces moving forward) has increased interest
  • they can be purchased outside of the issuing stores via programs like Blackhawk Gift Card Mall, providing a very convenient mall in a kiosk
  • their small size makes them portable for shipment anywhere around the world – no taxes, no duties, no problems
  • the prevelance of chain and big box stores often makes them usable close to most recipients, wherever they may be
  • they can be purchased online and sent to a recipient, avoiding a store visit and providing a personalized gift
  • while they are effectively cash, they indicate a level of thought based on where the card comes from (music lover = iTunes gift card)
  • they provide a simple way to gift without knowing sizes of the recipient for clothing purchases (avoids embarassing size gaffes)
  • there is no charge for MOST of the programs

At the same time, this provides the issuing organization a number of benefits:

  • for regional players, it brings in purchases from outside their normal geographical limits
  • they obtain funds up front – drives year end results
  • many cards are not redeemed or only partially redeemed resulting in income with little cost
  • there can be upsell to holders of cards – those with $100 cards will purchase an item over $100 and pay the balance
  • outside programs like Blackhawk can extend the reach of issuers with very little investment needed
  • assists consumers with fickle recipients and driving a sale
  • organizations can track the usage of cards to understand consumer behaviour of both purchaser and recipient
  • certain organizations can drive the cards to be used as an ongoing tender, locking in customers and revenue streams
  • drives revenue to stores in ways cash gifts cannot

Increased usage means increased competition for dollars spent on gift cards.  More usage can be expected for organizations that can get creative about the processes and features of gift cards, and there are so many ways to deal with this very simple concept.   There are a number of areas of potential, and examples around these:

Marketing – Differentiating one card from another will depend on the needs of the organizations constituents.  Examples of approaches include customized gift cards, buy 2 cards, get one free, and unique sizes and shapes.

Initial Purchase – Options will need to suit the target market for the cards.  In general, the ideal is allowing consumers the potential to purchase via the three key channels: point of service, via the internet, and mobile, and many cover at least two of these, with the third on the way.  As a twist on point of service, retailers and vendors are providing kiosks that print custom cards with unique images and names of givers and recipients.  The technology is proving itself and coming down in cost, so we can expect to see more of these in the future in higher volume initiatives.

Transfer to Recipients – Being able to provide the gift in a novel, simple and creative manner that suits the giver and the recipient.  Apple has provided the capability to provide a gift card via Facebook.  Amazon provides gift cards via email.  It won’t be long until we can purchase gift cards in Twitter.

Validating Balances and Adding Value to Cards – if this is simple and convenient with no costs, it can drive more usage of the card and more business to the card issueing organization. The Starbucks iPhone app (available in US only) allows users to register their cards on their iPhone, shows the actual image of the card they have, and add value to the card at the click of a button.  Toys R Us allows consumers to scan their gift cards at store price verifiers to validate the balance on the cards.

Redemption –  Simplicity and convenience can drive more usage of gift cards.  Starbucks iPhone app is providing gift card redemption via 2d barcodes on a trial basis.   Online stores like iTunes allow gift cards to be connected to an account and used against purchases until the amount is used up.

Given the increasing market of gift cards, expect the level of ingenuity to increase over the next year as everyone scrambles to get a piece of the market.

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