Gift Cards

July 28, 2005
Written by Anja Sonnenberg.
6aThe Hottest Trend in Retail

For years gift certificates were consider the ‘lazy’ gift, which didn’t require a great deal of thought or effort. When large retail chains first capitalized on the new gift card technology, consumers had a change of heart and quickly embraced the new version of gift certificates. Now you can find them everywhere – department stores, coffee shops, hardware stores, electronics stores, even grocery stores.

According to a report by the J.C. Williams Group ‘Gift Cards Are Here to Stay – Why Retailers Should Take Them More Seriously,” 2004, the U.S. gift card market has grown from $1 billion in 1995 to $45 billion in 2003, and is expected to rise to $70 billion by 2006. Considering these statistics and retailers who have been reaping the rewards of their successful gift card endeavours, you might want to consider giving your current gift certificate program a makeover.

Two recent studies by the National Retail Federation and by Deloitte and Touche show the explosive popularity of the gift card market:
• 74.3 per cent of consumers were predicted to buy a gift card over the holidays
• 81 per cent of consumers received a gift card last year
• 50.2 per cent of consumers would like to receive a gift card
• 12 per cent of shoppers bought gift cards for their own use
• 11.5 per cent of the average consumer’s holiday budget is spent on gift cards
Plastic vs. Paper
Gift cards can be far more profitable for garden centers than paper gift certificates. Consumers are familiar with paying with a plastic card – debit and credit cards for example, and the plastic gift card mimics this familiar habit. Paper cheques and gift certificates have become a payment method, which was preferred by older generations. Plastic has several advantages over paper:

• The same size as a credit or debit card, they are usually placed in a customer’s wallet or purse. Unlike paper gift certificates, gift cards are normally carried with the customers at all times.

• Gift cards can be placed as point-of-sale items as the register counter, where they will capture the customer’s attention. Theft is not an issue with gift cards, because they have no value until they are electronically activated.

• Retailers benefit by not having to return cash from unused portions of gift cards because they can be reloaded, unlike gift certificates. By carrying a remaining balance, it encourages multiple trips to the retailer. If customers do not return, the unused cash is put back into the retailer’s register as profit - this is called ‘breakage.’

• Customers buy more. More than 20 per cent of gift card users spend more than the value of their gift card.

• Since gift cards are electronic, they improve tracking customers’ accounts.

• The average gift card value purchased is $50, almost twice as much as the gift certificate average.

6bGetting Started
Large retail chains    were the first to capitalize on the new gift card technology and have had tremendous success. Smaller retailers are starting to take advantage of this explosive trend, and new programs are being offered to make it easier to get started.

Many companies provide business owners with start-up programs, which include the cards, POS displays, hardware, software and systems needed to improve business efficiency. Moneris Solutions Corporation, Canada’s largest provider of credit and debit card transactions, offers customized gift cards with the company name or logo, which allow businesses to expand revenue, attract new customers and build brand awareness.

Credit card companies are also becoming involved in the gift card business. VISA offers the VISA Gift Card – a prepaid card that can be used everywhere VISA cards are accepted (over 600,000 merchant locations in Canada and over 12 million worldwide.)

With the popularity of gift cards increasing, banks and service providers will find less expensive ways to serve the business market, which will allow businesses of all sizes to take advantage of this fast-growing trend.
 
 
Cost is always the deciding factor when any small business is considering starting a new program or changing an existing one.  The gift card program offered by Moneris Solutions offers various packages for small business to choose from.

• The total start up cost for 200 cards, is $755 – each card costing $1.90.  

• The total start up cost for 500 cards, is $1290 – each card costing $1.85.  

Both these cost include the set up fees for the program.  If you order more cards, the price per card is less.  The cards can go as low as $1.45 if you order 10,000 cards or more.

The minimum number of cards you can order is 200, but you can order as many as you want.  There are different price thresholds, depending on if you order 200, 500, 1000, or 10,000.

Moneris launched the gift card program at the end of September, and they had over 300 merchants sign up for the program in less than three months.  
For more information, visit www.moneris.com.
Market for Success
Gift cards with your store logo and eye-catching designs help brand your products.

If you want to have your gift card program up and running before Christmas, it’s important to get things organized early in the year. Remember that gift cards given as a Christmas gift will likely be redeemed in January, which is often one of the slowest months for businesses. As more retailers replace their gift certificates with gift cards, creative and successful marketing ideas will be realized. Here are some ways to market your gift card services:

• Place the gift cards where customers can see them.

• Gift cards should be offered to customers in-store and online, and they should be redeemable at both.

• If you’re involved in fundraising or community events, offer them as donations.

• The wedding season is an excellent opportunity to offer brides the choice to ask for gift cards for shower and wedding gifts. The gift cards could then be used to purchase flowers, vases, and giftware for the upcoming event, which would help alleviate some of the costs for the couple for the big day.

• When a customer is returning merchandise, offer them a gift card as store credit, instead of cash refunds.

• Promotions with a partnered retailer can become a great method of targeting potential customers. A café or coffee shop in the neighbourhood could offer their customers your gift cards and vice versa.

According to the report by the J.C. Williams Group, the gift card market is set to grow by 55 per cent in 2006, so there is no better time to start your gift card endeavours. As more retailers begin to carry gift cards, customers will begin to expect them from every retailer. You can’t stop progress or technology. The survival of your business is dependant on how well you adapt to changing global trends. 

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