In late October, I had the opportunity to moderate a panel at the Retail Gift Card Association Forum (RGCA), the premier annual event in the gift card industry, where senior executives from Panera, Disney, Inspire Brands, and Best Buy joined me in discussing the fast-changing gift card landscape. It was a spirited conversation about trends, innovations, and customized gift card experiences. Below are a few key takeaways:
Capitalizing on the Holidays Despite the Supply Chain Challenges
According to a recent Gift Card Gauge survey by Fiserv, most U.S. consumers (56 percent) planned to get a jump start on the busy holiday season by starting their shopping before November. This is a testament to the trend toward a longer holiday shopping season we’ve seen growing for years. Despite the early start to the season, many consumers report they won’t complete their shopping until late December. As a result, our panelists said they’re both launching holiday promotions earlier and keeping them active later in the season, with some even extending through December and into January.
Although gift cards have been a mainstay over the last decade, panelists emphasized how macroeconomic factors in 2021 have elevated their position as a premium gift — with some referring to gift cards as the “hero gift” due to supply chain challenges. The panelists noted that empty shelves might drive even stronger-than-forecasted gift card sales. Others even predicted a shortage of physical gift cards by season’s end, which led us to a conversation on growing demand for digital gift cards.
Consumers Expect Digital Solutions
The COVID-19 pandemic has changed consumer buying behavior, and digital purchases have become a necessity. According to the Gift Card Gauge, U.S. digital gift card adoption will increase 23 percent by 2025. To that end, the panel discussed how digital gift card demand could spike exponentially as we exit 2021, driven not only by consumer preference, but also due to lack of supply and an associated increase in the cost of plastics.
Additionally, panelists described an ongoing evaluation by gift card managers of how best to solve consumers’ digital needs. If a retailer doesn’t have its own branded app for digital purchases, it’s necessary to have a fully responsive website so consumers can easily buy gift cards. The panel also highlighted the importance of other digital pay functionalities, as nearly two-thirds of consumers use digital wallets. Consequently, retailers need to ensure gift cards can be used within digital wallets as consumer behavior continues to shift in that direction.
Gift Card Program Advantages: Beyond the Transaction
Gift cards are a great marketing tool to raise brand awareness and grow sales. Our panelists provided three additional bottom line-boosting benefits brands should consider when planning and executing a gift card program:
- Improving cash flow and revenue: The panelists talked extensively about how gift cards can drive traffic in-store and online, and the associated “lift,” or overspend, that occurs when a gift card is converted into a sale. On average, customers spend $59 more than the value of their gift card.
- Increase customer engagement: The panelists provided their company-specific experiences in leveraging gift cards to drive customer engagement, with numerous examples of how they’re using gift cards to improve customer loyalty or as an incentive to keep customers coming back.
- Milestone events: The panelists discussed how gift card giving has grown beyond the traditional holiday season. From birthdays and graduations to anniversaries and babies, gift cards are becoming the most popular way to celebrate milestones. As such, brands should have a yearlong gift card strategy, and think of gift cards as more than a tool they break out just for the holidays.
Given the global supply chain crisis, the tried-and-true gift card will take on even more importance this holiday season. Gift cards are a staple for today’s consumers, and merchants realize that the benefits of a well-rounded gift card program extend well beyond a single transaction with a single customer.
Tom Niedbalski is the vice president of gift solutions at Fiserv, a global fintech and payments company with solutions for banking, global commerce, merchant acquiring, billing and payments, and point-of-sale.