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Blackhawk Network

ISO/MLS contact:

Teri Llach
Chief Marketing Officer
Phone: 925-226-9028
Email: teri.llach@bhnetwork.com

Company address:

6220 Stoneridge Mall Road
Pleasanton, CA 94588
Phone: 925-226-9990
Fax: 925-226-9083
Email: corporate@blackhawknetwork.com
Website: www.blackhawknetwork.com

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Article originally appeared in The Green Sheet Issue 100902

Mall of the 21st century

A mong the most successful innovations to come out of the prepaid card industry is the gift card mall. The concentration of hundreds of open- and closed-loop prepaid cards into a standalone "mall" has proven to be a magnet for consumers and a main driver of growth in the prepaid sector.

Naturally, Blackhawk Network, the originator of the gift card mall, has reaped the benefits. Blackhawk remains a strong growth area for Safeway Inc., Blackhawk's parent company. In Safeway's first quarter 2010 earnings report, Chairman, President and Chief Executive Officer Steve Burd said the face value on cards sold through Blackhawk's gift card malls increased 28 percent over first quarter 2009 totals.

"This increase is larger than any quarter in 2009, and represents a significant acceleration from what we experienced in the fourth quarter of 2009," he said. In fact, Burd correlated the growth of Blackhawk's prepaid card mall to a slow but discernable improvement in the U.S. economy.

Gifting

Gift cards are of course Blackhawk's bread and butter. In 2001, when Blackhawk started, the novelty of the first gift card malls was the main attraction. Teri Llach, Group Vice President of Marketing at Blackhawk, remembered the time, saying, "When we're putting racks in stores and we're hanging gift cards, you got people just walking by going, 'Ooh, what's this?' 'OK, that's cool.' 'Oh, I need one of those.' 'Oh, good, I'll get that.'"

But times have changed and the Pleasanton, Calif.-based company is now focused on expanding its selection and adding more functionality and convenience to the cards, Llach said. To do that, the company has targeted two main growth areas: gifting and alternative financial services.

In 2009 Blackhawk launched its online channel for gift cards, GiftCardMall.com, which now features over 100 different cards, many of them customizable with messages and photographs. Blackhawk also launched e-gift cards - virtual cards that allow card recipients to instantly shop online or print out the cards for use in-store.

Listening to consumers who wanted more variety for stocking stuffers and other gift giving opportunities, Blackhawk further developed gift card packets with three to five cards that come in several low-dollar denominations but are activated via one bar code.

Llach said customers wanted to have the ability to pick the amount of money they load on cards. So Blackhawk added another wrinkle with variable load cards. "It gives that consumer that added flexibility," she said. "Maybe they don't want $25 or $50. Maybe they want $35."

Providing customers with greater flexibility in their prepaid choices goes hand in hand with Safeway's grocery store philosophy. "You know, you don't get one kind of pickle," Llach said. "There's lots of kinds of pickles. And we want the consumer to be able to go in and be able to get the pickle they want. So we extended that into prepaid."

Alternative and everyday

Llach stressed that Blackhawk has also been aggressive on the "everyday-use" front. With the state of the economy, consumers want to avoid overdraft fees and other fees associated with credit and debit cards, she said. But she pointed out people are shying away from carrying cash as well.

"So they're finding these prepaid debit cards," she said. "They put $400 on a card and then use it down and then load it up again."

Consumers can better track their expenses using open-loop, network-branded, reloadable cards. Llach said, "Consumers are really saying, 'Hey, I prefer that. I prefer controlling how I spend and I don't want some charge from a bank because I bought a Slurpee for $3 and I only had $2 in the account."

Other popular everyday uses of open-loop cards are for purchasing advance tickets to amusement parks like Disneyland or Universal Studios, Llach added. Although the consumer base for everyday-use cards is small in relation to closed-loop gift cards, Llach said the category is one of the fastest growing in the prepaid card industry.

International

In addition to Safeway store placement, Blackhawk's gift card malls are now in about 92 percent of all U.S. grocery stores. And Blackhawk's growth domestically is now mirrored by its international expansions. To date, it has ventured into Australia, Canada, the United Kingdom and Mexico.

Llach said Blackhawk is "big" in the Australian postal system, as well as in Woolworths Ltd. - the "Target of Australia." As for Canada, Llach said Blackhawk has 100 percent of the grocery market. In Mexico, the company is piloting programs in smaller chain stores.

Llach believes Blackhawk's success, both international and domestic, is largely a product of its ability to listen to customers and react to their feedback.

"It varies by region of the country," she said. "It varies by retailers. Someone shopping at a Kroger might want something different than someone shopping at a grocery outlet. So, you have to be smart, and you have to tailor the program to the retailer, to the region of the country, and you have to listen and look at what sells, and market effectively to the consumer. ... So it's listening, listening to the consumer."

Tech driven

Another main component of Blackhawk's success is the technology the company employs. Llach pointed out that Blackhawk is foremost a network that connects retailers and processors. The technology that underlies those connections has to be quick and virtually seamless.

"At the end of the year, the holidays, nobody wants to have any kind of slowdown or stoppages," she said. "We pride ourselves on a technology that is extremely cutting edge and very effective."

Mike Blandino, Chief Technology Officer at Blackhawk, said the company lives or dies by its technology. "We sell hundreds of thousands of cards on a normal day," he said. "And during the holiday season, we sell millions, multiple millions. And the closer that gets to Christmas, the more compact that time is. ... And so the stability, the reliability of our system and making sure we process those transactions in a timely manner, is critical."

Blackhawk operates two data centers, one in Santa Clara, Calif., and the other in Seattle. Both centers are capable of processing 2,700 transactions per second, according to Blandino. To quantify that processing power, he pointed out that during the busiest time of Christmas 2009, Blackhawk's systems peeked at 500 transactions per second.

Down market, too

Despite Blackhawk's size and scope, the company has not overlooked the small mom-and-pop stores. Through the Local and Regional Card (LARC) program, also referred to as the Local Stars program, Blackhawk offers gift card malls featuring the cards of area merchants, thus creating localized merchant offerings in the gift card mall. Another program targeted toward smaller merchants, but available to all of Blackhawk's partners, is PayGo.

It is a terminal-based acquiring platform - a back-end, turnkey solution comprising both hardware and software - for customers who need a stand-alone tool that helps with managing transactions for gift card purchases and phone card top-ups.

It seems Blackhawk has been thorough in leveraging the gift card mall concept in as many directions as possible. Llach, who came from a marketing background, said her experience at Blackhawk has been a marketer's dream.

"I've been here for nine years, and it's probably been one of the most interesting rides I've had, just because of the sheer acceptance of these products by consumers," she said. A company's goals are much easier to achieve when demand for its product is palpable. "So the consumer wants what I'm selling," Llach said. "Yea! That's great."

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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