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Table of Contents

Lead Story

A political action plan for ISOs

News

Industry Update

New best practices for data storage

Financial reform bill passes. What now?

Cash-only holiday to protest Durbin Amendment

ETA/Strawhecker report: Reason for optimism

Features

Research Rundown

ISOMetrics:
Top 25 privately held industries for the last 10 years

Selling Prepaid

Prepaid in brief

Evolution Benefits ties prepaid to philanthropy

What's next in gifting technology

Walter Paulsen
Giiv Inc.

Views

Three kinds of consolidation to watch

Brandes Elitch
CrossCheck Inc.

Education

Street SmartsSM:
Is dial dead?

Ken Musante
Eureka Payments LLC

Agent or employee: Which are you?

Adam Atlas
Attorney at Law

Budgeting: A crucial management skill

Vicki M. Daughdrill
Small Business Resources LLC

Best practices for crisis communications

Peggy Bekavac Olson
Strategic Marketing

Putting the cold call in its proper place

Jeffrey Shavitz
Charge Card Systems Inc.

More than PCI

Tim Cranny
Panoptic Security Inc.

Avoid 'always be closing' and other old traps

Jeff Fortney
Clearent LLC

Company Profile

Voltage Security Inc.

New Products

Determine the best interchange for each transaction

BINSmart
Merchant Warehouse

Layered protection for ACH

ProtectPay ACH
ProPay Inc.

Inspiration

Focus on success with self-help CDs

Departments

Forum

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

August 09, 2010  •  Issue 10:08:01

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SP
What's next in gifting technology

By Walter Paulsen

With each passing month comes another announcement of a new technology to help retailers drive more traffic into stores, increase spending, and surprise and delight customers. From geo location-based social apps to group discounts to charity incentive models, innovation is coming fast and furious - but without any clear leaders or obvious strategic direction.

The market will sort things out eventually, but progressive retailers want to spot trends early. To help sort the winners from the pretenders, it's useful to ask a few questions to understand the environment in which winning solutions will operate.

What makes a great gift program?

For a retailer, a great gift program is one that creates incremental sales, at high margin, and additional foot traffic. If a program requires too much discounting or only replaces purchases that were already going to take place, the total sales volume and net margin don't improve. Some gift card programs work well in this regard, especially if they bring new customers into stores to purchase merchandise at full price.

In the United States, gift cards are the 800-pound gorilla of gifting, since they are ubiquitous and well understood. However, like most innovations, gift cards have a life cycle and are showing their age.

Grocery and drug stores now offer hundreds of gift cards for every imaginable buying niche, and the onslaught of plastic has created consumer overload. Gift cards now pile up unused in sock drawers and purses, more of an obligation than a delight.

Gift cards are so overused that companies have sprung up to help customers dispose of unwanted cards. One such company, Plastic Jungle Inc., has attracted high-profile management and investment from leading venture capital firms.

Plastic Jungle may or may not succeed, but its mere existence validates the belief that gift cards are a mature technology. By any reasonable standard, gift cards no longer qualify as a great gift. But if the tried and true is no longer in fashion, what will come next? To answer that question, let's take a small step sideways and consider how we got here, and then ask where the next generation of great gifts will come from.

How did we get here?

It's been said that the road to hell is paved with good intentions, and that is certainly true of the current gift card overload. For decades retailers offered paper gift certificates. By the mid 1990s, they began to switch to gift cards. With advances in color printing and copying, retailers were hit by a wave of fraudulent certificates, and the reliable plastic card, based on the form factor of the credit card, seemed like an ideal solution.

Success begat success, which begat excess. But, hemmed in by its own success, the entire gift card industry now sags under the weight of several drawbacks. First, the majority of cards are made of plastic, the ultimate environmentally damaging material. Second, gift cards are expensive to produce and distribute, especially for gift card malls, where retailers have to print millions of identical cards months in advance, many of which linger unsold on grocery and drugstore shelves for many months, and even years.

Third, and most damaging, gift cards have been so successful that customers are tired of them. They neither surprise nor delight. Consumers now say a polite "thanks" and then toss the latest card into the pile with the others. Instead of a pleasure, cards are at best a duty and more often a chore, requiring extra work in redeeming them, draining the joy out of gifting and shopping.

Gift cards are so well established that they will continue into the twilight for another decade or longer. But they are by now clearly destined for the scrap heap of old technologies, joining VHS tapes, vinyl records and DVDs in the twilight realm of being no longer loved but too useful to die a graceful death.

Where are we going?

As gift cards wane in popularity, what's to replace them? Thankfully for retailers, the relentless drumbeat of innovation is bringing waves of new products and services to market. A confluence of mobile and network technology is breaking down barriers that have kept consumers and retailers locked in a plastic gifting paradigm. It's too early to predict specific winners, but three key trends are emerging:

Next stop?

This is an exciting time for retailers and the companies that serve them. They are helping consumers redefine expectations and embrace innovation from small and unlikely sources. Plastic has served the gift market admirably and deserves to be treated with dignity as it fades away.

Technology is rapidly replacing plastic with a host of innovations that are better from every angle. Retailers should milk the cash cows and invest in the bright future represented by new gifting innovations in social, Internet and mobile technologies.


For more stories from SellingPrepaid E-Magazine, as well as breaking news and forums devoted to the prepaid sphere, please visit SellingPrePaid.com.

Walter Paulsen is Senior Vice President of Business Development and Retail for Giiv Inc., a mobile and social gifting company. He was previously President of CardFact, and prior to that a founding Vice President at Blackhawk Network. Walter can be reached at walter@giiv.com or http://www.linkedin.com/in/walterpaulsen.

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

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