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The Green Sheet Online Edition

August 08, 2011 • Issue 11:08:01

Gift card potential still untapped

sellingprepaidA new First Data Corp. study reveals the future growth of the gift card segment will rely on initiatives that maximize gift card revenues. The main way to increase profits with gift cards is for merchants to use them to attract and strengthen relationships with new customers, according to a First Data executive.

The 10th annual 2010 Consumer Insights Gift Card Survey identifies market and consumer gift card trends and provides analysis on how the cards are used. The survey results may be downloaded at www.firstdata.com/downloads/thought-leadership/firstdata_2010usgiftcardconsumerinsightssurvey.pdf.

"The most important thing to take from this study is, despite changes in the economy, consumers still like gift cards," said Michael Hursta, Vice President of First Data Prepaid Services. "The biggest change is the way these cards are distributed through different venues. There are so many different ways to access cards: vendors and partners, kiosks, malls, charities, schools and fundraisers."

Trending shows birthdays remain the most popular reason among consumers to purchase closed-looped gift cards, while Christmas is the second most popular occasion. However, gift cards for birthdays in 2010 showed 4 percent growth over the previous year while Christmas gift cards had a 5 percent decline in 2010 from 2009.

Gift card purchasing for other occasions, such as weddings, graduations and anniversaries, is "quiet a bit smaller" in terms of market share and showed no substantial change from year to year, Hursta said.

Gift cards make up only 1 to 2 percent of the overall payments market, according to Hursta. But he noted that some retailers – especially in the quick service restaurant market – may see as much as 10 percent of their payments coming from gift cards and other types of prepaid cards.

Relationship building

The one action merchants can take to increase revenues is use gift cards to build customer relationships, Hursta said. Gift cards offer merchants the opportunity to attract new customers and build better, more sticky relationships. These relationships can be nurtured via data analysis that targets individual shopping preferences, which can then be leveraged through rewards programs and reloading options, the survey concluded.

Additionally, the survey reported consumers chose open-loop, reloadable gift cards 15 to 25 percent of the time because of their rewards features; 18 percent considered reloading more convenient than carrying cash; 8 percent prefer reloadable cards to credit and debit cards; and cardholders generally prefer to reload cards in-store, but up to 30 percent now reload online.

The study concluded that reloading encourages more store visits and that consumers spend 20 percent more per visit with reloadable cards.

First Data recommends merchants develop and implement electronic gift cards that enable consumers to purchase and gift virtual cards online. For the moment, however, the public still seems unsure about electronic gift cards; only 25 percent of the consumers surveyed said they were likely to use this option.

Still, Hursta believes there is a "robust future" for gift cards. "Gift cards are striking a balance between not knowing what you like but still having the more intimate and knowledgeable gesture of knowing where you like to shop," he said. end of article

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