Global prepaid network Blackhawk Network Holdings Inc. opened 2016 with two strategic acquisitions for a total purchase price of approximately $120 million. Given the success of physical gift card distribution since Blackhawk's introduction of the gift card mall more than a decade ago, the company is now expanding its reach in the digital and rewards arenas.
Blackhawk stated the acquisition of GiftCards.com LLC, a website that offers digital and physical gift card solutions to consumers, and OmniCard LLC, a firm that specializes in prepaid incentive and reward solutions for business clients, is consistent with the company's growth strategy around its digital product expansion and is expected to increase Blackhawk's net income in fiscal year 2016.The acquisitions were funded using cash on hand and borrowing from an undisclosed institutional investor.
Originally a subsidiary of Safeway Inc., Blackhawk introduced the in-store gift card mall concept at Safeway stores starting in 2001. After going public in 2013, the company saw significant growth through partnerships and acquisitions as it built out its gift card network across 24 countries.
"By adding GiftCards.com to Blackhawk's suite of gift card e-commerce solutions, we expect to broaden our open- and closed-loop product offerings and provide more ways customers can purchase gift cards through more websites and mobile applications," said David Jones, General Manager of Global Digital and eCommerce at Blackhawk.
At this point, retail gift card distribution has reached maturity in the U.S. large retail segment. "If you want a plastic card, which is a great product, there is no shortage of places," said Walter Paulsen, payments industry consultant and startup executive, who expects single-digit growth in this segment. "The GiftCards.Com and OmniCard acquisitions focus on alternatives where there is growth, which is primarily B2B, incentive and online/digital."
Blackhawk Chief Marketing Officer Teri Llach agreed, noting that in addition to its robust physical retail business, the company has adopted an aggressive strategy within the digital space in recent years. "Physical gift cards are still very popular and growing," she said. "But we also have GiftCards.com and GiftCardMall.com, where people are buying the digital card."
Jones cited GiftCards.com's strong web presence as a contributing factor in the purchase decision. "Adding their website to our portfolio of e-commerce sites, which we already have a few of, just doubled or tripled our e-commerce presence," he said. "That provides us scale, and it solidifies our existing e-commerce strategy."
With these recent acquisitions, Blackhawk is making steady progress in unifying its multichannel offerings. "The e-commerce channel overlaps or straddles a lot the businesses Blackhawk is in, in that we sell physical plastic, we sell e-gift and we also sell B2B incentive," Jones said.
As a longtime prepaid expert, Paulsen considers the acquisitions a smart move, tactically speaking. "I think what Blackhawk is trying to do, in a very calculating way, is to not disrupt their retail business, which is a highly profitable machine run like a Swiss watch," Paulsen said. "This is a bet on the future, and it's not just on digital distribution, but all the associated digital payment marketing services that they may be able to do."
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