he mercury is rising, and so are the opportunities for holiday gift card sales. That's right: In order for merchants to be ready for the holiday sales season, MLSs need to get them on board by September in plenty of time to get cards designed, printed and shipped.

The Heat is On

Electronic gift cards represent one of the hottest revenue opportunities for the electronic payments industry today. TowerGroup calculates that gift card sales reached $45 billion in 2003, with an average card value of $64. It's projected the gift card industry will reach $90 billion in sales by 2007.

The payoff for MLSs is the ability to boost sales volume to existing merchants by adding a new service that can generate multiple revenue streams from initial account activation, card orders/reorders and transaction fees.

Gift cards are also a great door opener for winning the merchant's bankcard processing. Start the conversation by asking about the merchant's business, whether or not gift certificates are currently used and then describe the benefits of moving to gift cards. Once the merchant is hooked, close with other processing services. This might prove to be more successful in creating a total solution sales opportunity than cold calling would.

Seasonal Selling Tips

Most retailers sell gift cards year-round; however, a significant sales boost typically occurs during the holidays. The National Retail Federation (NRF) reported that gift cards accounted for over 8% of retail sales, or $17 billion, during the 2003 holiday season. Merchants earn interest revenue/float from the time the cards are sold until they are redeemed after the holidays. A boost occurs when shoppers come in to redeem the cards, as two-thirds of all users spend more than the card's value.

As with other seasonal marketing tactics, gift cards can be packaged and merchandised especially for the holiday season. Instead of just offering a generic year-round gift card design featuring a merchant's logo, put together a card package, featuring special holiday-themed designs.

Cards can be branded with merchants' logos, and new merchants can try holiday-themed cards incorporating their business name without incurring costly set-up fees.

Merchants might want to offer a variety of cards for Hanukkah, Christmas or New Year's. Remind them to display their gift cards at the point-of-purchase instead of behind the counter; statistics prove that this results in increased impulse purchases. Offer merchants display racks or other advertising tools, such as buttons, to help employees promote gift card programs.

Talk to merchants about corporate gift programs. For example, a restaurant might want to sell gift cards for local businesses to give to their employees as holiday gifts. Entrepreneurial MLSs become the "broker" for these deals by doing what they do best-forging relationships and then profiting from them. The business benefits from giving employees something of value that might also be tax deductible, the employees get a "free meal" on the company, and the restaurant has an opportunity to make more money than the value of the card and to win new patrons.

Talk to merchants now about after-holiday returns. Do they realize the value in providing gift cards in lieu of cash for merchandise returns? Instead of taking a sale off of the books, gift cards give merchants the ability to retain the original value of the sale and to ensure that the full value will be spent at their store. Make sure that merchants have enough gift cards in stock for the after-holiday return season.

A Bundled-up Choice

MLSs have a unique opportunity during the summer months to lead their merchant sales pitches with gift cards, and then closing with also winning the card processing business.

By bundling gift cards into total merchant-processing packages, MLSs can provide merchants with a single source for all electronic payments. NOVA's Electronic Gift Card program is one such solution, pre-bundling payments and gift cards into one multi-purpose application.

Merchants then have one source for all electronic payment processing, service, statements and reporting. Sure makes it easy for the merchant-and it gives MLSs the needed "hook" for better retention. A bundled solution makes it that much more difficult for another provider to come in and "steal" the merchant, as there might not be room on the terminal to load another provider's gift card application.

Take time to find out which providers offer bundled solutions and which terminals support those applications. If the payment package is bundled with the gift card application, the merchant may not have to upgrade to a multi-app terminal. MLSs could simply reprogram a merchant's existing Hypercom T7 or VeriFone Omni 3200 to support both payment and gift card, eliminating potential cost-of-equipment barriers.

The Gift that Keeps on Giving

Once merchants have implemented gift card programs, the re-orders and revenue roll in-for merchants and for MLSs. Chances are strong that they will continue to re-order cards as inventory depletes. And once the cards are in consumers' wallets, merchants are obligated to honor the remaining value. This provides MLSs with an additional advantage, since converting merchants from another gift card program can often be a timely, painful and costly process.

August and September are "last-minute shopping" days for electronic gift cards. The pressure is on and you don't want to be caught in the cold once the season rolls around. Plus, the incremental revenue earned from selling holiday gift card packages in the summer will pay off when it's time to do your own holiday shopping!

Michelle Graff is Vice President of Marketing for NOVA Information Systems. You can e-mail her at michelle.graff@novainfo.com .