Gift cards can extend your ROI into 2022

Research shows us that gift cards will be the ever-popular gift this holiday season.

Tags: Best practices, POS
Published: December 01, 2021

The item topping more and more holiday wish lists isn’t a hot new toy, the latest fashion trend, or even a sparkling bauble. It’s a 2.125-inch-by-3.37-inch piece of plastic: the humble, ubiquitous gift card (now widely available in virtual form).

  • DealDrop reports that 17% of people in the U.S. prefer to receive gift cards, topped only by cash (32.2%) or a surprise gift (32%). 
  • Gift cards are most popular among people age 65 and over, 20% of whom prefer them as gifts.
  • The worldwide market for gift cards is forecast to have a compound annual growth rate of 16.7% between 2020 and 2027, increasing from $619.25 billion to more than $2 trillion over that period, according to figures compiled by Allied Market Research.
  • More than one-third of the average shopper’s holiday budget (35%) is spent on gift cards, as the shopping site Moola reports. Restaurant gift cards are the most popular category.

Holiday gift card promotions have become a key component of nearly every retail business’s marketing strategy. Gift cards help stores and restaurants improve cash flow, build brand awareness and grab a larger chunk of holiday sales. Here’s how businesses of all sizes can be sure they start the new year with a bang by leveraging all the benefits of holiday gift cards.

 

How gift cards help retailers generate revenue

Despite the challenges of operating under COVID-19 restrictions, the U.S. retail industry saw an 8.3% increase in sales in the 2020 holiday season, according to the National Retail Federation, to a total of $789.4 billion. The clear star of the 2020 holiday shopping season was the gift card segment:

  • U.S. retailers sold 25% more digital gift cards in November 2020 than in the same month a year earlier, and a whopping 106.1% more in December 2020 over the year-earlier period.
  • In the 2020 holiday season, U.S. consumers spent $25.7 billion on gift cards, with an average value of $48.87 and an average of 3.3 cards purchased per shopper.
  • Most gift card recipients spend between 20% and 30% more than the value of the gift card when they go shopping.
  • Between 3% and 5% of total gift card value is never redeemed; this rate of “breakage” is a windfall for retailers.

Perhaps the greatest benefit of holiday gift card promotions for retailers is their ability to extend the holiday shopping season well into 2022 as recipients postpone their purchases or choose to take advantage of post-holiday markdowns. Restaurants and coffee shops are among the big winners from the surge in gift card purchases: 45.8% of all restaurant gift card sales in 2020 occurred in November and December, according to Restaurant Technology News.

 

The benefits of offering virtual gift cards

The growing popularity of virtual gift cards, which are also called digital gift cards, presents a tremendous opportunity for retailers this holiday season. Consumers did 68% of their 2020 Christmas shopping online, and the percentage is expected to be even higher in 2021. In addition, shoppers are buying more “gift” cards for themselves as a way to show their support for their favorite local businesses.

An added convenience of virtual gift cards is their ability to be added to digital wallets such as Apple Pay and Google Pay, which makes shopping with the cards safer and easier. These are among the other benefits of virtual gift cards for retailers:

  • Retailers can offer virtual gift cards without having to add any equipment.
  • They are easy for stores to customize and for consumers to personalize by adding their own messages to the recipients.
  • Virtual cards can’t be lost and are easy to keep tabs on how much of their value has been spent.
  • The cards can be programmed for delivery to the recipient on any specific date.
  • Virtual gift cards can be redeemed in many ways, including via an app on a phone or other mobile device, by printout, or by a sales associate at checkout via the store’s POS system.

 

By the numbers: Gift cards are a boon for small businesses

Businesses of all sizes know how important it is to have an online presence, but as digital and real-world operations continue to merge, they also need to understand that every part of their operation now has a marketing component. Gift cards serve as a nexus for the many different aspects of running a modern business.

  • Gift cards raise brand awareness among your business’s customers and potential customers. Physical gift cards serve as “wallet-sized advertisements,” while virtual gift cards help you reach new online audiences.
  • Businesses as varied as lawn care services, car washes, gyms and nail salons can take advantage of customers’ growing preferences for holiday gift cards by using them to promote their services.
  • The people who give the cards as gifts serve as your business’s brand ambassadors, which builds customer engagement for the gift giver and the recipient.
  • Gift cards help your business gather information about your customers to help you get a jump on market trends and changing customer preferences.
  • As more major outlets add gift-card sections, you’re able to expose your business’s brand to more people and place your cards next to those of leading brands.
  • Gift cards enhance your business’s cash flow by allowing you to collect revenue for items before they’re actually sold.

The best way to prepare your business to capitalize on the boom in gift card sales is by planning your holiday gift card promotions via the features built into a modern cloud-based POS system. In addition to offering a custom card design and personalized messages, the system lets you control card amounts and apply promotional discounts on certain items. The person buying the card can choose a physical card or a virtual card, and specify the activation date.

 

Supporting a range of gift card options is only one of the valuable features available in today’s fully integrated POS solutions. To ensure your business takes full advantage of the benefits of modern POS technology, the POS experts at U.S. Bank and talech work with you to craft a system that matches your business’s needs and budget. Learn more about what talech point of sale can offer you and your customers.