Gift cards accounted for more than $129 billion in consumer spending in 2015 and are one of the most requested holiday gift items. In fact, it was the number one requested gift item in 2015…for the ninth year in a row, according to the National Retail Federation’s Holiday Consumer Spending Survey.
With the gift card industry expected to reach $160 billion by 2018, the ever-growing popularity of gift cards presents an excellent opportunity for small businesses to cash in on a profitable trend while aligning themselves to gifting occasions and competing with national brands. Small businesses also have an added advantage selling gift cards in that they can be more personal than big box brands – giving a pre-paid card to a business that is unique and local shows the recipient that the giver put some thought and consideration into the purchase. But the benefits of gift cards don’t end there. Keep reading to learn four reasons why you should get on board the gift card train.
1. Increase average transaction amounts
The majority of gift card recipients spend nearly 40% more than the face value of the gift card they receive. Essentially, when a customer uses a gift card at your store, it typically leads to higher sales. Enough said.
2. Guaranteed revenue
Unlike physical items that customers may purchase as gifts, gift cards cannot be exchanged or returned, which means that those dollars will stay in your bank account. And when shoppers don’t spend their gift cards, that also adds to your revenue. This is called “breakage” and in 2015, $973 million in gift cards went unused. For small business owners, these qualities are an effective strategy for maximizing profitability and reducing the possibility of lost sales.
3. Bring in customers you wouldn’t otherwise attract
At a very basic level, a gift card program has the potential to bring in at least two customers to your store – the giver and the receiver, either of which may have never thought to shop at your business until they went to buy or spend the gift card. Studies show that 11% of gift card recipients receive gift cards for businesses they rarely or never visit. And another 33% changed their purchasing behavior in order to redeem the card.
4. Expand your reach by aligning your brand with gifting occasions
The most popular time of year to buy gift cards is during the holiday season (shocker). But people also purchase gift cards for other special occasions such as birthdays, weddings, showers and to show appreciation and gratitude for friends and colleagues. You can align your business to these popular gifting occasions by offering gift cards that match these events. For instance, create gift cards that says “Happy Birthday” or “Thank You” and then market those options through in-store signage, social media, or email. The benefit of doing this is that people will start to think of your business when they’re looking to buy a gift.
If you’re just starting to offer gift cards, keep in mind that most customers won’t immediately think of your business as a place to buy them. But this can be quickly fixed by communicating that information to shoppers. Marketing your gift card program can be as easy as putting up signage in your store, printing a message at the bottom of your receipts or posting a reminder to social media that says something as simple as “Buy a gift card today.”
If you don’t currently have the capability to offer your customers gift cards, fill out this form and check the “Gift Cards” box to learn how EMG can help you get a gift card program started.