Selling gift cards can be a very profitable endeavor for retailers. According to an independent survey commissioned by Stored Value Systems, a gift card supplier and electronic transactions manager, 53 percent of gift card recipients spend more than the card’s value when it’s redeemed at the retailer.
Customer loyalty also increases when a customer uses a gift card. SVS found that as a result of receiving a gift card, 15 percent of gift card recipients become loyal customers of the company where they redeem the card.
Retailers love gift cards. Maybe it’s because almost 50 percent of gift card users load between $20-$29 on cards they give to others. But the incentives go beyond the increased revenue.
Paper versus plastic
Gift cards have many advantages over traditional paper certificate systems. First, gift cards can be used in the store, when ordering from the catalog or via the merchant’s Web site.
A second advantage is that gift cards offer security features that paper certificates can’t.
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Most gift card programs have security features built-in to protect customers and the retailer from theft or fraud. This includes features such as 16-digit account numbers, card validation values and, some with, security PINs.
Unlike losing a paper certificate -- which is similar to loosing cash -- if gift card is lost or stolen, customers can report the problem with most magnetic-strip cards being immediately deactivated and reissued.
But one of the biggest rewards for retailers is the ease of tracking usage at the point of sale.
Tracking paper certificates can be a nightmare. Because most certificates are issued at one store and redeemed at another there is room for error when accounting for the gift usage. With gift cards there’s no need to manually match certificate purchases with redemption slips or reissue the balance on another certificate.
Kiosk distribution
Retailers have the opportunity to easily distribute cards to a larger audience while providing convenience and a higher level of service by employing kiosks for card distribution.
E*Trade is one company that understands that retailers can expand the store’s reach by placing gift card kiosks in remote locations.
“We believe the biggest advantage is to be able to sell that gift card outside of the store,” said E*Trade President Dale Dentlinger. “So it’s not for in-store sales because they can do that at the point of sale easily.”
And the promise of being able to increase market share through remote selling is something that E*Trade is counting on.
“We are working with some of our current retail partners to try and develop some gift card kiosk programs,” said Dentlinger. “It’s something that the benefits are primarily to the retailer, and E*Trade is in the perfect position to provide those services since it is so similar to deploying an ATM.”
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