Why retailers shouldn’t underestimate the value of gift cards

Why retailers shouldn’t underestimate the value of gift cards

By Gail Cohen, Director General of the UK Gift Card and Voucher Association

The struggles currently faced by the High Street have been well-documented in recent years. While it may be tempting to blame these woes on the rise of e-commerce, it unfortunately doesn’t seem to be that straightforward, with some of the biggest online-only players reportedly encountering financial difficulties. 

In such a challenging environment, retailers must be responsive to consumers’ changing demands, and any strategy that can drive consumer footfall and encourage greater spend should be embraced wholeheartedly. 

The UK Gift Card and Voucher Association (UKGCVA) recently published its bi-annual State of the Nation research, which seeks to explore UK shoppers’ attitudes towards gift cards – be they physical, digital or paper. The results of this year’s survey, sponsored by First Data, highlighted their enduring popularity amongst consumers of all ages and revealed them to be an extremely useful tool for retailers looking to attract and retain customers. 

The report showed that a massive 83.7% of UK shoppers have purchased a gift card at some point in their lives. Perhaps even more significantly, the youngest generation Z/Millennial generation (aged 18-34) shoppers represent the most frequent purchasers. 43.7% of this age bracket purchase one at least once every two months, as opposed to 34.8% of Generation X (aged 35-54), and just 16.3% of baby boomers aged 55 and above. 

With demand so high, here are just four of the ways that a well-managed gift card scheme can be of great benefit to retailers.

Attracting new customers

One of the most obvious benefits for retailers is the ability to attract new customers; gift cards can play an important role in driving brand awareness and engagement. Often, the recipient is not already a customer of that particular brand, enabling retailers to build relationships with shoppers they may have otherwise struggled to reach. Giving consumers the option of spending their gift cards online provides retailers with additional data collection opportunities, helping them to expand their marketing lists. 

Interestingly, the data revealed that almost one in five (18.5%) shoppers have become a regular customer of a new brand after being given a gift card, highlighting their effectiveness in this arena. This figure rises to 31% of Generation Z/Millennials, suggesting gift cards are a great way to establish a younger customer base, which will be crucial for most retailers going forward. 

Encouraging greater spend

Gift cards can be a brilliant tool for driving consumer footfall, with the research showing that 98.6% of consumers spend them within a year of receipt, and 50.3% within a month. However, not only do they encourage people to visit a store – either in person or online – they also often result in customers spending a higher amount than the straight value of the gift card during redemption. 

66.7% of respondents said that they normally spend more, with an average extra expenditure of £18.55. This is a significant 67.1% uplift on the stated average gift card load of £27.64. 

Increasing customer loyalty

Various pieces of recent research have highlighted the rise of a very interesting trend: self-gifting. One 2018 survey showed that 47% of UK shoppers purchase gift cards for self-use, with Millennials most likely to do so. One of the main reasons is to receive a discount, highlighting gift cards’ potential value when it comes to fostering customer loyalty, which is often overlooked.

According to the UKGCVA report, 73.5% of people would be interested in the ability to collect points or receive cashback on future purchases when redeeming gift cards. To help increase shopper loyalty, retailers could look at developing their programme to include rewards and incentives for users, such as alerting users to deals, offers and discounts accessible with the gift card. Additionally, retailers can look at creating members’ areas and special promotions for holders, maximising the opportunities for long-term relationships and a sense of exclusivity.

Flexibility is the key to success

It is becoming increasingly clear that an omnichannel approach is critical when it comes to success in the retail industry, and this includes gift card programmes. This year’s research shows significant growth of the use of digital channels among consumers when redeeming gift cards, with 43.9% of shoppers now usually spending them online, and 11.4% via mobile. 

No surprise, then, that the majority of respondents also said the ability to redeem online is an influential factor when making a gift card purchase. For consumers, the freedom to spend across all channels is increasingly important, so retailers should be making technical innovation a focus going forward in order to ensure they are meeting their customers’ expectations. 

Retailers should not underestimate the potential value of a gift card scheme, which can help them to optimise every step in a customer chain – from initially raising brand awareness and attracting them to the retailer in question, to maximising their average spend with that retailer, and finally to returning as a repeat customer and increased loyalty. 

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