Gift cards are becoming increasingly popular for many reasons, with convenience being the most important for consumers. In this blog, we'll explore why gift cards are a great opportunity for merchants to boost revenues and the benefits they provide for both consumers and businesses.

Gift cards are convenient

Have you ever wanted to give someone a gift but had no idea what they'd like? Or maybe you want to get something for someone who seems to have everything? That’s exactly when gift cards are a great option, as they are versatile and suitable for any occasion. Literally, name an occasion where a gift card wouldn't be appropriate. In our fast-paced society, where we often don't have the time to shop for the perfect gift, gift cards provide an easy and practical alternative that also helps manage expenses and extend budgets amidst the rising cost of living, making them an even more appealing choice.

Types of gift cards

Gift cards come in several types and each type caters to different preferences and needs, ensuring there’s a suitable option for every gift-giving occasion. Let’s take a look at the main types of gift cards available.

• Store-specific, or closed-loop, gift cards can be used at designated retailers, making them ideal for recipients who have a favorite store.
• Multi-store gift cards provide more flexibility, allowing use at a range of affiliated stores.
• Prepaid debit cards, or open-loop gift cards, such as those from Visa or Mastercard, offer the broadest usage, working like cash at most locations.
• Last but not least, there are e-gift cards, which are digital versions, perfect for instant delivery and online shopping.

Rising trends

Gift cards are becoming increasingly popular, in 2023 the gift card market saw a 10% growth, and the Combined Annual Growth Rate (CAGR) is set to hit approximately 13% by 2027. Holiday seasons are more important than ever, as consumers plan to spend nearly half their holiday budgets on gift cards. Furthermore, younger generations are more likely to buy gift cards as compared to older generations, and the main driver is their immediacy and convenience, especially for open-loop gift cards. Open-loop gift cards give consumers a wider choice, which makes them the most favourite gift card type. But what consumers seem to be preferring, is digital gift cards or e-gift cards. It is no surprise that e-gift cards now claim about 48% of the market share. With the rise of digital wallets, e-gift cards can be instantly added to online accounts or mobile wallets, which makes them more attractive.

Gift cards as a versatile (corporate) gifting option

With the cost-of-living crisis, consumers are adapting their spending habits because of less disposable income. We can see that for instance, leisure or grocery gift cards, are one of the most preferred gift card choices, suggesting that consumers are gifting these to their family and friends who don’t have the budget to spend on them.

In the corporate sector, gift cards are used for employee incentives, customer loyalty programs, and customer gifting. Businesses benefit from the flexibility and ease of gift cards, eliminating the need to find the perfect gift while providing scalable and customizable options. This empowers recipients to use the gift according to their preferences, adding significant value during times of financial strain.

In conclusion, gift cards are an adaptable solution for both personal and corporate gifting needs, addressing the current economic challenges while providing practical and appreciated gifts. Whether for individual consumers or businesses, gift cards simplify the gifting process and offer value in a time of financial uncertainty.

Why retailers should care

If it wasn’t already clear, retailers should make sure they offer gift cards in their catalogue. Why? Because they offer immediate liquidity and a stable revenue stream, even during economic downturns. Gift cards encourage consumers to spend more than the card’s value, boosting sales and profit margins. They also drive customer loyalty, as consumers are more likely to pay full price when using gift cards.

Moreover, digital gift cards enable retailers to gather consumer data, allowing for personalized promotions and targeted marketing that can enhance customer satisfaction and retention. By offering gift cards, retailers can attract new customers, provide convenient gifting options, and create opportunities for upselling and cross-selling.

Learn more about this topic: Digital goods supermarkets' new aisle

Important factors to keep in mind when selling gift cards

Some things are important to keep in mind if merchants are planning to sell gift cards, or want to improve their sales. Customization is an important factor for consumers looking to purchase a gift card because it shows more effort from the gifters' side and adds a personal touch to it. You can offer customization options by allowing consumers to choose a particular design for their gift card, or maybe add a personal message, photo, or video to it.

Also important is to remind consumers about their unused gift card balance. Not only does this help boost revenues, but it also avoids consumer disappointment, especially in cases where money is detracted after a certain amount of time that the gift card is not used.

Additionally, offering gift card promotions can be useful, as consumers are more likely to buy gift cards with special promotions, or loyalty incentives. Considering that consumers often exceed the gift card value when making purchases, this can result in higher profits for businesses.

Lastly, don’t forget about fraud. Fraudsters love gift cards because they are easy to monetize, readily available for use and difficult to trace, which makes the chances of getting caught almost inexistent. Usually the most common type of gift card scam is for fraudsters to buy them with stolen cards or IDs, and then quickly exhaust their value or resell them before a chargeback request is made by the victim. So always have strong fraud-prevention measures in place.

Learn more about this topic: The gift cards' industry: A fraudsters paradise?

Need help selling gift cards?

Selling gift cards is a great opportunity for your business but it can also be tricky. Managing customization options, keeping track of unused balances, and creating effective promotions to encourage purchases is a challenging task. It is also not easy to ensure gift cards integrate seamlessly with digital wallets and mobile platforms, and protect against fraud. That is why we are here to help!

With Checkmaxx, our end-to-end solution, merchants can enable their brands to quickly launch a digital goods store without any risk or hassle. At Alphacomm we provide best-selling digital goods including gift cards, top-ups, game cards, e-money and eSIMs. We can even add your own gift card online. Contact us to know more.