Who gives gift cards anymore? According to the Global Gift Card Survey, the U.S. gift card market will reach over $3.22 billion in 2022. The gift card market is forecasted for a CAGR or growth of 8.8% from 2021 to 2025. American consumers love giving and getting gift cards! And that is great news for merchants.
If you have a retail location, such as a medical or adult-use dispensary, you may be wondering about gift cards. Many retailers enjoy increased revenue and other benefits like brand awareness after launching a digital or conventional gift card program. And some use gift cards as part of a customer retention or loyalty program.
When you decide whether to add a gift card program to your business, consider five important benefits that can help you recruit and retain customers and grow your sales volume. Branded gift cards can augment your retail sales and revenue stream in some surprising ways.
1. Gift Cards Increase In-Store and Ecommerce Transactions
When a consumer uses a credit card, debit card, or cash, the instinct to budget kicks in; we are all careful about what we spend when it is being added to our credit card or debited out of our checking account. As inflation increases, American consumers are even more careful about spending, regardless of how good the deal or promotion is.
Gift cards, however, are viewed as “free money” since the individual received one as a gift. It didn’t cost the recipient anything to purchase it. This means the consumer has no qualms about spending the full amount on the card. After all, that is the whole intention of receiving a gift card. Casual (and guilt-free) retail indulgence.
Whether at your brick-and-mortar store or online, your customers can’t wait to spend their gift cards. Many people are concerned they will lose or forget they have a balance on the gift card. When the recipient visits your store, chances are that they will use the full value of the gift card on their purchase that day.
Have a gift card? Will shop! No further encouragement or incentive is needed for consumers who will enjoy using their gift card at your POS. And since many payment terminals do not offer the option of split payment (to return change from a gift card), your customer is motivated to spend the full amount on the card. Or possibly more.
2. Consumers Make Higher Value Purchases Using Gift CardsMany consumers will use a gift card balance to help reduce the cost of a larger ticket item or product sold in your shop. For example, your customer may have their eye on a luxury good in your store. One that they may not want to pay the total price for out of pocket. But would gladly apply a gift card balance to essentially discount the purchase.
Sometimes, people save up gift cards for very large purchases. If your customer loves the products in your store, they may ask family and friends to contribute gift cards. That allows the recipient to choose their gift. And get exactly what they want.
It also means that consumers using one (or more than one) gift card are likely to spend more than the balance provided on the card. That increases your cart or POS value too. Particularly on higher-cost items that can be more difficult to sell.
3. Gift Cards Benefit Cash FlowWhen consumers purchase a gift card, it benefits the cash flow for your business. That is because you receive the value of the gift card upfront. Whether the end consumer uses the card to purchase products, retailers receive that payment in advance. The holiday season is a popular time for people to purchase gift cards. But the majority of consumers may not use the gift card for 1-2 months after receiving it. The average consumer, however, uses the value on a gift card within six months.
For retailers, that can be an advantage for both in-store and e-commerce sales. It can help stagger out purchases beyond busy seasons and present opportunities to upsell consumers on additional products. With new campaigns encouraging consumers to shop and use their gift card balance, sales can be stimulated (for example) in the slower winter months.
Should You Create a Reloadable Gift Card?
Some consumers also use reloadable gift cards as a personal budgeting tool. For example, if a customer visits your medical cannabis dispensary monthly, they may prepay an amount on a gift card to help them budget purchases for the month. Particularly if they receive an incentive for using the gift card for purchases, such as a discount, or a BOGO loyalty program offer.
Once your customer loads the card, you know that they will return to use it. That helps encourage more traffic to your store, or e-commerce transactions.
4. Promotional and Discount Incentives to Sell Gift Cards
Some vendors encourage the purchase of gift cards by providing an incentive. For example, a gift card may provide $50 of spending value at a cost of $40 to the consumer. A small discount like that is often enough to encourage the purchase of a gift card. Discounted gift cards have even more intrinsic value. It provides consumers with an additional monetary incentive and more spending power for participating. Consumers can give a higher value gift card to someone they care about while still keeping costs economical.
5. Employee Incentives
Are gift cards part of your employee reward program? Another benefit of creating a gift card program is the ability to build a reward system for your employees. Issued to employees, gift cards must be reported as taxable income. They can be fully branded and customized to encourage teamwork and reward performance.
Talk to Us About Creating a Gift Card Program for Your Business
The ongoing challenges with the global supply chain and increased inflation have impacted the retail sector in every product or service vertical. But a gift card strategy for your business could help stimulate sales and boost revenues.
Learn more about designing a unique gift card program with Paybotic. And choose from our e-Gift cards, reloadable, secure PIN, and promotional card options. Let our team help you boost sales, increase POS cart value, and build effective loyalty programs.