Focus on: Gift Cards

Retailers looking to add sparkle to this year’s Christmas season may want to take a new look at their gift card programs. Last year, more than half of consumers bought at least one gift card for the holidays, according to a report from First Data Corp., an Atlanta-based e-commerce processor.

Indeed, consumers seem to be taking more of a shine than ever to these types of spending vehicles.

“The average value of a closed loop card purchased in 2011 rose more than 23% year over year, from $34 in 2010 to $42 in 2011,” according to the First Data report. (A closed loop card can be used only at a specific store. An open look card, issued by credit card providers, such as Visa and American Express, can be used at any store).

The reason for consumer interest? Choice: Sixty-five percent of participants in a First Data survey said they valued the ability to select their own gifts.  

“More than half of consumers would prefer to receive a $25 gift card than a gift valued at $45,” according to the report.

The message for retailers: Launching a new program or fine-tuning an existing one might pay off. Here are some tactics to consider:

• Go virtual. “Offer e-gift cards where possible,” suggested Shelley Hunter, a San Francisco-based gift card consultant. “The ability to send a gift from your phone gives the customer a way to quickly take care of last-minute gifts.”

Indeed, a report by digital gift card company Giftango Corp. noted that fulfillment of a gift card purchased from a retailer’s website generally takes three to five days from time of order to mailbox delivery, with the time frame even longer the week prior to Christmas. The report, “A Case for Digital Gift Cards: eGift Cards Turn Slowest Gift Card Sales Days into Busiest for Retailers,” found that gift card sales decline dramatically starting nearly two weeks before the gifting event.

However, this trend is reversed when instant digital delivery is presented as an option, according to the report. It found that the highest gift card sales days for retailers that offered both delivery options was Dec. 19, a full week later than the highest sales days for retailers that offered only plastic delivery.

• Incentivize the staff. “Reward store personnel who make gift card sales,” suggested Bob Phibbs, a retail consultant based in Coxsackie, N.Y. “Individuals on a commissioned sales team usually only get credit when gift cards are used, which can lessen efforts to sell them.”

• Liberalize return policies. If the recipient of a gift card buys something they end up not liking, will you refund their purchase or only issue a new gift card? You might prefer the latter option, but it can disappoint your customer. “You don’t want your employees angering customers about what the store can’t do with a gift card,” Phibbs noted.

• Encourage reloading. Only 9% of consumers reloaded a gift card they’d bought or received in the past year, according to First Data. Punch up that figure by offering cash bonuses or free items each time a customer adds cash to a card.

• Offer gift card substitution. Is a certain item out of stock? Post a “purchase gift card instead” sign at the in-store display, or on your website catalog. Train all the staff to offer gift cards when items are stocked out.

• Add value. Many people still hesitate to purchase gift cards, looking upon them as cold and impersonal. Warm things up by offering exciting combinations of cards and small merchandise items, Hunter suggested.

“Customers quickly catch the vision that adding a little something to the gift card turns otherwise impersonal plastic into a thoughtful act,” Hunter said. “Keep ribbon on hand to encourage the upsell.”

• Reward givers. Offer gift card buyers an incentive, suggested Hunter. “For example, customers who buy a $50 gift card might receive a $10 coupon toward their next purchase.”

Phillip M. Perry is a New York City-based business writer.