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GUEST COMMENT Why retailers should take notice of consumer demand for gift cards

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GUEST COMMENT Why retailers should take notice of consumer demand for gift cards

Gail Cohen is director general of the UK Gift Card and Voucher Association
Gail Cohen is director general of the UK Gift Card and Voucher Association

 

It is no secret that the current retail environment is rather challenging. In December, a report by the KPMG/Ipsos Mori Retail Think Tank predicted intensified challenges throughout 2019, including changing consumer behaviour, the oversupply of physical stores, debt levels and regulatory costs. As reported in the Guardian, major players from ASOS to Primark have warned of choppy waters ahead.

 

In such an environment, any activity which can drive consumers to retailers’ ecommerce sites and encourage greater spend should be encouraged and embraced wholeheartedly. The question, of course, is what kind of activity is actually effective at doing so?

 

The consumer perspective

The UK Gift Card and Voucher Association (UKGCVA) recently published its State of the Nation 2019 research, drawing on a nationally-representative survey of 2,000 UK shoppers.

 

The survey highlighted the enduring relevance of a popular consumer proposition that has been around for years – the gift card - which includes digital, physical and paper forms.

 

A massive 83.7% of UK shoppers have purchased one 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 of gift cards. 43.7% of this age bracket purchase a gift card 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. This is largely impart to the rise in omnichannel strategies, which allow consumers to spend their gift cards online, as well as instore.

 

What do these results tell us? Not only have gift cards retained powerful penetration in customer consciousness over time but, crucially, they are particularly popular amongst the younger demographics that retailers need to attract and maintain in order to retain a strong customer base into the future.

 

A well-managed gift card scheme can help retailers 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. Let’s take a closer look at how.

 

Attracting customers and developing brand recognition

As well as receiving gift cards as presents from friends or family or rewards from employers, more and more people are buying gift cards for themselves. Little surprise, then, that over half (50.3%) of recipients redeem their gift cards within a month of receipt, and 98.6% within a year. For the retailer in question, if the recipient did not already shop with them, then this is a golden opportunity to engage with new customers, increase brand awareness and expand its marketing list.

 

For online retail in particular, it is worth highlighting that 58.6% of survey respondents said that the ability to redeem their gift card online would be a major factor in driving a purchase decision. Gift cards can be a powerful means of driving consumers to an ecommerce website, where valuable data collection and cross-selling opportunities can take place with relatively little effort on the retailer’s part. Special online promotions or website areas for gift card holders, for example, can enhance the shopping experience and maximise the sensation of a treat.

 

Increasing average spend

So-called ‘lift’ – the average extra spend that a shopper makes above their gift card value – is not always well-understood amongst retailers, and yet it is one of the simplest, and most powerful benefits of a gift card programme.

 

67% of survey respondents said that they normally spend a higher amount than the direct value of their gift card when they redeem it. The cited average extra expenditure was £18.55, or a 67.1% uplift on the stated average gift card load of £27.64. In other words, gift cards offer a powerful means of up-selling.

 

Building loyalty and long-term customer relationships

This benefit is often neglected by retailers deploying gift cards, who focus on the initial gift card purchase and its redemption, but not necessarily what happens next. Yet our survey results suggest that just under a third – 31% - of Generation Z and Millennial shoppers have become regular customers of new brands or organisations after receiving a gift card.

 

To help increase shopper loyalty, online retailers could look at developing their gift card programme to include rewards and incentives for gift card users, such as alerting users to deals, offers and discounts accessible with the gift card. Our survey found that 73.5% of UK consumers would be interested in the ability to collect points or to receive cash back on future purchases when redeeming gift cards.

 

Additionally, online retailers can look at creating members’ areas and special promotions for gift card holders, maximising the opportunities for long-term relationships and a sense of exclusivity.

 

How to implement an effective gift card strategy

With such a wealth of benefits available to retailers who implement a successful gift card programme, it would be questionable if retailers did not look into it. However, to use gift cards truly effectively, it is important for retailers to consider the major motivations of today’s shoppers, particularly the Generation Z and Millennial demographics.

 

While gift cards have predominately been seen as a consumer gifting tool, more and more are being used as incentive, reward and regonition products, which has consequently seen an uplift in the B2B market each year. In addition, they are also being used as a self-use product, with many Millennial and Generation Z shoppers buying them for themselves.

 

Savvy online retailers should therefore think carefully about the channels their gift card is being used for and what is important to the consumer, including the aesthetics, sustainability and ease of use of the product.

 

In terms of aesthetics, for example, personalised products, using photo uploads, video content and/or bespoke packaging can be a powerful way of standing out from the crowd and making the purchaser feel more confident that they are gifting something special; a hefty 58.7% of UK shoppers said that they would be interested in such an approach when buying a gift card.

 

Being able to purchase – and redeem – gift cards online is also an increasingly powerful driver, which put e-tailers in an opportunistic position. Creating a slick, intuitive and attractive mechanism for both gifting and spending cards through a website could make the difference between surviving and thriving in today’s tough retail landscape. Because let’s look at the facts – gift cards have never been so popular and are here to stay.

 

Gail Cohen is director general of the UK Gift Card and Voucher Association

 

Main image: Fotolia

 

Author image courtesy of the UK Gift Card and Voucher Association

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