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GIFT CARDS ARE PROFITABLE

Are you using Gift Cards?  If not, you should be.  Research has been done on these cards and it has been found that people who use them usually spend more than the value of the card, as much as 31% than they would have if they did not have the card.   They are also more likely to buy at regular retail instead of waiting for a sale.

Following are some statistics from a study commissioned by ValueLink, the gift and spending card service of First Data Corp in 2003.  Survey findings indicated that consumers increased the number of cards they purchased to an average 5.6 cards per year

  • Purchasers and receivers rate their overall satisfaction with gift cards as 9 on a scale of 1-10, with 10 being "extremely satisfied" and 1 being "not at all satisfied."
  • Compared to the average $197 spent on gift cards in the previous year, middle age purchasers, age 45-54, now average $235 per year; and purchasers in the age range of 55-64 now average $241 per year.
  • Nearly 50 percent of all purchased cards had a $20-25 value.
  • The growth rate for reloading gift cards has more than doubled -- 20 percent to 42 percent growth -- between 2001 and 2003. This is an opportunity to get more loyalty from customers (or new customers).  When the value left on the card is relatively low, ask the customer if they would like to add to it for future purchases.
  • 54 percent of consumers spend the initial value of their gift card within one month.
  • 61 percent of consumers spend the initial value of their gift card in their first visit, (which means that 39 percent will make more than one visit to your store)
  • 56 percent of consumers spend more than the initial value of their card.

Advantages Of Gift Cards Over Paper Gift Certificates
Gift cards have no value until loaded at the cash desk. As a result, they can be prominently displayed any where in the store, rather than stored in a drawer for security reasons, like their predecessor, the gift certificate.

For both consumers and retailers, gift cards are not the drab gift certificates of old. They are particularly attractive to younger recipients, due to their similarity in appearance to credit cards, and to older recipients who "have everything".

They are also much harder to counterfeit. They are more flexible than gift certificates because they can be loaded for any amount the purchaser desires and many of them can be reloaded.

Many retailers are using the cards as a marketing tool, producing them in bright colors, with their logos and a variety of eye-catching designs. They can also build store-loyalty; drawing in recipients who might not have frequented a particular retailer in the past.
Because the cards are electronic, the retailer can better track their use, providing another source of data on their customers’ purchasing habits.

In addition, a further side-benefit to the retailer is that a certain percentage of gift cards are never redeemed, in full or in part. Even where cards are ultimately redeemed, a certain percentage remains outstanding at all times, giving the business a fund to invest in the meantime.


Are There Any Disadvantages For The Retailer?
They're not cheap. Gift cards can cost a retailer from 50 cents to $3 a card, depending on how many are ordered.   Though they can be re-used. Also, there are implementation costs and you generally have to go to an outside company to set up a program.  Also, you need to be aware that since there is no sale until merchandise is actually purchased, using Gift Cards tends to shift sales from December to January or later.

If you do not already have a Gift Card program in your store, it is time to start or at least give it some serious thought.

The Retail Management Advisors is a BBB Accredited Management Consultant in Allen, TX

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