B2B Gift Card Industry Trend Report: Q2 2011

Designed to keep our clients informed of the evolving B2B gift card landscape

Throughout the second quarter of this year, the GiftCard Partners team has attended industry conferences including the Great Lakes Scrip Center 2011 Retail Partnership Summit and also kept our pulse on the latest industry trends. As the gift card industry  is always evolving, we are pleased to keep you current. If you have any questions or would like guidance navigating any facet of the industry, we’re here to help. Just contact Ed Shulkin at: Eshulkin@giftcardpartners.com.

The more we study emerging gift card technologies, the more we discover key opportunities for our clients.

In our constant efforts to stay apprised of up and coming gift card technologies, GiftCard Partners recently investigated which of the Top 50 Retailers are accepting gift cards as payment online. We found that over half of the Top 50 retailers do. Among those that don’t, they are primarily restaurants or drugstores.  

Getting in touch with your gift card e-retail side is now more important than ever. Wide-spread broad-band across America has contributed to an increase of internet users, from 55% to a whopping 84% in the last 10 years . Not only will adopting online gift card redemption enhance customer convenience, increase sales, and amplify loyalty; it is also a foray into the mobile internet realm, which is predicted to overtake desktop internet usage by 2013 .

No matter the size of your business, not accepting online gift card redemption is a missed opportunity to engage with customers via their potential preferred researching and buying method. Other opportunities include:

  • Decrease  in breakage (if they are in your breakage #’s they are lost customers)
  • Increased brand awareness
  • Cross-promotional opportunities
  • Opportunity to serve potential customers that don’t have a store nearby
  • Cost efficiency (more online gift card redemption results in less usage of credit cards and the associated interchange fees)

Internet immersion is also one important baby-step towards the more mature e-retailing strategies like utilizing QR codes to connect offline and online consumer activities, social media for customer service, group couponing and targeted promotions….undoubtedly the cutting edge of retail is online.

This year’s Great Lakes Scrip Conference gave us some great insights into the uses and demographics of an important gift card category, Scrip.

Despite our slow economic recovery, the apparel category showed a respectable 12% increase in 2010 versus 2009 and gas/auto and grocery both showed year over year increases of 13% and 5.5% respectively. Not surprisingly, decreases were seen with department store merchants and in the dining category. We can see that the state of the economy has impacted consumer spending patterns resulting in a flight from spending on discretionary goods to increased purchases in the grocery, gas, and discount retail categories.

One of the goals of a scrip program is to gain a greater share of consumers’ wallets by encouraging participants to use Scrip rather than cash, credit cards, debit cards, or checks and this is happening with “necessary” purchases. The end user/consumer spending will happen anyway, for everyday needs, but gift cards used for Scrip supports good causes: charities & fundraising events, schools, churches, athletic organizations, bands, Scouts and hospitals.

What do we know about the average Scrip participant?

  • The average scrip family is “blue collar”
  • The use Scrip on a weekly basis for personal consumption
  • The rebate (discount) is central in their decision to purchase one brand over another.
  • Scrip families are highly dedicated to their schools and non-profit organizations and scrip is an integral part of their fundraising efforts

Where are the merchant promotional opportunities?

  • Bonus promotions (Avg. bonus promotion produces a 14% lift)
  • Coupons inserted in orders
  • Online advertising at SWS.com
  • Customize marketing messages that can be delivered to participants through the ShopwithScrip portal 
  • Bonus Cash Scrip
  • Social media as a promotional vehicle

In last quarter’s GCP Industry Trend Report, we outlined the general benefits of closed loop gift cards as they pertain to the Credit CARD Act of 2009, including escheatment and incentive card exemptions.  A law on the docket in Oregon, if passed, will require companies to give gift card holders cash back if the remaining value on the card is $ 5.00 or less. This will make Oregon the second state to adopt a cash-back statute, California being the first. Although these seem to be the only states working towards a cash-back law at this time, there is the possibility of this consumer law becoming a trend and we’ll be sure to keep you posted.

Source: NRF Stores – Top 100 Retailers 2010

Source: Internet Retailer – Market Saturation Trend 2000-2010

Source; Morgan Stanley research