Summer 2008

Gift Cards: Will They Work in Your Gift Shop? By Lyssa Myska Allen

As you know, gift cards have become a major player in the retail world. According to a recent report by Packaged Facts, a market research firm, sales are expected to grow every year for the immediate future. In its report entitled “The U. S. Market for Prepaid Cards with a Focus on Gift Cards,” sales should hit $52.2. billion by 2012. The numbers are big enough to keep an eye on. So how can small, independent retailers get into the gift card game? Is it worth the effort? Or should you not bother?

Bob Negen, retail marketing expert and founder of WhizBang! Training, says they are worth a look, especially if you don’t have your heart set on working with gift cards but can do paper gift certificates instead. “For the costs associated with gift cards, if you don’t sell enough, it makes sense to stay with nicely presented cardboard or high-quality paper certificates,” Negen says.

Whether you run with a gift card or a certificate, they have the potential to work in many ways: for the retailer, it can increase sales, bring in new customers, and encourage spending more than the gift card amount. For the consumer, it assures that the recipient can choose a gift for themselves and cuts down on returns.

In the pre-push period before holiday seasons, one idea is to partner with a non-profit and offer a percentage donation to the group for all gift cards or certificates sold to members. A store sells gift cards, acquires new customers, and creates a tax-deductible donation with one simple move—it’s a win-win-win situation.

Selling gift cards

Negen says contests and rewards for the sales staff can be a powerful motivator to sell. Prizes can range anywhere from movie tickets to a percentage of the cash value of gift certificates sold. If a customer comes in not knowing what to get as a gift, suggest a gift certificate as an attractive option.

It is also important that signage is sprinkled throughout the store. Each sign needs to be high quality and attractive. Equally important is the way you present the certificate, attractively boxed or packaged, so that people will feel proud to give a gift card or gift certificate from the store.

Marketing is also important, especially through email. Negen likes to create push periods before holidays, where he starts with an email marketing campaign that suggests gift card giving, and couples the email campaign with bag stuffers in the store. He suggests promoting proactively before the season starts. Especially in the pre-holiday period, stores can also look into corporate gift giving: selling their gift cards at a small discount to corporations who give holiday gifts.

Too impersonal?

While gift cards are a great idea for tough-to-shop-for people—grandparents, teenagers, boomers who have it all—some worry that they might be a tough sell to customers shopping for close friends. Despite the fact that a recent BIGresearch report shows that 65% of American consumers like or love receiving gift cards, personalization is still important to many gift-givers.

Helen Kenney is the owner of The Scented Garden, in St. Michael’s, MD. Her store is targeted primarily at women. Kenney wonders if women gift givers are more hesitant to buy and give gift cards. “We want to find the perfect gift that represents our friendship, that lets them know that we know them so well,” Kenney explains.

Luckily for retailers, there is a way to personalize those impersonal gift cards and certificates: add-ons. Promote these in your store. The add-ons can be anything from a teddy bear to a snow globe, a pillow to a tree ornament—and even anything with a little pocket or slot for a gift card. Philip Rist, executive vice President of BIGresearch, a market research company based in Worthington, OH, argues that the add-ons are important because “It’s something that makes the flat gift card into a three-dimensional thing that you can take and wrap up.”

Even if you don’t sell gift cards, you can always push add-ons in your store. For a smaller store, it makes sense to acknowledge the gift card trend and stock the accompanying products, even if it isn’t feasible to create gift cards for the store itself, Rist says.

Potential negatives?

With so many advantages to selling gift cards or certificates, are there any disadvantages? Unredeemed gift cards can present a challenge. Rist calls it “a double-edge accounting game … [the store] has the cash but can’t record the sale until it’s redeemed. So a lot of holiday gift card purchases don’t show up until January, February, or March.” Negen adds that if a gift card or certificate goes unredeemed it’s a lost chance at making a new customer.

For retailers worried about fake duplicates, Negen offers a few tips: Use color printing and personalize it with a signature and manager’s initials to make duplicating more difficult; or try a wax seal with the store’s logo to make duplication almost impossible.

Marketing move?

Negen advises retailers to work gift certificates into their marketing strategies. He encourages a marketing blitz where the store gives away free gift certificates. The idea is geared toward creating a lifelong relationship with new customers. Even if you take a bit of a hit on the first transaction, you are creating a valuable relationship with a customer who will likely come back many more times in the future, Negen points out.

According to Negen, a store needs a sale to make a customer. “The value lies in the customer. Gift cards and gift certificates create new customers.” When a customer comes in to use their free gift certificate or gift card and is satisfied with their experience, they will come back.

Distribute gift certificates to your hottest prospects. They can be identified a number of ways: population groups likely to spend money at the store, or the customer base of a complementary store.

Another marketing strategy, one that Kenney of The Scented Garden uses, is to donate gift certificates when local schools or non-profit organizations come looking for donations. This also brings customers (potentially new ones) to the store.

Gift certificates can easily be printed even at the local copier and there are dozens of companies who offer gift card options for retailers like you. Gift cards and gift certificates offer a variety of ways to expand customer base, create new opportunities for retailers, and increase sales. They might also work for you as efficient marketing tools. So do your research and try them out. They might not work for everyone. On the other hand, they could become a strong arm of your retail business!

Lyssa Myska Allen

Lyssa Myska Allen is a writer based in Austin, TX. Her work has appeared in a variety of regional and national magazines including Texas Home & Living, HOUSTON Modern Luxury, and Concrete Homes.