Retailers discovering benefits of gift cardsWhen a customer pulls out plastic to pay for a purchase,
it’s no longer always a bankcard. The gift card has become an increasingly
popular product with customers and retailers alike, and is fast replacing
the traditional paper gift certificate. The past holiday season saw an impressive rise in the
sale of gift cards across the country. A survey by America’s Research
Group found that more than half of Americans who shopped this past season
said they intended to purchase gift cards or give cash for the holidays.
Paper or plastic? Product placement is a big advantage, according to Marcy
Janeszko, marketing director at Ann Arbor-based Ideation, which has three
gift stores using the cards. “Paper gift certificates are not even visible,”
she said. “Gift cards can be placed very visibly as point-of-sale
items at the register counter, where they are more likely to get a customer’s
attention.” Jewelry retailer Becky Beauchine Kulka, whose store has
been using gift cards since before the holidays, points to the durability
and portability of a gift card. “It doesn’t get worn, torn or faded like paper.
It usually goes in customers’ wallets, near their credit cards, so
customers see the store’s name or logo when pulling other cards from
their wallets. And they have it with them all the time, unlike a gift
certificate,” she pointed out. Kulka markets her gift cards in a way that would not work
with gift certificates. “When a customer purchases a card, our salesperson
puts it in a small jewelry box, so it can be presented as a gift of jewelry.
People receiving them love the presentation,” she said. An average of seven percent of the value of a gift card
is never even used; the unused value goes to retailers as profit. Much
of this profit comes from that remaining few dollars left on a card after
a purchase. The unused portions of gift cards are not refunded, as often
happens with the unused balance of a gift certificate. Small values left on a gift card may also bring a customer
back for another purchase, another thing that doesn’t happen with
a gift certificate. “A customer with a balance of $5 on a gift card will
often return and spend another $100 to use that remaining value. That
means I’ve got a sale that might otherwise not happen at all,”
said Kulka. Many retailers report that the biggest advantage over
gift certificates is the improvement in tracking and management. Gift
certificates require laborious record keeping, often done manually. Stores with multiple locations may face accounting confusion
and tracking errors when a gift certificate is redeemed at a location
other than where it was bought. One location would need to cut a check
to the other to compensate for the gift certificate redemption. Deb Sweeny, director of finance for Douglas J Salon and
Spa in Okemos, described the problem. “It was an accounting nightmare. Now we have three
locations, one gift card and zero hassle.” Record keeping with gift cards is handled electronically,
and managers can easily generate reports. They find it much easier to
see how much value is “out there” on unused cards than on certificates,
as well as to track sales growth or other trends. Added security is another big plus for gift cards. Some
retailers have had serious concerns about counterfeited or doctored certificates.
Gift cards feel much safer. Retailers who use them often think of gift cards simply
as the “new gift certificate”—the most logical way to handle
merchandise vouchers. “Without exception, my entire staff thinks
gift cards are a much better way to handle the gift certificate product,”
said Kulka. Janeszko agrees, and is pleased that MRA’s program
allows retailers to purchase gift cards in lower volumes than other gift
card wholesalers. Kulka adds, “It’s been a pleasure working with
MRA to set up and manage this program. When any issues come up, I get
immediate help and the issue is resolved.” Thinking outside the box The auto body shop buys a set of gift cards at a discount
from the car wash. After each paint job, the body shop recommends that
the customer should not wash the car for 30 days. The shop then gives
the customer a promotional gift card for a free car wash at the partner’s
car wash, with a sticker showing the date the car is ready for a wash.
The auto body shop has an exciting promotion; the car
wash may have a new customer. And unlike a one-time-only coupon or certificate,
the car wash can offer the customer a way to prepay for future washes
by adding value to the card (sometimes called “reloading” the
card). Gift cards can also be used as an incentive to try other
services at your store. Kulka encourages customers to use her online “Dream
Registry” (a gift registry service) by giving a $25 gift card to
a new registrant. Janeszko’s gift stores use the cards as a means of
giving store credit when merchandise is returned, instead of cash refunds.
“It’s so much easier and faster for our clerks and customers
both,” she said. Off-site sales of gift cards are another innovative way
to drive new customers to a business. Gift cards can be marketed as fundraising
products. An organization buys gift cards at a discount, sells them and
keeps the markup for their organization. Shopping malls are considering installing vending machines
that sell gift cards for merchants in the mall. Customers appreciate the
convenience of one-stop shopping for gift cards, especially during holidays
when long lines in stores may deter a shopper from buying a gift card.
After the holidays, the recipient, often a new customer, shops at leisure. Another idea for offsite gift card sales requires thinking
of the cards differently. “The term ‘gift card,’ while
descriptive for some applications, may actually be limiting. A gift card
simply stores value conveniently. It need not be seen merely as a gift
certificate substitute,” said John Mayleben, MRA’s director
of sales and marketing. For instance, a ferry service to Mackinac Island may beat
out the competition by selling gift cards valued at the ferry-crossing
ticket price at a popular rest stop far south of the ferry crossing, when
the billboards for the island first start appearing on the highway. A traveler, thinking about lines at the ferry docks, sees
the cards available at the rest stop and purchases one there. When he
arrives in Mackinac City, he heads straight for the ferry line that he
has chosen, ignoring the competition. Ideas like these are just the early round of marketing
ideas that use gift cards to drive traffic to retailers. As more retailers
replace gift certificates with cards, the creative ideas will continue
to flow. For more information about MRA’s gift card capabilities, please contact your MRA marketing and sales representative. |
Michigan
Retailers Association began offering a gift card program to members in
December 2002. As retailers sell more and more gift cards, they are realizing
the many advantages cards have over traditional gift certificates.