With the holiday season now behind us, our unprecedented circumstances brought to light something we all expected: Shopper behavior has changed dramatically.
The pandemic has uprooted conventional wisdom behind when, where, and what customers are buying. In 2020, we watched holiday shopping begin earlier than ever before, with an increasing focus on omnichannel and hybrid experiences including online shopping with curbside pickup. Meanwhile, Black Friday foot traffic saw a nearly 43% decline in 2020 from the previous year.
Despite the continued disruption from the pandemic making waves throughout the retail industry, a marked silver lining for retail brands could be felt in record growth in gift card purchases, reflecting our socially distant festivities. For retailers, this could mean record Q1 and Q2 results. According to Paytronix, 70% of gift cards are redeemed within six months of receipt, which means a holiday boom for retail and e-commerce brands that will continue throughout the first half of 2021.
Now, the focus for retailers is how to stay ahead of consumers in order to reach them in their preferred shopping channels. This push has already begun, as nation-wide efforts to promote awareness, like National Use Your Gift Card Day (January 16), among others, are making headway in the cultural zeitgeist.
It goes without saying that brands that meet consumers on their terms and best navigate the omnichannel will be best positioned to capitalize on the first half of the 2021 boom.
Gift card winners
Data from Gift Cards During the Holidays 2020 InMarket Insights shows a 3.13 times increase in the number of consumers purchasing gift cards year-over-year, significantly outpacing figures from the previous year.From September to October, consumers spent on average 18.38% more on gift cards in 2020 than during the same time period in 2019. Similarly, the frequency of purchasing gift cards, in terms of number of gift cards, increased 12.33% year-over-year across the same time span.
Some have seen a particular boost from the gift card boom. Familiar brands like Visa, Disney, and Gap have benefited most from gift card purchases. Visa topped the e-commerce and digital brands category, holding the highest percentage of gift card purchases (10.08%) and average spend per device ($100.54). Its competitor, MasterCard, saw a 2.41% share of gift card purchases, averaging $39.57 spend per device.
Disney eclipsed all other entertainment brands in both average spent per device ($280.16) and share of purchases (.77%). In the apparel/shoes category, Gap and Old Navy (which have the same parent company) had the highest share of gift card purchases at 0.17% and 0.19%, respectively. And in the department store category, Kohl’s beat other department stores in terms of highest share of gift card purchases (1.34%). This may be correlated to its pivot during the pandemic to “be more efficient in fulfilling digital orders.”
When we take a step back and absorb the disruption that 2020 has caused, a gift card made sense as the ideal COVID holiday gift. They are a great way to make someone’s day while giving them the flexibility to shop when they want in the channels where they feel most comfortable.
For brands, gift cards present great opportunity, but also a challenge for marketers to make the most in terms of driving both continued spending post holiday a growing loyalty and lifetime value with recipients over time.
Five ways bands can maximize gift card spending in Q1
As gift cards fast-tracked their way to the top of shopping lists this holiday season, retailers have an opportunity to extend related sales well into 2021. There are several consumer data signals marketers can use such as CRM data, purchase data and foot traffic data in order to make sure they are maximizing gift card related spending. Here are my top five.
- Connect the dots between activity and sales. Analyzing pre-holiday sales and user activity can help marketers promote popular products that drive consumers back into stores. It’s important to do this especially during a holiday season like this one, as trends change and the activity of consumers changes with them.
- Stay engaged with holiday shoppers. While the holidays are a major event for marketers, that doesn’t mean the holiday shopper can’t be targeted outside of the season. Using offline behavioral data signals such as foot traffic can help marketers find and retarget holiday visitors in 2021.
- Cross promote products. Brands need to play the long game and ideate on the high-impact products that comprise Q1 and Q2 2021. While year-end gifts might be trending down, the gift card boom to follow this holiday season will provide flexibility to target and cross sell existing shoppers based on past Q1/Q2 purchases.
- Stress value shopping. The brands that emphasize value and savings will be popular options for consumers who are looking to make the most of their gift cards this holiday season. Continuing value-based promotions through key holidays such as New Years and Valentine’s Day will put brands in a strong position to extend holiday related growth.
- Put your loyalty program to work. Offer and promote rewards and incentives using CRM data to drive increased loyalty and repeat purchasing through the year.
It goes without saying that 2020 dealt a tremendous blow to retailers– the holiday season is just the latest example of that. In many forms, the light at the end of the 2020 brand tunnel is coming closer. With the right strategy brands can work toward a resurgent 2021 while driving increased loyalty and lifetime value with key customers and that will more than cover the challenges suffered throughout 2020.
Michael Della Penna is chief strategy officer of InMarket, a provider of 360-degree consumer intelligence and real-time activation for thousands of major brands.