Digital Gift Card Options Abound

Stored value gift cards have become a staple item in many retailers' holiday assortments. Last year the NRF estimated U.S. consumers would spend close to $29 billion on gift cards during the holiday shopping season, and there is no reason to think the trend is slowing down.

In addition to growing, the gift card trend is evolving as the rest of consumer-facing commerce evolves to become more of a virtualized environment. Digital gift cards are still a relatively new phenomenon, but are becoming more important and offer several important benefits to retailers and consumers, such as:

• Ease of use: Granted, pulling a traditional gift card out of a wallet and swiping it at the register is not terribly difficult, but digital gift cards offer ease-of-use benefits not provided by physical cards.

"You can have access to and manage your gift cards without losing them in the clutter of a purse," said Denee Carrington, senior analyst for Forrester Research, during a telephone interview. "Digital gift cards are easy to remember. You have tools like Passbook that digital cards can live in, and Passbook can notify you whenever you're near a merchant's store and give you access to the card."

• Interactivity: Digital gift cards are by their very nature much more interactive than physical gift cards. For example, Carrington said some digital gift cards provide visuals of a "gift" being unwrapped and opened when a user first activates it. In addition to aesthetically pleasing interactive features with soft benefits of customer engagement, there are also some interactive options that offer hard, business-focused benefits.

"You can provide additional gift cards through online promotions and emails," said Carrington. "You can also provide links to additional gift cards through SMS text messages."

This type of quick digital upsell also plays into the fact that for many consumers, gift cards can serve as personal stored value cards. A digital gift card recipient impressed with the convenience may respond to a text promotion linking to a new card for their own further use, as well as for a gift for someone else.

• Shopping companionship: Digital gift cards fit perfectly into the broader evolution of mobile devices into what Carrington termed consumers' "personal shopping companions." Consumers already routinely use mobile devices in stores to compare prices, obtain product information, check item availability, receive targeted promotions and in some cases even to execute transactions. Having a digital gift card loaded on a mobile device further emphasizes this role it plays in the life of a consumer.

In addition, retailers could tie other mobile promotions into their branded digital cards. For example, digital gift card holders could receive real-time personalized incentives, such as extra gift card credit to purchase an item they are scanning for more information or a two-for-one purchase on a cross-sell product when a digital gift card is used.

None of this is to suggest that digital gift cards should replace traditional gift cards in retailers' plans for this holiday season, but only that digital gift cards can help boost profitability and customer engagement both during and after the all-important holiday rush. Now that's a gift that keeps on giving!