Reinventing the Gift Card

Gift cards are a perennial favorite during the holidays, with the months of November and December accounting for nearly 40% of gift card activations. An uptick in gift card sales during the first half of 2010 bodes well for this year’s holiday season. First Data, a provider of e-commerce and payment solutions, forecasts that sales of merchant-branded gift cards will increase by 1% to 5% for 2010, with the potential for upside.

There are many new trends popping up in the space that are expected to hit the mainstream this season, most notably around virtual gift cards. Such cards allow recipients to receive a gift code either via e-mail or on their mobile device that can be redeemed online or in stores.

“Although digital gift cards have been around for a while, the adoption of smartphones and iPads has primed them for big growth,” said Michael Hursta, VP gift cards for First Data, Atlanta. “Many of the large retail players are gearing up to create a much more rich environment this year for virtual gift cards that includes videos, photography and fun graphics around it to enrich that experience for the recipient. This will make the demand for virtual gift cards even higher.”

In time, Hursta predicts that virtual gift cards are going to become equally important and dynamic as traditional plastic gift cards in the future.

“Plastic gift cards won’t go away though, especially since many prefer giving a physical gift for the holidays,” Hursta said. “However, traditional gift cards will likely show slower growth as virtual options take off.”

To keep the plastic gift card experience engaging, many retailers will give shoppers the opportunity to personalize the cards by designing, decorating and adding messages to them. Others will offer packaging for free or a small fee that dresses it up for the holidays.

Another major trend on the rise is using gift cards as incentive devices.

“Shoppers love a reward for making a purchase—giving them a free gift card will not only get them into the stores, but it will keep them as a loyal customer,” Hursta said. “We saw this concept last year and predict it to grow about 10% to 20% this year.”

To give traditional cards the most play this season, retailers should make sure they are placed in an area that is highly visible in stores.

“Put gift cards near products that might sell out quickly,” Hursta advised. “We’ve seen that when shoppers come into a store in search of a specific gift and discover it’s not in stock, they will pick up a gift card instead if they see one nearby.”

As for touting gift cards online, give it proper placement on the home page, as well as on the checkout page. This is key especially during the last few weeks leading up to Christmas when many shoppers have less time to shop.

Retailers can also implement an online feature that detects when someone is aimlessly searching on a site and can’t make up their mind. In response, a prompt for them to consider buying a gift card can pop up and remind them of the option.

Social media will also serve as a platform to sell gift cards this year, though some sites may fare better than others.

“Facebook is most likely better suited for this sort of marketing because there’s more of an environment around it, from both a graphic and sharing standpoint,” Hursta said.

However, retailers will undoubtedly remind shoppers about gift cards via Twitter, as well.

The bottom line: “As long as retailers know its consumers are aware that gift cards are available for purchase and where to find them, they’ve done a job well done,” Hursta added.