What retailers need to know about gift card exchanges
The holiday season is rapidly approaching. For years, gift cards have remained the most requested gifts in America but with the billions of dollars worth of gift cards that will be sold this holiday season, not all will be used. That’s because gifters aren’t always spot on with their purchases and if the card isn’t a match for the consumer it may go unused, a lose-lose for all parties involved.
The result? Consumers began finding their own ways to deal with unused gift cards, and one practice that became common was selling unused or partially used gift cards through channels like Craigslist. From here, the gift card exchange industry was born, grown organically from consumer demand. Today, gift card exchanges provide consumers with preowned marketplaces where they can buy and sell gift cards.
Most recently, due to the growing popularity of gift card exchanges, some retailers and other organizations are looking to “get in on the action” by offering gift card exchange services in their stores or their own branded channels.
How it works: a retailer allows consumers to sell their unused gift cards (from a variety of brands) in store or online. In return, the retailer then provides the consumer the option of receiving cash or a store gift card instantly, on the spot. The gift cards “turned in”, so to speak, will then be offered for sale through the exchange to other consumers seeking those particular brands.
When done right, gift card exchanges can be a win-win for retailers and consumers. Shoppers want to trade the gift cards they have for the gift cards they want so they sell their unused gift cards for cash or a store gift card or buy previously owned gift cards at a discount. And they can do this quickly and easily online or in retail locations where they’re already spending their time. (Grocers, discount and media retailers across the country are already starting to offer these services to customers.)
And retailers offering their own gift card exchange services (like a gift card exchange kiosk in-store or a self-branded exchange online) can reap a number of benefits:
Delight customers, boost loyalty: Gift card exchange services are in high demand. Gift card spending has grown from $40 billion in 2003 to over $100 billion in 2014, and gift cards have topped the list of most requested gifts for the last eight years. But with this popularity, there is the inevitable fact that some consumers end up with cards they can’t use. And they have a serious appetite for selling or exchanging them: 86% of consumers are likely to use exchange services. Accessing these exchanges via their favorite retailers makes it even more convenient.
Drive in-store spend: By providing customers with gift card exchange services, retailers are giving them additional means to shop – with either cash or store gift cards. 81% of consumers report that they spend money where they sell cards when provided cash.
Acquire new customers: As the concept of gift card exchange continues to grow, shoppers will be looking for these services in places that are convenient to them – both online and physical locations. Retailers stand to acquire new customers through a gift card exchange offering, and once shoppers are in store or on the store website, they are likely to purchase more.
Leverage the exchange as a marketing tool: Gift card exchanges allow consumers to purchase previously owned gift cards for a discount. For example, a shopper may purchase a gift card worth $50 for just $40. This equates to free money to the shopper, which is a highly valuable proposition. Retailers combining the promise of free money via gift cards with additional in-store promotions stand an even better chance of driving consumer traffic.
Shopper demand is high and the time is right for the proliferation of gift card exchanges. Retailers can take advantage of this emerging market by strategically integrating gift card exchange services into their in-store and online channels.
Patrick Ramsey is general manager of Cardpool, a leading gift card exchange and subsidiary of global prepaid and payments company, Blackhawk Network. Ramsey can be reached at [email protected]. To learn more visit Cardpool.com.