Retailers worldwide are embracing prepaid gifting solutions, although their degree of sophistication and understanding of prepaid as an element of marketing strategy and execution vary greatly.
The majority of retailers might view gift cards primarily as a payment instrument, potentially with a fee to cover the cost of issuance and a small margin, and possibly some breakage (unspent funds) that can be claimed as revenue at a later point. However, this narrow view prevents retailers from realizing the true potential of prepaid.
For example, according to South-Africa based gift card provider DrawCard, South African merchants who switch from paper to plastic prepaid gifting experience anywhere from a 30% to 200% increase in sales. What is more, 61% of South Africans spend more than the face value of the card. Coupled with float, higher margin sales, and the potential for new customer acquisition, gift cards offer significantly more benefits than might be superficially apparent.
A retailer or service provider that grasps the economics of the gift card will make efforts to promote their cards actively in their in-store environments. The next step up from in-store promotion is incorporating gift cards into the overall marketing strategy of the company. There are many opportunities for issuing a prepaid card during interaction with customers and potential customers. For example, instead of giving a customer a cash refund upon returning a product, one can issue a prepaid card to encourage repeat visits and incremental spending. Prepaid cards can also be used as part of promotions. One example is replacing point of sale cash discounts with giving out a gift card of a certain value.
When a retailer or non-retailer has exhausted its options for self-promotion of gift cards, it is time to look beyond the physical outlet network and online sales channels. Enter the concept of third party prepaid distribution. A retailer with sufficient margins on its products should consider distributing its gift cards through other retailers’ stores, such as with Blackhawk Network.
Retailers and non-retailers that view gift cards as a category, rather than merely a payment instrument (or unspent funds to go into the bottom line at a later point), can significantly increase their sales revenue. Gift cards can be used to attract, retain, compensate and stimulate additional customer spending; but they cannot do so if they are in a drawer behind the till and not promoted.
