New Perspectives on Gift Cards

News

Recently I received an e-mail that was touting the success U-Pak-It, a regional convenience-store chain, had experienced selling gift cards for Bass Pro Shops. This struck me as surprising, since I would never have thought of shopping for a gift card for a sporting-goods retailer at a c-store, but it reminded me that gift cards have evolved into something much bigger than most of us had ever envisioned.

For instance, gift cards are possibly the most universal, frequently purchased gift of choice for consumers. According to a survey from FirstData, Denver, 90% of U.S. consumers either purchased or received a gift card in the last 12 months—that’s up from 70% the preceding year.

Additionally, the survey found that during the last 12 months:

  • Consumers bought 5.6 gift cards on average and spent an average of $46 on closed-loop gift cards. (Closed-loop cards are for redemption at a specific retail store vs. open-loop cards that can be redeemed at a number of locations.)
  • Sixty percent of U.S. consumers received a gift card and 71% spent more than the value of the gift card when they redeemed it, with the “extra-spend” averaging $29.
  • Sixty-eight percent of consumers said birthdays were the occasions for which they were most likely to purchase a gift card, followed by Christmas, cited by 61% of consumers.

These statistics confirmed how popular gift cards have become with consumers. To understand why retailers, such as U-Pak-It, have enthusiastically embraced selling gift cards, I talked with Brad Lemoine, marketing director of U-Pak-It.

With 40 stores in its home state, Monroe, La.-based U-Pak-It started selling gift cards about three years ago.

“We make a commission off selling the gift cards, and when people come in to buy gift cards they end up buying other items as well,” reported Lemoine.

Another advantage is that there’s no money tied up in the inventory. (U-Pak-It works with Bellevue, Wash.-based Coinstar, provider of gift-card and prepaid-card merchandising solutions.)

“If someone takes a gift card without paying for it, there’s no dollar value loaded on the card and no shrink or loss of revenue to us,” explained Lemoine. “More importantly, the gift cards have become a destination purchase that drives traffic to our stores.”

“We’ve done especially well with the Bass Pro gift cards, and Coinstar set up a special Father’s Day display that boosted sales even more,” he continued.

Bass Pro Shops, based in Springfield, Mo., has two stores in Louisiana. Given the popularity of outdoor sporting among Louisiana residents, it makes sense that Bass Pro cards would be a popular gift, and a more convenient purchase than driving to one of the stores.

One key to gift-card success, advised Mike Skinner, general manager of Coinstar, is effective in-store merchandising that builds awareness of the assortment offered by the retailer. Additionally, he explained, “Category management is a key driver of merchandise selection for a particular location and we look at the retailer’s shopper demographics to determine the optimal mix of products.”

That said, Bass Pro and U-Pak-It defy the norm. As a general rule, c-stores typically have more success with open-loop cards and grocery stores have more luck with closed-loop cards.

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