By Derek Warburton, firstname.lastname@example.org
Retailing is a highly competitive business, so being among the first to embrace a new marketing strategy or technology can deliver substantial rewards to the earliest adopters. In the case of eGift cards, they’ve been in the marketplace for about four years. Although some of the biggest chains in the world have already “early adopted” these programs to great effect, many retailing chains have put off extending their plastic gift card programs to the electronic arena. This is likely due to the typical misconceptions that pervade many newly emerging business trends. The bad news is that this delay could end up costing these companies a lot down the road. The good news is that you can change the race right now.
First, let’s look at the top six misconceptions around eGift Card programs that chain store executives need to know.
1. “eGift Cards will only cannibalize our existing gift card sales”
At first, adding eGift Cards to your existing gift card program may seem like an added expense that will cannibalize sales of existing plastic cards. In fact, real-life implementation shows that these promotions deliver new, incremental sales, not only in eGift Cards but also in plastic cards.
One factor is that the entire program often grows through an increased general awareness fostered by the eGift Card promotion. In addition, evidence from current sales of industry leaders indicates that it will take only a year or two before eGift sales can equal or exceed online plastic card sales. While plastic gift card sales are unlikely to decline outright, any reduction in the use of plastic will deliver cost savings while still seeing overall sales increase.
2. “Fraud in eGift Cards is too pervasive”
Definitely, eGift Card programs are a target for fraudsters. However, advanced analytical algorithms, good old-fashioned human awareness, and other classified fraud-detection tools and techniques that industry vendors utilize to reduce fraud keep it to a bare minimum. Still worried? Your vendor should be confident enough to cover 100 percent of any losses incurred from eGift Card fraud. That’s right: experienced eGift Card vendors will cover all fraud losses in their programs. In terms of prevention, there’s always a fine line between maximizing sales and minimizing fraud, but today the technology and vendor commitment is there to keep this problem to a minimum…and your risk of losses at zero.
3. “Our IT department can build this internally”
Sounds good because at first glance outsourcing may seem too expensive: “IT can handle this. It’s just an extension of our gift card program…right?” Fraud is the most immediate Achilles’ heel exposing you to high financial risk when you go in-house. The bottom line: this program is too complex to build and maintain internally, and the openings for hackers will be too attractive. You could get burned quickly, and badly.
In addition, it can be a costly and time-consuming misstep to have IT attempt to re-create the complex tools, documentation, procedures, modules and infrastructure that have been optimized by expert eGift Card vendors over years. And by the time your IT department does that, industry advances will have made their work obsolete. What will IT say when you request a new feature? Probably something like this: “It could take a while but we’ll get to it as soon as we can.” With an outside ve