Retailers Should Copy Restaurants to Boost Holiday Gift Card Sales
Retailers Could Benefit in Several Ways by Promoting Gift Card Sales
With gift cards at the top of holiday wish lists, traditional retailers fighting show rooming and online only retailers, consumers wanting the convenience of online shopping, and shoppers looking for discounts and deals, the environment is perfect for traditional retailers to benefit by copying the “tricks” of restaurant chains that have been aggressively marketing gift card sales.
Restaurant chains are offering buyers of gift cards a “bonus” for themselves that is typically 20% of the value of gift cards purchased. In other words, someone buying $100 in gift cards for others will receive a $20 card for their own use. These “bonus” cards often have restrictions on how and when they can be used, thus giving the restaurant an opportunity to redeem the cards under conditions favorable for their bottom line.
Many retailers are using variations of this type of offer, i.e. offering bonus dollar certificates for certain levels of merchandise purchases, but few seem to be doing it for gift cards. Gift cards can be offered for purchase and delivery online, an attractive convenience for shoppers.
The bonus cards could be structured with restrictions e.g. must be used in January or in certain departments or for clearance merchandise only.
Most importantly, the gift cards lock in sales and revenue for the retailer without having to worry about some of the competitive challenges that gift shoppers often pursue. And the retailer has the opportunity to benefit from breakage, i.e. cards that are not fully redeemed or used.
It may be that traditional retailers have some hesitation about pursuing such a promotional strategy because of accounting issues, i.e. when revenues and sales are recognized and how that affects the reporting of financial performance. It seems these issues could and should be resolved given the benefits to be gained.
The affluent market that we survey would certainly welcome such offers.