An Assessment of the US Gift Card Market for Retailers

For the sixth consecutive year, NAPCO Research, in conjunction with Blackhawk Network, has undertaken a comprehensive review of the state of U.S. merchants’ gift card programs. The 2023 review included an assessment of retailers’ e-commerce/digital, mobile, and in-store gift card offerings, providing an omnicommerce view into the consumer gift card purchase and recipient experience. The full report can be downloaded here.

The report features data and analysis from the assessment of 100 U.S.-based retailers. Those retailers, which represented 12 product verticals (apparel, convenience, department store, general merchandise, grocery, health/beauty, home furnishings, home improvement, restaurant - casual, restaurant - quick serve, specialty, sporting) were evaluated across 175 unique criteria. Key components evaluated included the online consumer purchase and recipient experience of both digital and physical cards (e.g., ease of discoverability, payment options, delivery options); in-store consumer purchase experience of physical cards (e.g., how well stocked were gift card checkstands and fixtures; how helpful was signage); and the mobile consumer purchase and recipient experience of digital and physical cards, as well as in-store mobile payment options and functionality.

There were two new components added to the 2023 report. One, convenience stores were added to the verticals assessed. Convenience store sales grew by nearly 25 percent to $664 billion in 2021, and the category’s conduciveness to selling gift cards quickly and easily to consumers on the go makes it a vertical worth tracking. Two, a separate, smaller assessment for 25 digital ascendant brands was added. We evaluated their digital gift card programs on a scaled-down version of the full assessment (E-Commerce Digital and Mobile Digital criteria only).

The research was conducted from October 2022 to January 2023. Our analysts went through the research and buying experience, purchasing both physical and digital gift cards from each of the 100 retailers evaluated.

Why conduct this comprehensive research? Simply put, to gauge how well retailers are positioning their businesses to cash in on the massive revenue opportunity that gift cards present. Consider the following data:

• The U.S. gift card market is forecast to grow at a compound annual growth rate of 9 percent between now and 2026, when it will be valued at $260 billion.
• For the 16th year in a row, consumers chose gift cards as their preferred gift to give to others.
• Gift cards provide strong return on investment on a sales-per-square-foot ratio in-store.
• There are multiple use cases for gift cards throughout the customer lifecycle — e.g., gifting, self-use, B2B, promotions, refunds and credits.

What the Data Revealed

The positive news for the merchants analyzed was that each component of the omnichannel assessment improved year-over-year. This starts with the total omnicommerce average score of 70 percent, which represented a 7 percent YoY gain. Here's a look at how the retailers performed on a channel-specific basis:

• E-Commerce/Digital: 64 percent average (up 4 percent YoY)
• In-Store: 69 percent average (up 4 percent YoY)
• Mobile: 78 percent average (up 12 percent YoY)

When looking at e-commerce/digital, the retailers received high scores for customization of digital gift cards
on desktop such as faceplates options (104 percent average), personal messaging (75 percent), and denomination flexibility (68 percent). On the flip side, customer service is an area where merchants scores were lower, representing an area for improvement. For example, average scores in the customer service criteria category were only 51 percent, inclusive of self-service (64 percent); email responsiveness (43 percent) and email accuracy (35 percent).

As for in-store, retailers are doing a fairly good job of having a variety of their own brand’s gift cards in-store (63 percent for checkstands, 56 percent for fixtures). Furthermore, they’re also wisely marketing their own brand’s gift cards ahead of other brands’ gift cards (58 percent for checkstands, 50 percent for fixtures). Yet many are missing an opportunity by not selling other brands’ gift cards in their stores, earning just 13 percent for this criteria for checkstands and 45 percent for fixtures.

Lastly, retailers' performance improved most for the mobile criteria, driven by gains for the mobile in-store experience (+24 percentage points). More specifically, retailers have adopted mobile payment options for gift card (and other) purchases. However, it's not all positive as it relates to retailers' mobile gift card scores. While the overall score for the mobile app portion of the assessment increased 8 percentage points YoY, the channel remains the lowest of all evaluated.

In a follow-up article on the 2023 Merchant Gift Card Omnicommerce Evaluation, U.S. Edition, to come next week, we will share best practices for improving performance across the omnicommerce gift card purchase and recipient experience. In the meantime, you can download the full report here.