Report: The Retailers With the Best Omnichannel Gift Card Programs

For the fourth consecutive year, NAPCO Research, in conjunction with Blackhawk Network, executed a comprehensive review of the state of merchants’ gift card offerings. However, unlike the previous three years, the 2020 review included an assessment of retailers’ e-commerce/digital, mobile, and in-store gift card offerings, providing a truly omnichannel view into the consumer gift card purchase and recipient experience.

Why the change in methodology? First, consumers have been exhibiting omnichannel behaviors for some time now. Interacting with brands across channels during the purchase journey, whether the item being sought out is a gift card or some other product, has become commonplace for consumers. Second, and perhaps more importantly, the COVID-19 global pandemic, which fundamentally changed the way many consumers shop, rapidly accelerated this trend.

Therefore, for the 2020 report we conducted a cross-channel assessment that evaluated 100 leading merchants across 150 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.

The 2020 Merchant Gift Card Omnichannel Evaluation report is intended to serve as a benchmark for retailers and brands as they evaluate the omnichannel performance of their gift card programs. It exposes areas of strengths as well as weaknesses within their programs, identifies the gift card leaders across the industry as well as by product vertical, highlights trends that are emerging within merchants’ gift card programs, calls out best practices to optimize the omnichannel gift card purchase and recipient experience, and more.

What’s at stake? Adoption of e-gift cards is expected to increase significantly over the next four to six quarters. This comes on the heels of a new report from Blackhawk Network that revealed a more than 80 percent increase in digital gift card (i.e., e-gift) sales and a nearly 40 percent increase in overall e-commerce gift card sales during the 2020 holiday season. Overall, the gift card market in the U.S. is projected to record a CAGR of 9.2 percent during 2020-2024, according to the Q2 2020 Global Gift Card Survey.

The research was conducted from mid-July to early August 2020 (in-store) and early October to late November 2020 (online, including mobile). Our analysts went through the research and buying experience, purchasing both physical and digital gift cards from each of the 100 retailers evaluated. We examined every step of the purchase process to experience it from the perspective of both the gift card buyer and recipient.

In assessing the complete gift card experience, from discovery to fulfillment, merchants were scored on how they promote the omnichannel sale of gift cards to both consumers and B-to-B buyers. Merchants were evaluated against 150 unique criteria, covering the specific elements of the purchase and recipient process.

For the 2020 omnichannel gift card evaluation, 100 leading U.S.-based merchants across a wide range of product verticals were assessed. To obtain a true omnichannel evaluation, each of the merchants assessed needed to have a physical store presence in addition to a digital/e-commerce presence. Furthermore, giftable product verticals were prioritized. Product verticals represented in the evaluation include the following: apparel, department store, general merchandise, grocery, health/beauty, home furnishings, home improvement, restaurant – casual, restaurant – quick serve, specialty, sporting.

What We Found

For the first time in the four years that our merchant gift card report has been produced, there was a new No. 1 company. By earning 90 percent of the total points across all the criteria, Target took the top spot in the 2020 rankings. In fact, Target rather easily distanced itself from the other merchants evaluated, earning a score 10 percentage points higher than the next closest merchant (Express, which earned 80 percent of the total possible points).

As previously noted, Express earned the No. 2 overall spot in the rankings, thanks in large part to its exceptional performance in the In-Store criteria category, where it captured the top score (113 percent). Rounding out the top five in the overall rankings were Ulta Beauty (78 percent), Best Buy, and Barnes & Noble (each tied at 77 percent). Moving to an omnichannel assessment of merchants’ gift card programs has resulted in a shake-up of the brands at the top of the rankings. Of the top five in the 2020 rankings, only Barnes & Noble was in the previous year’s top 10 (Barnes & Noble came in sixth in the 2019 evaluation).

When looking at the results of all 100 merchants on an aggregate basis, there’s both good news and bad news. Let’s start with the good news: when comparing e-commerce/digital for the 2020 evaluation among the 88 retailers that were assessed both years, the average score of 50 percent bested the 2019 score of 48 percent. In addition, when comparing the year-over-year digital scores on an aggregate basis, the merchants posted increases in all channels except one (desktop, which was down a single percentage point to 57 percent).

Now for the bad news: The merchants evaluated earned, on average, just more than half of the points available to them. The numbers suggest that many merchants, even top performers, have plenty of work to do as they look to optimize the performance of their omnichannel gift card programs.

When looking at the aggregate results on a channel-by-channel basis, merchants performed best on the in-store purchase experience. The average score for the 100 merchants’ in-store experience was 62 percent of the available points earned, compared to 56 percent for mobile, and 50 percent for e-commerce/digital (i.e., desktop/laptop).

Lastly, the merchants that recorded the biggest year-over-year improvements to their e-commerce gift card purchase and recipient experience, including mobile, are as follows:

1. Kroger (+39 percent)
2. Costco (+28 percent)
3. Kohl’s (+27 percent)
4. Urban Outfitters (+26 percent)
5. Disney, Ulta Beauty (tied at +18 percent)

Overall, 55 of the 100 merchants evaluated improved their e-commerce/digital (including mobile) score YoY, four merchants saw their score stay the same, and 29 merchants saw their score decrease. (Twelve of the merchants were new to the assessment in 2020.)

In a follow-up article on the 2020 Merchant Gift Card Omnichannel Evaluation report to come in early May, we will address two emerging trends revealed in the data: one, the B-to-B gift card opportunity (which not enough merchants are capitalizing on) and, two, the lack of personalization options that merchants are providing to gift card purchasers. In the meantime, you can download the full report, which includes the rankings of all 100 merchants (including broken down by product category) as well as more valuable trends and tips gleaned from the data, here.