Top Takeaways From an Analysis of Retailers’ Gift Card Programs

The 2017 Merchant Gift Card E-Commerce Evaluation Report, sponsored by CashStar, is the analysis of the assessment conducted by NAPCO Research from July 2017 through August 2017. The cross-platform assessment evaluated 100 top merchants from the U.S. and Canada across several categories on 98 criteria, including the consumer purchase and recipient experience of digital and physical gift cards, as well as the availability of merchant B-to-B programs and the use of gift cards for marketing initiatives.

This year, gift cards are forecast to be a $160 billion market by the CEB TowerGroup. This may be of no consequence to the casual observer, but it does seem reasonable given that gift cards have been the most requested holiday gift by consumers for the past 11 years, according to the National Retail Federation. With many retailers feeling the pressure of declining traffic and sales, consumer affinity for gift cards present opportunities for merchants to effectively leverage online sales of gift cards to drive revenues.

As the recently released NAPCO Gift Card E-Commerce Evaluation Report indicates, some merchants are already successfully executing robust gift card programs to best take advantage of the market opportunity. However, there's still much more that merchants can be doing better. The overall average score of all brands included in the study was just 42 percent. Brands need not look far for ideas on how to improve their offerings. The evaluation reveals several trends that merchants can learn from to boost their gift card programs:

Omnichannel Hasn’t Made it to Gift Cards Yet

Only 36 merchants evaluated sell both digital and physical gift cards in all of their available e-commerce channels (desktop, mobile web and for some, mobile app). Even for merchants that sell in all available channels, the mobile experience is not generally at parity with their desktop experience. Only three included in the evaluation have mobile purchase experiences that score equal to or better than their desktop experiences, and scores on average for these 36 omnichannel merchants drop from 59 percent on desktop to 47 percent on mobile web and 45 percent on mobile app.

Too Many Errors in Purchase and Delivery

There are more problems with purchase and delivery of gift cards than one would expect. Sixteen of the brands evaluated that offered gift cards for sale online failed somewhere in the purchase or delivery process for digital and/or physical cards. Of these 16 brands, 10 seemed to have successfully processed the purchase but the cards were never received, even after contacting customer service. For the remaining six, issues arose during the purchase process that prevented the order from going through, even with customer service intervention.

Opportunity in B-to-B Sales

The sale of gift cards to other businesses appears to be an opportunity area for many brands. While Mercator Advisory Group finds that B-to-B accounts for more than 20 percent of all gift card sales, 41 of the merchants evaluated had no mention of a B-to-B program on their website. Furthermore, 25 merchants didn’t have their gift cards available in any of the top six credit card loyalty programs.

Strong Showing on Recipient Experience

Retailers have invested in making sure gift cards maintain their popularity during prime gifting occasions. The top 10 scores for recipient experience ranged from 79 percent to 85 percent, and the median score of 60 percent across all brands for this criteria category was higher than for other categories.

Notable Use of Gift Cards to Drive Marketing Programs

The NAPCO report indicates that roughly half of all merchants offered gift card promotions and/or used gift cards as incentives in marketing programs within the last year. These marketing-savvy merchants recognition of the inherent value of gift cards aligns with earlier research which revealed that consumers prefer gift cards nearly two to one over other incentives. The fact that more than half of the merchants evaluated appear knowledgeable about the gift card vs. coupon debate is good, however, there's still so much opportunity for merchants to apply strategy when leveraging gift card-based promotions.

Gift cards play an important role for merchants in driving sales and engaging customers. The full version of this report provides data and insights to help merchants assess their gift card program strengths and opportunities, as well as prioritize areas for investment so that they can improve customer experience and program results over the coming year. Click here to download a copy of the report.

Gerry Gilbert is vice president product, merchant solutions, Blackhawk Network. CashStar, a Blackhawk Network business, is a leading provider of merchant solutions for gift card e-commerce.