Gift cards — who’s really winning here?
Everyone’s bought or received a gift card at some point in their lives. Increasingly, gift cards are very popular with merchants and consumers alike. They’re an excellent last minute gift for friends or family and used commonly for corporate rewards and incentives. In 2014, the Australian Treasury’s Consumer Affairs Council suggests over $2.6 billion are spent on gift cards each year.
It’s easy to see why they’re appealing. They take the guesswork out of gift buying and ensure that the recipient won’t have to make a return. They’re also compact and easy to ship, but who’s really winning here?
- They’re free money for retailers
The Australian Treasury suggests almost ⅓ of gift cards sold goes unused. Our research has shown they’re often forgotten, unused and left to expire. Once that happens, the unearned liability can be converted into sales. It’s shocking the biggest brands have the ability to profit without any real transaction in goods or services. - Retailers love the upselling
According to CEB, 65% of consumers spend 38% more than the face value of their gift cards. It’s a great upselling tool. A different report from CBS reports that people are more than twice as likely to pay full price for an item when they’re using a gift card.
Gift cards are ripe for disruption. There’s clear value proposition for them to continue to exist, but they clearly need innovation to live up to their promise and create shared value for businesses and customers.
