The Future of Gift Card Sales is not through your POS
As a small business grows, at some point it makes the switch from selling paper, hand-written, gift certificates to plastic gift cards. This is typically done through the businesses’ point of sale (POS). Plastic gift cards are a service that most POS systems either provide, or support via a third party integration. Unfortunately for small and medium sized businesses reliant on POS for their gift cards sales, these systems are lagging behind when it comes to gift card innovation, particularly as it pertains to virtual gift cards. Businesses looking to take advantage of the latest web and gift card technology must decouple gift card sales from their POS. By doing so, they’ll gain a more robust system which includes online virtual gift cards, mobile gift cards, better pricing, and logical tie-ins to loyalty and rewards programs.
Gift cards are the best money a business ever makes. They are the only case where someone will hand over money now for a product or service they may or may not use in the future (breakage rates on gift card sales average over 20%). Maximizing gift card sales should be at the top of every businesses’ mind. Additionally, gift cards are usually impulse purchases, made at the last minute. Businesses that only offer snail-mailed gift cards to out of town buyers are missing out on the entire impulse-buying market.
The chart below shows December gift card sales rates, which typically make up half of a businesses’ yearly sales. The area in red is sales during the five days before Christmas, which make up almost half of all December sales. During these days, gift cards can’t be mailed to an out-of-town buyer in time for the holidays. Businesses that don’t have a virtual gift card solution on their website are literally closing the door on gift card buyers during the five heaviest shopping days of the year!
A business that limits itself to plastic gift cards is at a distinct disadvantage against the Amazon’s, Wal-Marts, Best Buys and PF Changs of the world, who all offer online virtual gift card solutions. This isn’t a trivial issue…the $100+ billion gift card industry means big money to merchants.
So what’s special about the relationship between gift cards and POS? Separating the two must be really hard, right? Here’s the answer, which may surprise you in its simplicity.
Gift cards tied to a POS can be validated on-screen when settling a guest’s bill.
That’s it. Validation. You can swipe a gift card at checkout, check the balance, and deduct the appropriate amount from the card. This is no doubt an important function… it’s critical to be able to quickly figure out how much money is left on a guest’s gift card and react appropriately. But other than validation, there is nothing special about the relationship between gift cards and a POS system.
If you are a business looking for better gift card services, it’s unlikely they will be provided through your POS. POS moves slow, is ruled by highly proprietary and monolithic software, doesn’t play friendly with third party technology providers, and isn’t where a merchant should be looking for gift card innovation. In order to take advantage of the latest technology, a business needs to decouple gift cards from their POS using these two steps:
- Validate gift cards outside of POS. Since the only special role a POS plays when it comes to gift card sales is validation, you’ll need to find a new way to validate incoming gift cards. The good news is that there are easy, technology-driven alternatives. The most obvious lies in the proliferation of smartphones and tablets. Any of these devices can serve as a validation device. Merchants can either mount such a device near their POS, creating a “Validation Station”, or validate in the presence of the customer (like Apple does at the Apple Store). Best of all, validating gift cards with a smartphone, especially in the presence of a guest, makes a business seem high-tech!
- Create a POS key to track gift card sales. All POS systems allow you to create custom categories for transactions. Simply create a new “Gift Card” button on your register, and use it to log transactions validated on a smartphone or tablet.
By taking the time to implement a new smartphone or tablet-based gift card validation system, small and medium sized businesses can easily see a double digit increase in gift card sales by capturing the impulse-buying market. Best of all, gift card sales can also be tied to loyalty / rewards programs, and businesses can finally take advantage of new technologies currently available only to much larger competitors.
