Despite the array of digital gift card options available today, customer engagement with gift cards is predominantly via plastic.
National Gift Card’s 2017 Gift Card Report reveals that 85 percent of the volume in gift card redemption is for plastic cards versus 15 percent for digital gift cards.
The Top 10 physical gift cards chosen are Walmart, Amazon, Target, Home Depot, iTunes, Kohl’s, various gas cards, Starbucks, Applebee’s, and Lowe’s.
“Participants in loyalty programs often gravitate toward rewards they can use to stretch family budgets,” said NGC President Eric Thiegs. “For instance, cards for shopping, dining, home or automotive needs that can be used for everyday essentials (or given as gifts to loved ones for the holidays or special occasions) make a difference to the household bottom line. The top gift card reward selections conveniently match consumer desires to save money.”
Other 2016 findings include:
Biggest Gift Card categories with the largest redemption increase from 2015 to 2016:
Travel 39 percent
Sports & Wellness 35 percent
Department Stores 25 percent
Gift Card categories with the biggest volume losses from 2015 to 2016:
Entertainment 10 percent
Gas 7 percent
Home Improvement 3 percent
Walmart is the most popular plastic gift card reward option
iTunes is the most popular digital gift card reward option
Open Loop prepaid reward cards from VISA, MasterCard, and American Express accounted for 25% of B2B incentive volume
Ashley Harris, senior director of strategic partnerships, National Gift Card, talked to Loyalty360 about the study.
What is your biggest takeaway (either positive or negative) from this study?
Harris: The biggest takeaway is plastic redemptions are still widely popular across the board. While the instant gratification of digital gift cards may appeal to a variety of consumers, receiving a physical card makes the reward or incentive much more tangible. Coupled with results from top selling brands, we have evidence that consumers are, more often than not, selecting cards for self-use.
What is being done well in the world of gift card reward options/redemption and where do the challenges lie?
Harris: NGC is focusing efforts on continually adding new and exciting content to its gift card catalog. Likewise, adding new merchants that will appeal to a broad set of consumers has also posed a challenge. Many merchants are hesitant to expand gift card sales into the B2B sector as the benefits are unknown or simply they do not have the staffing, technology, or resources to grow their existing program. NGC is working to strengthen its position as a gift card agency by providing services to support merchants and allow them to grow their program by reaching these incremental markets.
Are there certain segments that these companies should target more?
Harris: NGC sees top line sales from Loyalty and Reward Agencies, Employee Benefit Companies, and Marketing and Event Companies. While these categories account for top line sales, there is a multitude of other segments that should be considered such as Health Care, Insurance Companies, Research Companies, Colleges, and Universities, etc. While each company may find a niche within a certain segment, brands should be focused on reaching a wide range of customer segments. Using the help of an aggregator like NGC who has direct pipelines within these segments is a streamlined way to increase sales and exposure without augmenting an existing sales team.
What trends do you foresee for gift cards this year and beyond?
Harris: Slight increase in digital sales but not a takeover of plastic; increase in redemptions for e-commerce merchants and with the rapid decline of retail stores.
Consolidation: This is more of an industry trend. Companies are looking to grow better, faster, and stronger. Often, the path of least resistance to this growth is the buyout of another player in the space that as the technology or skill set another company is looking for. We have witnessed this time and time again over the past year. Many partner conversations revolve around this very topic.