Biz Tips: Why is the Driver of 10%+ of Retail Revenue Only 1% of Industry Dialogue?

Biz Tips: Why is the Driver of 10%+ of Retail Revenue Only 1% of Industry Dialogue?

Biz Tip:

Why is the Driver of 10%+ of Retail Revenue Only 1% of Industry Dialogue?

If you had a tool that increased the spend of your consumer by an average of $59, what would you do with it? What would you want from a product like this? Would you want it to be usable both in-store and online? Would it be brandable? Would it be something that could tie into multiple programs and software you already use?

… Now, what if I told you that a product like this already exists, you probably have one and it was already the most requested gift of the holiday season? Can you guess what I am talking about?

I’m talking about gift cards.

2019 Holiday sales for gift cards increased an estimated 7% and reports showed that for the 13th year in a row, gift cards were, in fact, the most requested gift of the holiday season. But, the gift card is often ignored by retailers, or seen as a “necessary evil”. And I get that. If a gift card is simply another product to your company; it will sit as a liability on your books until redeemed and cause you to deal with escheatment laws for no good reason!

But, if you start to look at gift card differently, and understand that when built correctly it can be a driver of customer attraction, retention and increased spend, it makes you stop and ask, “Why on earth are we not talking about this more often?”

So let’s talk about the gift card and how to make it an effective tool for your company.

First of all, maybe we should stop thinking of them as just gifts. I bet if I asked you to name the last time you used a gift card, you might not actually know when that was. The term itself is actually deceiving when you realize that gift cards fuel one of the most powerful mobile wallets in the world: The Starbucks app. You cannot do anything in the Starbucks app or loyalty program unless you load value on to a gift card.

Starbucks was able to reimagine what a gift card could do for their company and according to their Q4 2019 Earnings call, John Culver, Group President of International, Channel Development and Global Coffee and Tea noted “[… the loyalty program makes up] about 42% of our tender right now. And typically in the fourth quarter where we usually see retraction, we actually saw active member growth of about 15% year-over-year approaching almost 18 million members.”

Gift cards, however, are not JUST a tender type. Look at Loop Commerce, they saw that returns were through the roof for retailers selling online. So they looked at the problem and decided to transform the gifting experience. Loop Commerce created a way for you to send someone a link to an item, let’s say a pair of shoes. The recipient of that link can select the shoes s/he wants, in the right color and size, and then the shoes are mailed out; decreasing the return rate for retailers, and additionally extending the online shopping timeline for consumers since they were not shipping out physical stock. How is this possible? A gift card is holding the value of the shoes and shipping in the background until the selection process is complete. Thus, enabling a seamless customer experience and solving other operational problems at the same time.

The team at Jifiti realized that in-store point of sale consumer financing was much more complicated, clunky and expensive than it needed to be. So they took the power of prepaid cards and created a simple solution to allow consumers to apply on their own phones or devices for funding, and then instantly be issued a virtual prepaid card that can only be used at that brand. It is a simple solution that takes out the awful wait at a cash wrap for someone to fill out a form, hold up the line and then have a credit card with a high APR open.

There are plenty of other great examples of the gift card in action, and what you have to notice is that gift card is never doing the heavy lifting alone. It is tied to a loyalty program or an offer etc. It is never “just” a gift card; it is in service of a goal beyond just top-line sales numbers. This is why we also have to rethink our terminology around this incredibly versatile tool.

While the industry has not quite reached a consensus on this, I would advocate we start talking about Branded Currency instead. The definition being anything with brand-specific stored or prepaid value. Including but not limited to gift cards, prepaid products, loyalty points, coupons, promotional codes, and merchandise credits. When we start to think of all these tools working in harmony, the opportunities truly open up.

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