A How-To Guide for Gift-Cards


  Courtney Yule

 

  Ingenuities throughout 2014 within the gift card market has increased revenue and businesses financial portfolios. A National Retail Federations annual Gift Card Spending Survey concluded the average shopper will spend 172.74 dollars on gift cards this year, and teenagers are the highest demographic to request this type of gift. While we love to spend our holiday money at local stores, coffee shops, and music stores, businesses sell gifts cards as an investment. People are unaware of the financial strategy behind this popular gift. Therefore, this guide will help you understand the corporations’ financial tricks and how to avoid them when using a gift card.

    The business plan behind gift cards is simple. Provide the public with a convenient way to purchase their own gifts at their favorite store, but we do not generally understand how this concept impacts businesses in the short and long term.

First, the store revenue increases because “the average gift card user ends up spending an extra 20% beyond the value of the card” (giftcardgranny.com). In addition, 75% of shoppers will overspend their cards value by 60%. This statistic correlates to higher margin sales due to the fact people are inclined to purchase items at full price. The extra holiday cash allows consumers to purchase items they needed, but could not afford on their own. Corporations plan on this capitalist policy to ensure a higher sale margin. Although, we understand stores want our business, do we completely understand their mind frame?

The next part of this article will change your thought process about business organization. Stores play a vital role in our lives. Typically, we do not make our own clothing or grow our on food. Where we choose to shop represents how we manage our basic needs. The ability of stores to attract a certain number of people determines its success. Therefore, advertising, marketing, and incentive strategies helps to draw people into their store. Gift Cards are a major part of these investments. Not only does this card give you a reason to shop at a particular brand. The gift card acts as a catalyst. According to firstdata.com, “The advertising effect of gift cards, whether they are in the possession of a customer or on the shelf in a gift card mall, can help keep your brand top of mind and can possibly lead to additional sales”. Local and corporate stores design the layout based on consumer demand for certain products. The recent demand for gift cards has led to a vital change. Stores are likely to place gift card stands at the register, display case, and near products with a higher sales rate. They build their gift card program though print, radio, and other advertising opportunities. Another technique used is customer incentives (e.g., buy a $25 gift card and receive a $5 gift card free). The structure has been built due to the fact “Holidays account for a large percentage of all gift card sales. Most merchants generate anywhere from 25% to 50% of their gift card sales during the Christmas season”.

Lastly, take advantage of mobile gift cards. According to giftcardgranny.com “61% of surveyed retailers plan to offer mobile gift cards by 2015”. The benefit of using mobile gift cards helps consumers to keep track of balances, avoid losing them, and have them at all times.  These gift cards are easily downloaded unto smart phones and make paying convenient.

Understanding the logic behind gift cards presents us with various benefit. The ability to spend your money wisely and enjoy the savings is a great tool for the future.  Therefore, knowing how the business world markets itself will give you a consumer advantage.