We sat down with Prerna Sonawane, Merit’s Partnerships Director who works with leading companies in technology and retail to help devise their gift card strategies to maximise engagement and brand loyalty, which indirectly increases sales
Prerna, thanks for taking the time to discuss all things gift card related with us. Before we get into the detail, can you give us an insight into the UK gift card industry and how you assess the condition of the wider UK retail industry at present?
Gift Cards are big business in the UK with the UK gift card market worth over 7 billion pounds in 2020.
The UK high street has taken a bruising recently with COVID restrictions just accelerating the move online and the decline bricks and mortar retail. Increasing rents, increasing business rates and complex red tape were all challenges well before the pandemic.
I refer to a recent statistic from the GCVA market report that total retail spend fell 3.6% in 2020, the biggest year-on-year decline in more than fifty years. However, beyond this headline statistic are a wide variety of different experiences. Most marked was the contrast between physical and online performance, with online retail growing 32.4% vs. an -11.1% decline in offline sales. With gift cards being such big business in an everchanging retail landscape, it is definitely a market all retailers should be actively involved in.
You have worked extensively with Gift Cards in your career – what are the benefits of retailers issuing Gift Cards?
There are so many advantages to having a gift card and it is a subject I’m really passionate about. I will focus on the top 6 benefits to retailers as I see it:
Additional Revenue b2c additional revenue, and b2b incremental revenue, both using existing assets.
Immediate cash flow, and a pre-curser to purchase, often taking some time before being redeemed. An element of non-redemption also occurs to the retailer’s benefit – although retailers will always prefer the customer adds value to their Giftcards.
Get Clients to Buy Directly from you – clients often buy via a third-party reseller who will want commission in exchange for selling your goods and services. Think for example for a hotel room you book on Booking.com, the hotel has to pay commission to Booking.com on that sale. If the hotel company gets the client to book direct using a gift card, it removes this commission, helping boost margin.
Drive Customer Loyalty, Brand Awareness and New Audiences – when someone receives your branded gift card, they are going to look up your brand. What can I buy? Where can I buy? What is the brand about? Having your logo front and centre in front of an audience with your branded gift card builds familiarity.
Capitalise on B2B Opportunities – Gift cards unlock a whole new market for companies, enabling them to capture sales from the B2B market. This can be the corporate gifting, voluntary benefits or the loyalty market (where large enterprises reward loyal customers for spending with their brand)
Data – I’ve saved perhaps the most important point until last. Data analytics on your customer will enable you to deeply understand your customers and their behaviour, driving your business strategy and decision making.
How valuable can a Gift Card be?
Further GCVA research found that the majority of people spend more than the nominal value of their gift card, often significantly, and this increased spend amount is full retail price, which thereby dilutes any b2b discount offered.
An average b2c revenue from Gift Cards is about 3% of turnover, and b2b varies by retail genre, but typically 1-5%.
So could the Gift Card support a rejuvenation of the high street?
To be honest, I think it is unlikely. Gift Cards are often able to be used online as well as offline so as to drive engagement and revenue. What Giftcards would do in a b2b sense is reach new online audiences and gain new traffic.
How do you create your own Gift Card, is it complicated?
It isn’t as complicated as you might think. The gift card technology is very advanced and makes issuing and redeeming of gift cards seamless. You incur the same payment gateway fees at the time of selling the gift card as you would when someone pays in store with a credit card directly, so there isn’t any downside to selling your own gift card.
What is the future for Gift Cards? Are they at risk from new technology?
Gift Cards are extremely popular globally- some stats suggest that 1 in every 2 Americans gives a gift card at least once a year. Like all industries, gift cards will evolve to stay relevant, moving from paper vouchers to physical cards to e-cards and e-wallets. Customers demand speed and convenience and as long as gift cards can deliver that, I think gift cards will be a part of the retail landscape for a long time to come.
r a long time to come.