The future of gift cards is bright, indeed. The gift card market has been undergoing incredible growth for years – and it shows now sign of slowing down anytime soon.
But that doesn’t mean that the world of gift cards isn’t changing. While we’re unlikely to see the elimination of traditional, physically-based gift card any time soon, the gift card market has been undergoing quite a few shifts in recent years – and in 2017 and beyond, we’re sure to see the results of these changes.
Gift cards are turning into something bigger. No longer are gift cards just a way to give flexible, versatile gifts to others. Instead, things like continued integration with loyalty programs, a rise in self-gifting, and gift cards being used as promotional tools and incentives by large corporations are changing the ways that we use and sell gift cards.
Identifying and observing these changes can lead to quite a few benefits for retailers, financial organizations, and consumers. So in this article, we’ll take a look at 7 predictions for the future of gift cards, and tell you what you can expect from the world of gift cards – in 2017 and beyond.
1. Gift Cards Will Be More Tightly Integrated With Apps
Perhaps the only industry experiencing more rapid growth that gift cards is the mobile smartphone application market. Though mobile application sales are not accelerating as quickly as they have in the past, the use of mobile applications has only increased.
In fact, 52% of all time spent on digital media is spent on apps, according to GO-Globe. In addition, mobile traffic is now driving the vast majority of traffic on the internet as a whole – this is a truly dramatic shift.
And it points to a single conclusion – companies must place increased focus on app support for gift cards, in order to drive sales in the modern, technology-dominated market. If retailers can sell gift cards on mobile devices and provide a simple, intuitive experience to users, they can benefit from dramatically increased sales.
Perhaps the best example of a company implementing an app-based gift card program is Starbucks. The MyStarbucks application is responsible for driving a huge amount of gift cards sales for Starbucks. The company continues to smash records for gift card sales – in 2014, Starbucks sold nearly 700 gift cards per minute, a truly astonishing figure.
The reason for these sales is simple – the MyStarbucks application integrates gift cards, payment, loyalty points, and gift card purchasing into one seamless, easy-to-use app. By doing so, they have integrated their entire gift card system into a single application, allowing Starbucks customers to quickly and easily purchase, use, and be rewarded for buying gift cards.
Other companies are sure to take note of the success of this application. While some retailers like Target already have limited mobile gift card capabilities, we’re likely to see an increase in retailers offering applications that blend loyalty programs, sales, and gift card redemption/purchasing in a single easy-to-use package.
2. Sales Of Digital Gift Cards Will Continue To Rise
This is somewhat related to the above point. As time goes on, we’re likely to see a dramatic increase in the sales of digital gift cards. The growth of digital gift cards over the last several years has been dramatic – while the sales of physical gift cards are growing at a 6% CAGR, sales of digital gift cards have increased by over 200%.
This has not gone unnoticed by retailers. It’s now estimated that around 81% of top retailers offer some kind of fully-digital gift card, and this trend is sure to continue as digital gift cards become more popular.
There are two factors related to this. First, younger generations – including millennials and “generation z” are beginning to enter the workforce, providing them with much more purchasing power, and an increased ability to spend. Because these consumers are much more familiar with modern technology, they’re more likely to adopt modern products like digital gift cards.
Second, modern technology is making it easier to sell gift cards that are fully digital, and consumers are now more easily able to redeem these gift cards, both online and in-person. In the past, digital gift cards often had to be printed physically to be used in stores – but today, almost all digital gift cards support QR codes and digital wallet apps like Google Pay and Apple Pay, making them much easier to use and redeem.
These two factors combined are responsible for the growth of the digital gift card market – and it seems unlikely that this growth will slow down anytime soon.
3. Small Businesses Will Be More Likely To Implement Gift Card Programs
In the past, most small businesses were unable to implement comprehensive gift card programs, due to the costs associated with upgrading POS systems, contracting with payment processors, and working with large gift card program companies.
However, modern technology has made it much easier for small businesses to take advantage of the numerous benefits offered by gift cards. Square, a leader in mobile payments for small businesses, recently introduced a gift card solution that has been tailored specifically for small businesses.
This flexible program allows small businesses to choose from generic plastic gift cards, custom-designed gift cards, or an inexpensive, all-digital gift card solution – increasing flexibility and decreasing costs for small businesses.
Because it’s so easy for small businesses to implement gift cards – and because selling gift cards has a number of advantages for businesses of every size – we’re certain to see more and more small businesses making use of specialized gift card programs such as Square Gift Cards.
4. Per-Capita Gift Card Sales Will Continue To Grow
Consumers keep buying more and more gift cards. In 2012, the average number of gift cards purchased per capita was around 4.8, according to a survey done by First Data. In 2016, this number reached a peak of 5.9 – and if trends hold, we can expect consumers to purchase an average of 6+ gift cards throughout the year.
There are a variety of reasons for this trend. First, gift cards are becoming more socially acceptable. Even a decade ago, some people did not like receiving gift cards – but modern attitudes have shifted, and gift cards are considered acceptable gifts in almost all situations.
In fact, gift cards have been the #1 choice on wish lists around the US for more than 9 years – and this is unlikely to change anytime soon! It’s also easier than ever to buy the perfect gift card. Shopping online for gift cards has become common – whether on the website of a specific retailer, or on a third-party gift card marketplace.
Also, some retailers have begun introducing loyalty programs that reward consumers who purchase gift cards. By purchasing multiple gift cards from a single retailer, consumers can often enjoy percentage-based discounts, discounted gift cards, or even free gift cards. This appeals to thrifty millennial consumers who are more likely to take advantage of loyalty programs.
5. Consumers Will Be More Likely To Overspend The Value Of Gift Cards
According to First Data, consumers are more likely than ever to overspend the value of gift cards. In 2015, 69% of survey respondents said that they were “likely” to spend more than the value of their gift card when shopping.
In 2016, this number rose to 75%. This is important to retailers, because overspending is one of the main ways by which they profit when they sell gift cards. The fact that consumers are more likely than ever to spend more than the value of their gift cards is an indicator that consumer perceptions about gift cards are changing.
Consumers no longer see gift cards as a “separate” type of currency – but as a form of stored value that can be used alongside other forms of payment in order to make a purchase.
This is a dramatic shift in the way that consumers perceive gift cards. In the past, gift cards were often seen as “separate” from cash – consumers were more likely to spend gift cards, but reticent to augment their purchases with their own money.
However, the line between cash and gift cards has become blurred – and that’s a good thing for retailers who wish to sell more gift cards at their stores, and increase their profits.
The increased overspending of consumers indicates that they’re less likely to consider the value of a gift card when making a purchase, and they’re willing to spend a bit more of their own money to get an item that they really want.
6. Gift Card Self-Purchasing Will Become More Commonplace
This is somewhat related to the above point. As gift cards have become more common, more consumers than ever are purchasing gift cards for themselves – rather than buying them as gifts.
There are two primary groups of people who purchase gift cards for themselves. First, there are the “bargain-hunters”. This group of consumers uses gift cards as a form of currency that can be used in place of cash.
These consumers purchase gift cards at discounts through third-party gift card marketplaces, and from retailers who sometimes sell gift cards at special discounts through loyalty programs, flash sales, and other deals.
It’s important to note that these purchases are not random – most of these consumers only purchase gift cards to retailers where they already shop, using the gift cards as a sort of “store credit” that can allow them to save quite a bit of money on their everyday purchases.
The second group of people who self-purchase gift cards are those who lack bank accounts, credit cards, debit cards, and other common methods of payment that can be used online.
As the world has grown increasingly connected, online purchases are becoming more common – especially for subscription services like Netflix and Spotify, and app stores like Google Play and The App Store. However, if an individual lacks a credit card or a debit card, they can’t make use of these services.
Purchasing gift cards is a viable way for consumers to get around this problem. Consumers can simply purchase retail gift cards in-person at large gift card malls, and use them to make purchases both in-person and online, giving them more flexibility than cash.
It’s also very common for these consumers to make use of “open-loop” gift cards like preloaded VISA gift cards and MasterCard gift cards, as these gift cards can be used at almost any retailer, both online and in-person, providing maximum flexibility.
Both of these groups of people are likely to grow in the near future. Gift card marketplaces are becoming more prevalent and easy to use, and savvy consumers are likely to keep using gift cards as a way to purchase products at a discount. In addition, our digitally-connected world will continue to grow, forcing consumers who don’t use credit or debit cards to seek alternative methods of payment.
The Gift Card Market Will Certainly Change – But It Won’t Stop Growing
We hope you’ve enjoyed this list of predictions about the future of the gift card market in 2017 – and beyond! This is certainly an interesting time to be involved in the world of gift cards, and we look forward to seeing what the future holds for all of us!
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