Understanding The State Of The Gift Card Market In 2017 | EJ Gift Cards

The gift card market is deeply complex – and absolutely enormous. In 2015, gift card sales peaked at nearly $130 billion, and they’ve been growing at a steady rate in the years since. The CEB has predicted a steady 5-6% growth in the market for years, and this puts the gift card market on pace to reach nearly $180 billion by 2018.

But all of these raw numbers are rather unhelpful. Whether you’re just a gift card enthusiast, or a retailer who is curious about the buying habits of gift card purchasers, it’s much more useful to break down the gigantic gift card market into chunks of easier-to-digest data.

Lucky for you, we’re here with a breakdown about the state of the modern gift card market. Using resources compiled by WalletHub and a number of independent survey companies, we’ve compiled an article with some of the most valuable insights into the world of gift cards, and the gift car market at large.

So read on, and learn about the state of the gift card market in 2017.

The Gift Card Market Is In A State Of Near-Perpetual Growth

Gift card sales have remained on a steady upward trend for years – though they dipped somewhat in the aftermath of the 2007-08 financial crisis. However, since then, the gift card market has seen absolutely explosive growth.

In 2017, the expected sales of gift cards will have increased increased by 54% since 2007, a remarkably consistent growth rate, especially considering the financial turmoil caused by the financial crisis.

It remains to be seen if this trend will change in the future, but most consumer financial bureaus are quite positive about the outlook of the gift card market. Gift cards have truly changed the state of gift-giving – and they don’t seem likely to stop doing so any time soon.

Digital Gift Cards Are Growing – But Still Lag Behind

Digital gift cards are experiencing their own burst of growth. This market, which is currently dominated by the likes of Starbucks, involves the sale and purchase of wholly digital gift cards – no physical plastic to be seen here.

Digital gift cards are becoming more popular with people of every age – but especially tech-savvy millennials. As millennials have aged and begun to have more purchasing power, we’ve seen a huge growth in the digital gift card industry.

In 2014, digital gift cards made up about $5.5 billion in gift card purchases. In 2015, they were up to $7.1 billion. And by the end of 2018, the CEB forecasts an $18 billion market share – around 11% of the total market. That represents an overall increase of nearly 300% over the last 4 years.

Digital gift cards are certainly a market segment to watch out for, especially as easier purchasing and advanced smartphone technology make them easier to use than ever before.

And while digital cards are unlikely to overtake physical card any time soon, any retailer or company out there would be wise to consider how they may integrate digital cards into their overall gift card strategy.

The Top 5 Most Popular Gift Card Categories

Now that we’ve gotten a look at the overall state of the gift card market, it’s time to take a deeper dive into consumer spending habits, starting with the 5 most popular gift card categories, according to CEB and Wallethub.

NOTE: The sum of these categories is greater than 100%, as each consumer was able to indicate which type of card they were going to purchase, and were allowed to select more than one answer.

Restaurant – 34.8% – Restaurants have remained extremely popular among gift card consumers, and there’s a reason for that. Restaurant gift cards are the best low-value gift card option out there, especially to chain restaurants such as Chipotle or McDonalds.

Think about the difference between a $20 gift card to a fast-food restaurant and a $20 gift card to, say, Target. You can’t buy much with the Target gift card, but that $20 fast-food card can get you several meals, providing lasting value at a lower price.

It seems likely that this is the primary reason that restaurant gift cards have remained popular since the data was established – they offer a low-cost way to give gifts to teachers, during gift exchanges, and other situations where a high budget is not preferable for the purchaser.

Department Store – 34.4% – Department store gift cards have always had a strong showing in the gift card market, and it’s not hard to understand why. This category includes big-box retailers like WalMart, Target, Meijer, KMart, and others huge retailers with gigantic product selections.

Flexibility is the primary reason that these cards are so popular. A big-box store like Walmart offers tens of thousands of products, and a gift card can be spent on any item that the recipient chooses. From daily necessities like groceries to luxury items like phones, TVs, and computers, department store gift cards offer a tremendous amount of choice and flexibility for recipients.

Visa/Amex/Mastercard Gift Card 22.7% – Unsurprisingly, the runner-up to department store gift cards in 2017 offers even more flexibility. Visa, American Express, and MasterCard have offered specialized, flexible gift cards for purchase that allow cash to be turned into a flexible, pre-paid method of payment that can be used both online and in-person.

Essentially, these cards function like a preloaded debit card. They are activated upon purchase, and payment is rendered to the retailer. Then, the gift card is used in any situation where a standard credit or debit card could be used – for in-person purchases at retailers, restaurants, and more, as well as for online purchases on websites like Amazon.com

These gift cards offer unparalleled flexibility, as they are essentially as usable as cash. In addition, they offer people who do not have credit or debit cards a means by which they can purchase products and services online.

Coffee Shop – 20.1% – Coffee shop gift cards are another low-cost form of gift card that can offer plenty of use, similar to restaurant gift cards. This makes them the perfect gift for co-workers, teachers, and other people who you may not be extremely close to.

Starbucks is certainly the leader in this category, as their unique Starbucks Rewards application and loyalty program provide those who purchase and use gift cards with additional benefits and rewards, based on how much coffee they buy.

Entertainment – 17.2% – Gift cards to entertainment venues – primarily movie theater chains like AMC, Showcase, Regal, and others – come in at number 5 on our list. This may be surprising to some, but we think there’s an easy explanation.

Entertainment gift cards offer families and friends a fun, experience-based way to spend time together. Because films are especially popular with younger kids (The MPAA estimates that 12-17 year olds have the highest per-capita movie attendance per year, at 7.3), an entertainment-based gift card provides families with a fun way that they can enjoy a theatrical experience together.

Together, these 5 card types are top of the heap when it comes to consumer buying habits, and understanding them (and why they’re popular) is critical to getting a deep understanding of the state of the gift card market in 2017.

Consumers Are Likely To Spend $20-$150 On Holiday Gift Cards – Spread Across  1- 4 Holiday Gift Cards

holiday gift cards

In 2015 – the latest year that survey data is available – a large majority of consumers expected to spend between $20-$200 on gift cards during the holidays. Combined, 70% of all people who were shopping for gift cards expected to spend somewhere between $20-$200 on their gift cards.

The $21-$50 category was the most popular, with 21.4% of consumers indicating that they expected to spend that amount on gift cards. Interestingly, the second runner-up was the $76-$100 category, rather than the $51-$75 category we might expect to see.

In addition, consumers were the most likely to purchase somewhere between 1-4 total gift cards. 77.9% of all surveyed people said that they were going to buy somewhere between 1 and 4 gift cards, with 2 gift cards being the most common answer at 28.6%.

Together, these two statistics tell us an important insight – it’s rare for a consumer to buy one single, high-value gift card as a gift. Rather, they prefer to spread their gift card purchases across multiple cards for multiple recipients.

This is in line with the idea that gift cards are an easy-to-purchase, easy-to-gift option during the holidays. By simply purchasing multiple gift cards, the shopping process is vastly simplified, providing both gift card buyers and recipients with increased flexibility.

This idea also lines up with our next discovery.

Ease-Of-Use And Flexibility Are The Two Largest Factors Influencing A Gift Card Purchase

50.4% of all gift card purchasers said that the largest factor in their gift card purchase was flexibility – the recipient of the card could buy their own gift.

Furthermore, 24.7% of all gift card purchasers said that gift cards were easy to buy, providing them with a simple means of giving a high-quality gift to a friend or a loved one.

Every other factor on the survey list – including budgeting, incentive-based purchasing, and many other reasons – combine to less than 24.9% of the total share of factors that influenced a gift card purchase.

Clearly, flexibility and ease-of-purchase are the most important factors to a great gift card buying and receiving experience. If you run a retail organization, consider how you can make your cards even easier to buy and use.

Strategies like omnichannel sales and online purchasing of gift cards can enhance the positive aspects of gift cards, and drive further sales.

Concerns About Impersonality And Expiration Are The Two Largest Negative Factors

Gift cards, for all of their benefits, do sometimes carry a bit of a stigma. Beyond revealing why consumers liked gift cards, the CEB study revealed that there were two large negative factors that could dissuade customers from a gift card purchase.

The first is that gift cards seem “impersonal”. 25.3% of consumers agreed that this had caused them to reconsider a gift card purchase.

In addition, 16.3% of consumers cited expiration dates as one of their primary concerns when buying a gift card.

Together, these factors are the two largest contributors to consumer concerns about the purchase and usage of gift cards, outnumbering every other listed factor on the survey.

Retailers should address these concerns. Allowing gift card buyers to customize their cards can be a useful way to make gift cards seem more personal – this is becoming increasingly common among MasterCard and Visa gift cards.

Consumers should also be made aware of the Credit CARD Addendum of 2009, and how it protects them from credit card expiration dates. It seems that there are still a large majority of consumers who are unaware of the fact that they are protected from expiration dates for at least 5 years from the date of purchase of a gift card.

If retailers can address these top two concerns among gift card buyers, they’re sure to enjoy increased sales – and the benefits of a constantly-growing gift card market.

Got Gift Cards You Don’t Want? Sell Them At EJ Gift Cards!

As the gift card market grows, so does the amount of unused gift cards that are just sitting around in wallets, purses, and junk drawers. It’s a shame to let a gift card go to waste – even if you don’t need it.

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