We’ve all been there. We want to give our son, daughter, niece, nephew, parent or grandparent a gift, but what? Do we risk buying something that’s fallen out of favor? Cash obviously isn’t an option; it’s so “impersonal.”
There’s always gonna be one wacky family member giving people random goods, but fortunately for everyone else, there’s a better option that will satisfy all parties: gift cards.
It’s time to save your customers from their family’s silly gifts. You can do that, and stretch your bottom line and gain more customers at the same time with a retail gift card program.
To help, we’ll look at the potential impact of having a gift card program, and then take you through the step-by-step process of how to start one at your small business.
Here’s what we’ll cover:
Holiday 2016 Gift Card Snapshot
Let’s begin by looking at the performance of gift cards during the 2016 holiday season. While gift card purchases and use aren’t directly tied to the holidays, gift card sales flourish throughout November and December.
Fifty-six percent of shoppers, according to research from the National Retail Federation (NRF) and Prosper Insights, planned to buy gift cards as a gift during the 2016 holiday season. The same research highlights just how much money gift cards bring in during the holidays.
As you can see from the chart, which depicts BILLIONS of dollars, gift card programs are a very real boost to the retail businesses. Holiday shoppers in 2016 were expected to purchase three gift cards on average, each with an average value of $46.
- Restaurants (35 percent of buyers)
- Department stores (33 percent)
- Visa/MasterCard/American Express (22 percent)
- Coffee shops (21 percent)
- Entertainment (17 percent)
As you can see, patrons are definitely interested in purchasing and giving gift cards. So if you’re not offering a retail gift card program, you’re missing out on this great source of revenue.
How to Start a Retail Gift Card Program in 4 Easy Steps
Implementing gift cards for your business doesn’t require some crazy scheme. It’s as easy as:
1. Acquire the physical gift cards
You can simply order the actual plastic gift cards from a provider. Depending on your point of sale (POS) system, you may be able to purchase them directly from the vendor, while others partner with third-party suppliers. Square POS offers cards directly to customers while Lightspeed POS recommends their preferred gift card partner, Plastic Printers.
You may also have to contact a card supplier yourself. Either way, you just need to contact the appropriate party, choose or customize the design, decide how many you want and then place the order.
Something to keep in mind here is that the cards double as a marketing tool for your business. As such, it’s a great idea to include your logo, business name and contact info and website on there.
Another piece of advice is to order these cards in bulk. Most providers offer discounts on the price per card as the order size increases.
2. Input cards into your POS system
Just as with ordering the cards, the process for inputting cards into your system varies depending on your POS provider. There are two main options for storing information on gift cards:
If your cards have barcodes, you typically assign what is essentially a unique account number to each card’s barcode. You can record the original purchaser’s information and the amount and link it to the account number.
Every time the card is scanned, it’ll deduct the purchase amount from the remaining amount on the card until it reaches $0. Once it’s all used, customers have the option to reload the card or pay the rest of their balance with another payment method.
If you choose cards with magnetic stripes, each unique stripe works as its own identifier. You simply swipe it initially and input the amount purchased for that card into your system. The POS will then deduct the balance of the gift card each time it’s swiped until it’s depleted.
3. Make customers aware of your new gift card option
Marketing your new gift card program to customers is the fun part! There are multiple strategies for debuting gift cards for your business. You can offer various sales and incentives on the cards that are designed to get customers back in your store spending more money.
Example #1: Offer a free gift card of a lesser amount for any gift cards purchased of a designated amount. In other words, I could buy a gift card for $100 to give as a gift, and as an incentive, I might receive a second, free gift card for $20.
In this example, the $100 gift card will get the recipient (and potential new customer) into your store, while the $20 gift card will ideally get me back into the store.
Example #2: This option is similar to the first, as it is designed for customer retention. This strategy, however, awards a free gift card with the purchase of items over a designated amount. Let’s say I spend $100 or more on a new pair of shoes. In this example, the store would reward me with a $20 gift card to be used at my next purchase.
These strategies may seem like they’re giving away a lot of capital, but the next section highlights how it’s more of a long-term investment.
4. Reap the rewards
In terms of value for retail businesses, gift cards function in three primary ways:
- Bring in new customers. Gift cards given as gifts to consumers who’ve never shopped at your store will force them into your store to retrieve the value of the card. This introduces them to your brand and products, which, along with an excellent customer experience, will keep them coming back as loyal customers.
- Leverage store and brand advocates. Offering gift cards is a great way for existing loyal customers/brand advocates to share their love for your business with others. If I want to give someone a gift and introduce them to the experience of shopping in my favorite store, I can purchase them a gift card to be redeemed there.
- Capture “the difference.” Perhaps the most valuable aspect of a gift card program is the volume of customers that will spend more on a transaction than their gift card is worth. According to giftcards.com, nearly three-fourths (72 percent) of customers using gift cards will spend more than the value on their card. In fact, these customers will on average spend 20 percent more than their gift card value.
Next Steps for Starting a Gift Card Program
Now that you see the value and ease of establishing a gift card program, what’s next?
- If you don’t currently have a POS system in place, that should be your first step. Gift card programs represent a small fraction of the overall value POS systems provide. Our team of dedicated POS software advisors can provide you with a shortlist of the best system for your business. Just take a quick questionnaire to get the ball rolling.
- If you do already have a POS system in place, reach out to your vendor rep to determine what the best course of action is and/or who your third-party card supplier is.