Why Gift Cards Are So Good for Business – Small and Mid-Sized Businesses Needlessly Missing Out

If you own or operate a small to medium sized business and do not already do it, you should consider accepting gift cards. There are several reasons for this, but perhaps the biggest reason is that your customers want and expect them. Considering the trends in current business, not offering them is risky business.

Customer Preference

Consider this: according to the National Retail Federation, in the year 2005:

• Three-fourths (75.5%) of consumers purchased gift cards;

• More than half (52.3%) wanted to receive them; and

• The average consumer spent 15.6% of their holiday budget on them.

This trend that has continued and grown more marked, and not only do people buy gift cards for holidays and other occasions, many buy them as a convenient way to budget their money or simply store value for future use and convenience. By 2013, for example, 85% of the US population exchanged gift cards, with 61% of card holders spending more than the card value – 75% of those spend more than 60% more. The market is huge, expected to reach $130 billion by 2015.

Small and Mid-Sized Businesses Missing the Boat

Here’s a sobering fact: 97% of top retail stores and restaurants sell gift cards on-line. Less than 3% of local small businesses do.

That is handing larger enterprises an enormous advantage completely unnecessarily. Gift cards are neither difficult nor particularly expensive to create, and they are not time-consuming to implement. If you need help doing this, help is available.

Business Advantage

In addition to using and accepting gift cards because your customers want them, there is also the fact that doing so will increase your profits in other ways. It’s a little like printing money.

It’s actually a lot like printing money. Consider the mechanics of the cards. A gift-giver likes your store or something you offer for sale and decides to give someone else an opportunity to try it for herself. To do this, she buys a gift card, paying you the full face value of the card. That is like printing money – the cash is in your possession now, and you will have to provide value in exchange for it, if at all, some time in the future. One sees many different figures for how often the cards are not redeemed for the full amount, from about 7% to as high as over 20%. Whatever the amount is for your business, it is pure profit.

On the other side of that coin is the fact that most people who do use the gift card’s full face value almost always make purchases totaling more than the card’s value, and so the card creates an additional purchase based on the original purchaser’s desire to buy something from you. More than half the people going to stores with gift cards in their possession do so with someone else. So it is a great way to expand your business.

In addition to these obvious facts, there are other marketing methods only slightly “outside the box.” If you give customers a gift card with some value attached when they purchase something from you, you create a very strong incentive for them to come back – to spend the money you just gave them with you. Considering how much it costs to generate a customer in the first place, this can be an extremely cost-effective way to cement the business relationship with them and keep them coming back.

You could also give gift cards to people in your target demographic who have not been customers yet. Obviously these are more impressive than coupons (and they do cost more to do), but you get your money’s worth because people who have spent anything with in the past are approximately 20 times more likely to spend money with you again. If you know how much you are spending to obtain new customers, it would be easy to determine what makes sense to give people.

Contests, give-aways, and charitable donations could also all take the form of gift cards with a certain face value. These all sound like “cash” to the customer, but they bring people into your store or site and allow you to fulfill the gift in your merchandise. Thus you are potentially generating new repeat customers in addition to whatever advertising you would get from naming the card as the gift. If it is a local charity, your gift card could bring back major dividends.

You should not be missing this opportunity.