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The State of Gift Cards in Online Retail

By SVS


By Steve Bradbery - VP International Product Solutions at SVS

UK online retail is big business. According to the IMRG Capgemini eRetail Sales Index the UK spent £133 bn online last year.

Gift cards sales — including their digital and paper equivalents — amounted to just a portion of this. But at about £5.7 bn in the UK last year, their sales punch is not to be underestimated.

Research by the UK Gift Card and Voucher Association (UKGCVA) supports this, indicating this is a market experiencing strong year-on-year growth. 2016 saw a total of 5.06% growth on the previous year.

This data echoes our own qualitative research, which has also seen an increase in the number of gift cards bought in the UK year on year, with the greatest increase coming from those consumers aged 21-35 — millennials. This age group is significant as millennials represent the next generation of consumers and are also most likely to actively seek out digital solutions.

From online retail to mobile payments, millennials are driving habits and digital gifting is no different. In our 2016 Consumer Survey of 1,000 UK consumers, 60% of the age group 21-35 said they had bought an electronic or digital gift card during the year.

The research also showed a change in buying habits from the previous year. Our 2015 results indicated, for gift cards in online retail, that 33% of respondents had redeemed an eCard/digicard in the previous 12 months. In 2016, this figure had risen to 42%. What’s more, in 2015, 83% reported that they were comfortable with redeeming a gift card that had been sent via email.

With augmented reality and personalisation, physical cards that are enhanced with apps and emailed cards that display personal messaging and imagery provide a range of choice.

How gift cards are just part of a wide choice of payment methods in the digital arena

Barclays reported in their white paper, ‘The Future of MCommerce’, that three quarters of the UK adult population will own a smartphone by 2019. They predict mobile will be the fastest growing retail sales channel, generating £32 bn in retail sales over the next two years.

According to Deloitte, just nine years after the launch of the first full touchscreen smartphone, mobile adoption is nearing a plateau. This features 81 per cent of UK adults, and 91 per cent of 18–44 year olds.

As digital consumers we’re happy to use our smartphones to do a range of things. Most recently this has included the way we pay for things, with an increasing number of us choosing to pay via our smartphone.

How we pay, however, varies. Some of us use mobile wallets. The market’s current major mobile wallet players are ApplePay, SamsungPay and Android Pay. These can store electronic bank cards and gift cards.

Many of us have downloaded a retailer or brand’s app and stored our bank or card details too for a quick and easy repeat checkout experience. Many more of us are quite happy to input card details, or other banking options such as PayPal, at checkout — both for mobile and other online retail sites. The cards we use at checkout include credit and debit cards, store cards and gift cards.

The state of mobile wallets

In their 2017 UK Mobile Consumer Report, Vibes revealed the UK’s current Mobile Wallet adoption. According to their research, 1 in 4 consumers use a mobile wallet. While 25% may seem like a big percentage for such a new area, it’s worth taking note that this encompasses offers, coupons, airline boarding passes, loyalty cards and tickets.

According to research by Pyments.com, the Mobile Wallet picture is not so rosy. In fact, after 20 months of monitoring the take up and usage of Apple Pay, Pyments.com concluded that Apple Pay has not yet taken off.

They concede that Apple Pay’s total adoption is up — as defined by the total number of people in the U.S. who’ve tried it once. But they suggest this is not surprising, as more people now own the technology needed (the iPhone 6 and 6S) and more outlets operate the technology needed to support it.

(For more about the state of Apple Pay, see point five in this article about online fashion retail.)

More importantly, they say, is the fact that 19 out of 20 people who have Apple Pay and are in a store that accepts it, do not choose to use it. Although they acknowledge take up may be slow as Apple Pay needs specific POS technology, their research does not reflect how other mobile wallet providers are faring, in particular those who do not need changes to POS to work.

The success or otherwise of Apple Pay is not the real point, however. The key thing to note here is the fact that consumers like shopping online, using both online retail and mobile retail, and they like using their smartphones, both online and instore. However accessed, online remains popular.

This is particularly true of peak shopping periods. John Lewis, for example, reported a 300% increase in website traffic on Black Friday, with 36% of all Christmas sales happening via johnlewis.com on a variety of web-enabled devices.

Perhaps the key takeaway can be summarised in a single word — omnichannel. (For more on that see this post about digital marketing trends in online retail.)

Consumers like shopping online and they like choice. Enabling them to shop however and wherever they want to will support your brand. And, given the penetration and preference for mobile — particularly among the under 35s — providing mobile commerce options make sense. When it comes to gift cards in online retail, mobile looks like a perfect medium.

Creating mobile moments as part of a wider ecommerce strategy

The second key takeaway is to remember that regardless of whether we are talking online retail or mobile retail, credit cards, debit cards, store cards, gift cards, electronic payments or mobile wallets, a key feature of the transaction is not the money: it’s the consumer experience.

Making that experience positive, turning it into a conversation or just transaction that is satisfying, is something we like to call a mobile moment. When an app works well and enhances your experience or somehow makes your life a little easier, it’s a mobile moment.

Mobile moments are important because mobile-engaged customers are likely to be a brand’s best loyal customers. Consumers who have bothered to download your app are more likely to want to engage with you again. And, if the experience is a good one, they’re more likely to remain loyal.

When people use mobile to communicate with a retailer — either through downloading an app or through paying for goods using a mobile wallet — they create a new avenue of communication. Even before a you know a customer’s preferences or details, you’ll know that the customer is interested enough in your brand to take the trouble to download your app.

(For more on developments in online retail communication, see this article on online shopping habits.)

Reaching (and creating) loyal customers

App-downloaders are more likely to have a degree of loyalty. After all, they’ll probably want to use it if they’ve downloaded it. This is a compelling arena in which retailers can extend targeted offers and rewards to their customers.

This is where the conversation starts. Whether through an app, mobile wallet, text or email, you have the opportunity to push real time notifications, such a geolocation flags (‘we’re just round the corner and have a 24 hour sale’) or expiry date reminders (‘you’ve one month left to use your gift card before it expires’).

You have the chance to upsell (if you enjoyed this product, we think you’ll love this) and to reward (thanks for being so loyal, have this gift card on us). It’s these little touches that consumers appreciate and that help to drive brand loyalty.

Gift Cards present a great opportunity for retailers to create mobile moments with potential new customers: the gift card recipient (redeemer). After all, the gift card buyer was your customer and may already be brand loyal.

The recipient may have never shopped with you before, so here’s your chance to impress them and convert them into new loyal customers. By inviting them to register, you create a communication channel through which you can learn more about their preferences and meet their needs through push notifications.

Conclusion

We live in the age of the Digital Revolution. Digital living — from smart phones, to online banking, to smart metres that measure your energy consumption — is a normal part of the everyday. We’re used to new apps presenting us with original ways of engaging with, and consuming, the world around us. We’re used to online browsing on a variety of devices from desktops, to laptops, tablets and phones.

We’re happy to complete a transaction with a variety of tools. We just want the experience to be a pleasant or even compelling one. And that is where the savvy retailer can use gift cards in online retail to drive loyalty and, ultimately, sales.

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