Within three to five years, almost every retailer in the UK will offer gift cards to boost overall sales and foot traffic, according to Cards International, which predicts the trend to follow that of phone cards. Some UK retailers “are beginning to implement the gift card as a profitable, achievable entry point in a comprehensive payments strategy that can easily encompass store cards, and later, scheme-branded cards”, CI reports. In Canada, for example, the country's largest retailer, Canadian Tire, has already utilized gift cards to convert over 2 million customers to a MasterCard-branded gift card.
Adding a gift card to its “comprehensive payments strategy” enabled Canadian Tire’s Financial Services (CTFS) division to move more than CD 27 million in gift cards in just four months in 2002, including CD 20 million in December alone, according to CI. Over half of Canadian Tire’s customer base transacts in-store every month, which justified the retailer’s move to move its card business and loyalty program onto a single scheme-branded card. By end-2002, the gift-card was Canadian Tire’s sixth-best selling product, and had distinctly boosted profitability in stores.
Gift-card holders typically spend about 18 per cent more than the value of a card at a retailer, and visit the store at least twice more to spend the total balance on the card, according to research by TSYS. Conversely, gift cardholders not fully spending the value on their card, tend to leave 10 per cent of its value unspent, which, as ‘breakage’ in US parlance, is “an excellent additional source of income for retailers”, CI notes. Other, less tangible benefits of gift cards include lowered fraud costs and improved efficiencies gained by automating previously manual, paper-based vouchers.
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