Opportunities for Closed Loop Gift Card Growth

By David Stone, CEO of CashStar

Closed-loop gift card programs are a key offering for most organizations, and with new innovations available to retailers, these programs present growing opportunities. While the in-store closed loop industry grew by only 1.8 percent declined to about $60 billion in 2009, new channels and opportunities are emerging which will ensure that retailers can continue to capitalize off these products.

At CashStar, we believe that gifting is profoundly personal. In this regard, only closed-loop retailer gift cards can provide consumers with a truly personal and meaningful gift (versus an open loop card they can use to, say, pay the utility bill). With the advent of digital cards, retailers have the opportunity to make these cards easier to personalize, offering consumers multiple design options and the ability to write personal messages right on the cards themselves. Digital cards also lend themselves exceptionally well to integration with online promotions and social media – helping to both drive sales of these cards and engage with consumers like never before across multiple channels. For example, during the holidays, many retailers featured ‘Give One, Get One’ offers online (allowing consumers to get free online gift cards with a minimum purchase). CashStar’s patent pending offer management system made it easy to execute these offers and promotions on the fly. Many retailers promoted these cards on their websites and using their Facebook and Twitter pages.

Closed-loop gift cards are also a retailer’s most profitable SKU and digital gift cards can undoubtedly help drive additional revenue growth with virtually no inventory and overhead costs. Digital cards can be the most profitable sale for retailers. They have much higher face values, no inventory costs and are purchased by and given to more affluent customers, who tend to spend more in store as well.

We believe that the digital channel is truly the next frontier for gifting and those retailers who can harness the new tools available to them, whether online or mobile, will emerge with a clear advantage in the market.

At the Prepaid Expo this Tuesday, February 23rd, at 8:45 am, I’ll be moderating a session titled “State of the Market: Closed Loop Programs.” We will explore some of the latest issues impacting the closed-loop prepaid market, with a special focus on the experiences of the country’s biggest merchants. Joining me will be a panel of distinguished retail presenters including Nathan Ehrlich, Senior Manager, Gift Operations, The Home Depot Incentives, Inc.; David Tryder, Director, Interactive and Relationship Marketing, Dunkin Donuts; Tom Boucher, Senior Manager, Gift Cards, Best Buy; and Michael Hursta, VP, Prepaid Category Manager at First Data Corporation.

These panelists will provide insight on what developments they have seen in their gift card programs over the past year and what some of their most innovative tactics have been. They will also share their thoughts on emerging digital channels like mobile and social media.

It will undoubtedly be an interesting and provocative discussion, and I hope to see you there.

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