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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Using Digital Gift Cards as a Last Minute Sales Tool

By David Stone, CEO of CashStar

This past holiday season retailers in all verticals turned to gift cards to drive sales, and the results of those sales are no more evident than in the months of January and February when customers return to redeem their cards. In particular, many retailers took the plunge into digital gifting this past holiday season and leveraged these new channels to engage with their consumers and to drive incremental sales

CashStar recently aggregated the data from tens of thousands of customers purchasing millions of dollars worth of gift cards on our digital gifting and incentives platform this holiday season. The data showed that online gift cards proved to be a profitable last minute sales tool for retailers. In fact, Christmas Eve was the highest selling day of the year, with 39 percent being purchased after 6pm Eastern.

Online gift card sales increased more than twelve-fold (1129 percent) between Black Friday (November 27) and Christmas Eve. Sales increased 682 percent between the first week of December and Christmas Eve.

Other interesting results from the 2009 holiday season included:

• Of those consumers who purchased online gift cards on Cyber Monday, 15 percent chose to send the card at a later date and overall nearly one in five purchasers (18 percent) opted to send online gift cards at a later date
• This past year more than 97 percent of all CashStar-powered gift cards carried a personalized message right on the card, as consumers utilized CashStar’s best in breed personalization tool set.
• On average, more than one in eight consumers uploaded their own photo or image as their gift card design for an increased level of personalization.
• For the week of Christmas, the average face value of CashStar gift cards was 69 percent higher than the industry average for specialty retail gift cards and 151 percent higher for general gift cards (compared to sales info provided by First Data). This trend represents a demographic of affluent, Internet-savvy female buyers in the 31-50+ age range, who are more likely to purchase digital gift cards

The power of the digital channel lies in the flexibility and immediacy with which it can engage consumers. At CashStar, we also tested new marketing and social media efforts that, combined with our clients’ own promotional efforts and the highly personalized features of our platform, created major sales spikes and helped attract new customers.

These results are a critical point for retailers to consider as they move into planning their gift card programs for the next key sales dates such as Mom, Dads, Grads and the summer wedding season. Digital gifting can be the pivotal driving force in generating new more profitable sales and a powerful new way for retailers to engage with their consumers.

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