Retail is undergoing significant changes, spurred by the rise of e-commerce due to the pandemic, the merging of online and in-store experiences pushing companies into omnichannel, and shifts in consumer behavior. These challenges affect nearly every brand. In this dynamic commerce landscape, gift cards have become a crucial component of retail strategy, offering benefits from fostering brand loyalty to expanding business reach. According to the National Retail Federation, more than half of holiday shoppers would rather receive a gift card as a gift.
In this blog post, we’ll explore why gift cards matter for merchants and businesses, delve into Dyme’s unique approach to eco-friendly gift cards, and highlight the broader impact on the environment.
What are the types of gift cards there are out there:
As a merchant getting started with gift cards, you’ll hear a bewildering array of terms used to describe gift cards – here is a quick rundown on some of the most commonly used phrases:
Closed-loop gift cards:
Closed-loop gift cards are designed for use with a single retailer or a specific group of related businesses. They cannot be used elsewhere, ensuring the funds are spent within the issuing business. While this limits customer choice, it promotes customer loyalty and retains revenue.
Open-loop gift cards:
In contrast to closed-loop cards, open-loop gift cards are versatile and can be used at various businesses. Often featuring co-branding with payment networks like Visa or Mastercard, they function similarly to debit cards. Despite providing flexibility to customers, they may incur service fees and typically do not foster loyalty to a specific retailer.
E-gift cards are digital cards delivered via email or SMS. Valued for their convenience, they are popular among tech-savvy customers. From a business perspective, e-gift cards are economically advantageous due to the absence of production and distribution costs associated with physical gift cards.
Charitable gift cards:
Charitable gift cards enable cardholders to make donations to a charity of their choice. While less widespread than some of the larger brands, customers with specific ethical inclinations may find them preferable.
Experience-based gift cards:
Gift cards for experiences like spa days or adventure activities allow customers to redeem for activities rather than tangible goods. These cater to specialized markets and often come with time restrictions.
Reloadable gift cards:
Reloadable gift cards permit customers to add funds, similar to prepaid debit cards. This feature enhances customer loyalty and facilitates repeat purchases but requires more setup and maintenance.
Gift Cards Address Retailers’ Main Priorities
When we talk with merchants about key priorities, a few stand out as consistently top of mind – growing revenue, getting more customers, and working with the community. Gift card programs can have a dramatic impact on all these priorities.
Gift card recipients often spend more than the gift card’s value, increasing average order value (AOV). If the product’s value is lower than the gift card, cardholders will likely return to the merchant to utilize the remaining balance, fostering loyalty through multiple purchases. The psychological aspect of spending “free money” can motivate gift card holders to surpass the card’s original value. Customers are more inclined to explore higher-priced items or additional features with the base purchase amount already covered. This elevation in individual transaction value can significantly impact overall revenue figures.
Helping with Cashflow
The sale of gift cards contributes upfront revenue to a business, providing an immediate cash influx. Unlike revenue streams tied to future actions or outcomes, such as installment payments or conditional contracts, gift cards offer a swift and reliable injection of funds. This proves particularly beneficial for businesses experiencing uneven or cyclical revenue patterns, enhancing predictability and financial stability.
Getting More Customers and Keeping Them
When people get gift cards, they often learn about a new business. If someone already shops somewhere and gives a card to someone else, they’re saying, “Check out this place!” Because the giver and receiver trust each other, the person getting the card is likelier to become a regular customer.
Being a member of the community:
Gift cards can be crucial to a merchant’s broader climate mission, appealing to environmentally-conscious consumers. Companies like Dyme make a merchant’s gift card program eco-friendly by supporting clean energy for schools and communities without altering the face value for customers.
Smartly Managing What’s in Stock
Businesses can use gift cards to control what customers buy. They can connect special deals to certain products, especially ones they have too much of or that fit the season. Well-planned ads can make customers want to buy those specific items, helping the store keep the right amount of stuff and spend less on holding it.
Spending Less on Running the Business
Gift cards are usually a good deal for businesses, especially the ones you can use online. Digital cards don’t cost money to print, store, or send out, which helps businesses make more money. Also, some gift cards people get never get used, making the whole gift card system even better for businesses without making things more complicated.
Learning from Customer Behavior
When people use gift cards, the information about those transactions can tell businesses much about what customers like. It shows what things people buy the most when they use their gift cards, and if they’re first-time or repeat customers. Businesses can look at this info to decide how much each product to keep, how much to charge, and how to get customers more interested.
Keeping the Brand in People’s Minds
Every time someone uses a gift card, they think about that business. And it’s not just when they’re buying something. Whenever they see the card in their wallet or email, it makes them remember the brand and might make them want to return.
Making Sure the Money is Safe
Gift cards are like paying ahead for things you’ll get later. They help businesses avoid problems with checks or credit cards when someone can’t pay. With gift cards, the money is already there and ready to be used.
Go digital with gift cards
Since the pandemic, consumers have shifted even more to online purchasing, in opposition to physical stores. According to Deloitte, e-commerce is growing faster than offline retail. And the gifting market is going in the same direction. Blackhawk’s research suggests that 70% of consumers opt for gift cards as holiday gifts. So as part of an omnichannel strategy, it makes sense that a retailer would opt for digital gift cards. Most brands already have digital gift cards, like Twitch or Sephora.
An Example: How Lyft Increases Revenue and Builds Loyalty with Gift Cards
Lyft, one of the leaders in ride-sharing, is concerned with climate, aligning with the values of over 70% of Americans. If you get a Lyft EV and pay with a Lyft gift card from Dyme, you help reduce your carbon footprint twice: once because you caught an EV and second because you paid with a Lyft card from Dyme that has climate impact built. The way Dyme builds climate impact into the card is by using its profits to support solar energy for schools and communities in the US, creating jobs, cheaper utilities cleaner energy. This approach aligns Lyft with customer values, creating brand loyalty and a lasting impact on climate change beyond its operations.
Why It Matters
The Dyme approach challenges both conventional plastic gift cards and online e-gift cards, offering companies the ability to support their local communities with every gift card given. The commitment to purpose-driven business sets a new standard, allowing organizations to showcase their dedication to their communities and the planet publicly.
Gift cards are a key tool for merchants to help grow their business – generating more revenue, building loyalty, and, with Dyme, helping local communities. Eco-friendly gift cards not only revolutionize the gift card landscape but also provide a tangible way for businesses to contribute to a sustainable future. It’s not just about payments using gift cards; it’s about operating a business purposefully and positively impacting the environment.