Retailers use gift cards to woo shoppers
Gift cards are commonly thought of as just that – presents given from one shopper to another. However, retail merchants are increasingly using the payment tools as a part of their marketing initiatives, Direct Marketing News reports.
The weak economic conditions helped bring gift cards to the mainstream – they are cost-efficient presents that enable the recipient to buy whatever he or she wants. During the 2011 holiday season, consumers spent approximately $27.8 billion on gift cards – approximately $155.43 per person – according to the National Retail Federation (NRF).
Now, retail brands are using gift cards for giveaways and small promotions, providing fans and shoppers with gift cards worth anything from $5 to $1,000. The goal is to give consumers a small incentive to come in and shop, the news outlet reports. Many Americans are cost-conscious given the harsh economic conditions and are looking for deals and discounts – gift cards give them the perfect reason to choose one retailer over another.
The Belk department store chain, for example, gave away more than $1 million worth of gift cards to shoppers on Black Friday. The brand wanted to attract customers and felt gift cards were the perfect way to do that.
"We like offering free gift cards because they offer value, an immediate reason to shop, and they give our customers the flexibility to purchase anything they want," Jon Pollack, executive vice president of marketing, told the news source. "Redemption of these gift cards is extremely high, and by all accounts our customers love them."
The growing popularity of online and mobile shopping is expected to further fuel the popularity of gift cards, which can be purchased and sent digitally to shoppers. Some brands are even developing technology that uses near-field communication (NFC) chips that would be able to give credit to shoppers the moment they walk into stores.
They aren't necessarily cost sinks, either. Frequently, shoppers will spend more than what they have on the gift card, boosting profitability. Conversely, if they don't spend the total amount on the gift card, the merchant is technically making money from the transaction.
That said, it's crucial that retail brands keep their bottom line in mind as they run these promotions. After the 2011 holiday season, a number of merchants had to revise fiscal forecasts because of rampant sales throughout the two-month period.
