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Why Your Small Business Should Be Offering Gift Cards

by Logan Hickle | Nov 9, 2021 12:13:44 PM

Do you offer gift cards to your customers? If not, this may be the season to start.

Consumers are expected to spend an average of $1,000 on holiday gifts this year, and most of the people they’re shopping for aren’t hoping for traditional presents. The National Retail Federation (NRF) reports that 56% of consumers would prefer to receive gift cards in their stockings. They’re on more holiday wish lists than electronics, clothing, or jewelry.

For some companies, the timing couldn’t be better. Supply chain shortages have made it harder to acquire some items from large retailers this holiday season, so more shoppers are turning to smaller local businesses to pick up their presents. Gift cards are some of what they’re wanting to grab.

As a small business owner, you could end up seeing a larger share of the customer market. If that happens, you want to have as many options as possible available to your shoppers, which this year should include gift cards.

Why gift cards?

It’s important to better understand why people prefer to both give and receive gift cards right now.

According to the NRF, more than half of consumers who buy gift cards do so to allow the recipient to choose their own gift. Maybe most importantly, though, is that they’re just easier and faster to buy.

That convenience needs to be paired with the communication of your business’s story. Tell customers how your products or services fit into both their lives and the lives of the ones they love. Yes, gift cards are a quick purchase, but if they’re attached to a special business, their meaning can still be significant.

Attaching an incentive to your gift card offerings may add some appeal to gift-givers, too. Providing customers a discount, whether it’s a percentage off or an exact dollar amount, with the purchase of a gift card can really increase interest.

However, ensure you investigate the pros and cons prior to offering a discount on the value of the gift card. For example, if the customer is buying one item priced at $30 and wants to buy a gift card for $20, do you give them the discount on the $30 item or on the total check of $50? In most cases, this is up to you. Just ensure whatever method you choose is possible through your point of sale (POS) system.

Physical gift cards are a great tool for upselling during the holidays, but digital gift cards are becoming equally as important. Universal access from any device means the gift-giver does not have to be physically in your store to purchase. Especially if you have a strong and vocal customer base, shoppers know what brands their loved ones enjoy and can delight from afar.

Set up a path of least resistance for these individuals to quickly purchase that digital gift card, deliver it via email, and then move on to the next present. You’ll want to look at your POS system to see what it’s capable of for both physical and digital gift cards. For example, for digital gift cards, can the buyer set a specific day and time for the item to be delivered via email?

What are the advantages for my business?

The research surrounding gift cards points to many advantages for your business and its bottom line.

A gift card is the only category of gift that grew year-over-year from 2020, according to the NRF’s survey. Also, from 2018 through the second quarter of 2020, the average number of gift cards purchased per quarter rose sharply, jumping from 2.6 to 4.7.

Multiple reports also illustrate that those who buy items with gift cards on average spend more in your store than the value of the gift card. This is an enormous advantage for your business. You already made the sale once, but now your brand is in front of two sets of eyes, and you’ve made a larger sale.

As the small business, you also get all the money up front. You get the funds, yet do not have to hand out the inventory just yet. This scenario is especially helpful if you are experiencing supply chain shortages and delays. The sale is secure with the promise of inventory on a later date.

There is also a small chance that the gift card receiver will forget about your card and never spend the funds at all. While you don’t necessarily want this to happen (you want people experiencing your brand after all), it can have monetary advantages.

So, how do I set up a gift card program for my business?

When it comes to setting up gift cards for your business, the process can be convoluted. The short answer is that your options heavily depend on the POS system you’re currently utilizing. The best options include Square, Shopify, Revel, Toast, Quickbooks, Lightspeed, and others.

There are a few things to consider when choosing a provider:

  1. If from a third party, does this service integrate with your current POS system?
  2. Is there a monthly fee involved?
  3. What are the transaction costs for the gift card program (i.e., do you pay for the cards up front and pay a transaction fee at the time of customer purchase of the gift card?)?
  4. Does the service offer both physical and digital gift cards?
  5. Can you set an expiration on the gift cards (and do you want to set an expiration)?
  6. Can you put custom branding on the physical gift cards?

Research your options to set yourself up for success. Visit trusted websites, including BBB.org.

While there is a healthy amount of planning that goes into setting up and executing a gift card program, your business can realize positive returns on the program for years to come.

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