Boosting Gift Card Sales in the U.S. and Abroad (March 2013)

By Bill Grabarek and Loraine DeBonis     

Though much of the payments buzz at last week’s Prepaid Expo USA in Orlando, Fla., revolved around mobile and GPR products, closed-loop cards—whether it’s B2B or consumer gift cards—shouldn’t be ignored, according to several panelists who shared methods of maximizing sales, as well as challenges and opportunities in the international gift card market.

Industry experts stressed the importance of employee knowledge of gift card products, the growing popularity of digital media, providing marketing freedom to retailers and including a mix of national and regionally relevant brands in gift card malls.

“You have the national brands that drive the bulk of the business,” said Steve Weinbaum, senior director, gift card account management, InComm. “But [a customer] being able to walk into a [store] and find a card for a regional 20-store chain or restaurant makes that customer come back.”

For retailers concerned that selling open-loop prepaid cards will adversely affect sales of their own closed-loop retail gift cards, John Dwyer, senior account manager at card producer CPI Card Group, said not to worry. “Open loop is an offset to what is available from retail [gift card] products,” he said, adding that the addition of open-loop cards reenergizes retailers’ gift card offerings and increases sales of all gift cards.

Value Pay Services LLC develops promotional and marketing kits that each SUBWAY franchisee can order to provide them with the freedom and flexibility to execute their own SUBWAY gift card sales strategies, “which we find can be pretty interesting,” said Dave Baldwin, Value Pay Services president. “Our franchisees are incredibly entrepreneurial  . . .  so we really value their thinking and their entrepreneurial behavior. All we’re doing is providing them with the tools.”

Visibility, replenishment and store associate awareness are three keys to energizing a retailer’s gift card category, according to Colleen Dorwart, senior manager of gift card services at Cabela’s Inc. Furthermore, Dorwart urged gift card retailers not to discount the effect frequent conference calls—between retail locations to review gift card programs and sales contests between stores—can have on sales.

Brian Dunne, president, Incentive Marketing Association, and managing director at gift card reseller and distributor SVM Europe, emphasized the increasing popularity of digital media, especially among younger consumers.

“One of the important things is really understanding the generations,” said Dunne, who offered the example of his 10-year-old son who likely will never walk into a record store or listen to a song on the radio when he gets older because he will get his music digitally. “For him, digital is not a want or a need, it’s an expectation.”

International Challenges and Opportunities

Consumer research has revealed challenges and opportunities with taking closed-loop gift cards into international markets, such as Canada and Latin America, according to  First Data’s Michael Hursta, vice president, prepaid category manager.

First Data surveyed consumers in five countries—Brazil, Chile, Costa Rica, Guatemala and Mexico—and shared the results during a Wednesday session on “Going Global.” Hursta acknowledged the difficulty of generalizing across those five markets, but explained that key themes emerged, in particular a relatively low awareness of gift cards in Latin America and very little prepaid spend compared to cash, debit and credit.

“There’s a huge emotional component with gifting in Latin America. … Personalization is absolutely key. The more you can speak to the personal relationship or event—wedding or birthday—the more favorably consumers viewed the gift card,” he explained. In addition to offering a wide variety of design choices associated with seasonality or special events/celebrations, Hursta recommended bundling gift cards with other types of offers, such as small gifts, interesting packaging options or even loyalty to make them more appealing.

Hursta spoke briefly about the Canadian gift card market—where research suggests consumers might make the switch to e-gifts faster than U.S. consumers—before turning it over to Jacqueline Shinfield, a partner in the financial services regulatory group at Blake, Cassels & Graydon LLP, to discuss the legal landscape for gift cards in Canada.

“The good news is there are no licensing requirements,” she said, noting that retailers that sell gift cards are not considered money services businesses. However, she noted that if retailers have banks in their corporate family, they could be deemed a foreign bank, prohibiting them from operating in Canada unless they structure their programs on a cross-border basis or obtain regulatory approval.

Shinfield also detailed some of the differences in legislation by province and explained that national programs must be bilingual to satisfy Quebec. “Canada is a small market, and it would be difficult to roll out a program and not include Quebec.” The challenge is that disclosures on the cards, which in some provinces like Alberta are quite lengthy, have to be in French and English. The Canadian government also is in the midst of passing one of the most restrictive anti-spam laws in the world, which is expected to go into effect this fall/early 2014. The anti-spam laws will require, subject to limited exceptions, a person’s consent to receive emails or other electronic communications; however, that consent cannot be obtained by way of email.