Blog: Will Prepaid Change the Way China Shops? (August 2013)

By Shoney Yuan, Ceridian Stored Value Solutions (SVS)

Take a stroll down any street in one of China’s big cities and it’s hard not to feel excited about the business potential this vast nation offers. Sophisticated marketing and innovative advertising compete for your attention as a consumer. There is much to buy—from groceries, to household goods, to cars and holidays. Fashion is king and the emperor is consumer electronics.

The world is adopting new technology every day. China is no exception, often leading the way with high-tech advances, which the nation appears able to do without disregarding strong heritage and tradition. For example, you’ll often see a gleaming glass-and-steel building nestling elegantly beside an ancient pagoda, complete with a beautiful, geometric curved roof.

In the larger cities, similar stores often cluster together, which can make shopping easier. Need shoes? Just head to the shoe district, or even the shoe market. Shanghai, for example, has several specialty markets, including the Pearl Market, Insect Market, Antiques Market and Fabric Market to name a few.

So where does prepaid fit into this shopping Nirvana? The short answer is, very well, with room to grow. The size of the Chinese gift card market reached US$160 billion in 2012. Gift cards are widely used in the supermarket and department store sectors and are popular with employee reward and incentive programs.

Alongside this popularity is the potential for even greater adoption. This is because take-up has been historically lower in other areas of the retail and leisure industries. Gift cards—as they are known in the West, particularly in the apparel and specialty gift sectors—are still a relatively new concept for Asia.

This is not because Chinese consumers are averse to offering monetary gifts. The Little Red Envelope containing a cash gift is traditionally given in most Chinese societies during the Spring Festival or for special occasions such as weddings. So far, gift cards haven’t replaced cash as a gift. And Chinese consumers have been in the habit of using gift cards in supermarkets rather than fashion stores. But, as with all habits, this can be changed.

Indeed, current trends are indicating that the change already is happening. Many international brands with a presence in China are launching Chinese versions of their gift card programs. For example, Toys“R”Us enjoyed a successful launch of a gift card program this spring, in time for Children’s Day, which is celebrated every year on June 1 to honor children. Local brands in the fashion sector also are starting to embrace the concept with some multinational brands already being the early adopters.

We, at SVS, recognize that there’s an appetite, especially among young urban dwellers, for the flexibility and sophistication of gift cards. We have established a bureau in Shanghai and have successfully launched several programs in China and Asia for local and multinational retailers. Chinese businesses are increasingly seeing the value that gift cards provide as a flexible marketing tool. They’re exploring the potential offered by the “billboard in your wallet” and the options for targeted promotions, loyalty programs and for gathering valuable market data on customers.

This is an important new trend with the potential to change how Chinese consumers give gifts. Within the next few years we are expecting gift cards to overtake the Little Red Envelope as the gift of choice for the Chinese New Year and other special occasions. That is not to say that we believe the Little Red Envelope will die out. We expect China to continue to balance traditional values with technological advances. For us in the prepaid sector, this will mean seeing more gift cards and other prepaid devices put inside the Little Red Envelope in place of cash.

With our Shanghai bureau supporting local and international clients with prepaid solutions, we are located at the heart of a cultural shift. It’s exciting to be part of that change.

Shoney Yuanis SVS vice president Asia and has established a strong presence the company in Asia operating out of Shanghai.  With two decades of experience, SVS is a pioneer and leading global prepaid provider, creating billions of dollars in increased revenue each year for clients around the world. The SVS product suite includes retail gift cards, branded prepaid and promotional cards, plus a robust loyalty platform. Yuan can be reached at: [email protected].

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