Seasonal Gift Card Sales Headed for Record; Online and Digital Sales Propelling Growth

Gift Cards by the Numbers $31.74 Billion Total sales forecast for closed- and open-loop gift cards during the 2014 holiday season. $127.74, up 5% Average amount gift card shoppers plan to spend this holiday on gift cards. SOURCE: NRF 2014 consumer survey

By Kate Fitzgerald, Emerging Payments Editor

Overall holiday sales figures may be a mixed bag so far this year, but gift card sales for the season are on track to hit news sales peaks in the U.S. and the U.K., aided by an uptick in online sales, plus growing popularity for digital gift cards, new data suggest (see details at right, and below).

A big factor in the strong gift card sales trend is continued expansion of delivery channels. Blackhawk Network this week announced a deal to sell closed- and open-loop gift cards in U.S. Postal Service branches, available this holiday season at select branches. (For Blackhawk research on consumer attitudes toward gift cards, click here.) At the same time, more restaurants and retail outlets are promoting physical and digital gift cards on proprietary Websites and mobile apps, with small merchants adding gift card options, too.

Online Gift Card Sales Rising

Many more consumers are going online to buy gift cards, according to First Data, which conducted a survey of 3,724 U.S. adults in September asking respondents to compare their gift card purchasing routines this year versus last year.  

Social media also is playing a bigger role in gift card sales this year, First Data survey data indicate. Respondents who say they’re buying gift cards online via social media sites like Facebook rose to 13 percent from 8 percent in 2013, while 13 percent said they used an app to purchase a gift card.

Though digital gift cards still account for less than 10 percent of the estimated $118 billion gift card market, virtual products remain the fastest-growing category of gift cards, according to numerous organizations. First Data’s survey found 33 percent of respondents who’ve previously purchased digital gift cards are purchasing more digital gift cards this year compared with last year, while 20 percent of survey respondents routinely buying physical gift cards are purchasing more of that type this year.

Technology Boosts

Improvements in gift card technology and changing consumer habits appear to be driving the surge in online gift card sales, according to First Data. The widespread adoption of mobile technology has triggered a “fundamental shift” in how people interact with gift cards, including more personalized delivery options, along with streamlined processes for accessing and purchasing all types of gift cards online, the Atlanta-based company said in its recent 2014 Prepaid Consumer Insights Study.

Other advancements include mobile wallets, such as Boost Mobile Wallet and Sprint Money Express, adding e-gift purchasing options. Powered by Wipit, Sprint’s mobile wallets now offer digital gift cards from Amazon, Babies R Us, Bass Pro Shops and JCPenney. And, GiftCards.com added digital gift cards from CashStar’s merchant network to its gift card selection, including more than 50 brands and more on the way. 

Millennials Drive Digital Trend

InComm provided further insights into holiday gift card sales trends with its own survey of 500 U.S. adults conducted in October. InComm found that 71 percent of consumers this holiday season plan to buy at least one gift card online or from a mobile Website or app, and 74 percent said they’re likely to buy at least one digital gift card. Among respondents under age 35, that number is even higher; 85 percent said they’re likely to buy at least one digital gift card this holiday season. Eighty-nine percent of respondents under age 35 also said they’re more interested in buying digital gift cards than they were two or three years ago.

Mobile apps and wallets are playing a bigger role in promoting digital gift card usage, with 55 percent of respondents to InComm’s survey saying they like storing gift cards on a mobile app. Fifty-eight percent of respondents said they’d prefer to use one app to store gift cards from multiple merchants, versus separate apps from merchants. Millennials are even keener on using their phones to manage gift cards; 79 percent want to store gift cards on their phones and 77 percent prefer scanning a gift card from their phone than carrying a gift card code printout.

U.K. Sees Jolly Holiday with Gift Cards

In the U.K., sales of physical and digital gift cards are expected to be healthy this holiday season as well, according to the Prepaid International Forum (PIF). The U.K.-based trade organization is forecasting  strong growth within the nation’s £5 billion (US$7.8 billion) market for gift cards and vouchers this quarter, according to Alastair Graham, PIF’s spokesperson. The number of companies operating in the sector increased by double digits within the last two years, PIF said. Another sales push is coming from the U.K. Post Office’s move this year to display racks of gift cards from multiple U.K. retailers in 2,000 high-volume branches, PIF reported.

Digital gift cards remain a small but faster-growing part of the overall U.K. gift card market, Graham tells Paybefore. “Digital gift cards are gaining more traction in the B2B market as a human-resources rewards product, while in the consumer market the product is in its infancy,” he notes. But consumers’ growing fondness for shopping via mobile devices is promising for overall sales of digital gift cards, as it’s steadily improving the distribution and retail redemption options, Graham adds.   

Last month global gift card provider SVS released consumer data showing that U.K. consumers still prefer to give (60 percent) and receive (65 percent) physical gift cards over digital ones. But SVS expects demand for digital gift cards to increase as smartphone usage shifts shopping behavior.