APEX: The Gift Card Opportunity

Written by FinTech Futures
22nd March 2016

Retailers trying to get a gift card program off the ground, will need to get buy-in from the C-suite and that means getting the numbers, explaining the profit potential, making a case via graphics—and, if necessary, being a pest in the company café line.

That’s advice heard Monday at the All Payments Expo in New Orleans from Ken Bott, director, commerce programs and partnerships, Darden Restaurants, which operates Olive Garden, LongHorn Steakhouse and other brands. He told attendees in the conference’s gift card track sessions that the Darden gift card program is about two years old, and that he never has to stop selling his C-suite superiors on the value of the program, or digging for data to support the program.

The opportunity is significant. Consumers using gift cards often spend more than the amount on those cards, and often return to spend more money. As well, with more consumers moving to mobile payments, more will store their gift cards there instead of letting them languish in drawers and glove boxes.

That’s not to say launching a gift card program will be a simple proposition. There are a host of costs and other figures to detail to management: fulfillment and stocking, for instance, breakage, escrow interest income, call center and so on. But with enough numbers, and enough persistence—that’s where conservations in the café line came in handy for Bott—you can win over the bosses. But it helps to make sure you make the pitch using graphics, he said, as they can be more readily digested.

Jenny Jeansonne, head of gift cards for eBay, said the online marketplace, which recently split from PayPal, launched its gift card program 18 months ago. As eBay operates no physical stores, it places the cards with other retailers—about 95,000 U.S. locations, she said—which serves to heighten consumers’ awareness of the eBay brand.

Still, the marketplace’s gift card program is tiny, accounting for less than 1 percent of eBay’s annual revenue. “In the next five years, I hope we are (around) 10 percent,” she said.

Other panelists reported more robust gift card programs. Bill Hambrook, director gift cards, Kohl’s, said the department store chain counts on gift cards for between 5 and 10 percent of sales, depending on the season.

The next frontier for gift cards is digital, and there remains a fair amount of work, according to the experts Monday. For example, Jayne Stegemiller, gift cards manager for Cracker Barrel, estimated the restaurant chain is at least “two years” away from launching a digital gift card program.

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