Industry News | July 30, 2010

Loyalty Programs, Bulk Sales Fuel Gift Card Growth

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According to statistics released by First Data, an information commerce provider, the number of gift cards sold at quick-service restaurants between January and June of this year jumped 12.4 percent over the same period of 2009.

Overall, the number of gift cards sold by merchants in the first six months of the year increased 2.4 percent over the first six months of 2009.

Mike Hursta, vice president of gift cards for First Data, says one explanation for the big jump is the increased use of loyalty programs in the quick-serve space.

“We’re seeing an expansion in the use of websites inviting consumers to register their prepaid cards, and also invitations for them to set up auto-reload programs, with rewards in doing so,” Hursta says.

“I think that’s been one of the single biggest factors where we’ve seen an increase in the sale of these cards, that people are finding that there is a reward to doing so, that they can feel more connected to these brands by doing so.”

Hursta says another reason gift cards sold more in the first half of this year than last year is the fact that more quick serves are bundling their gift cards and selling them in bulk to fundraising activities.

But perhaps the clearest explanation for the jump in gift card sales, Hursta says, is that coming off last year, there was nowhere to go but up.

“It was the toughest year on the gift card industry since it began in the mid ‘90s,” he says.

Indeed, 2010 is proving to be a better year for many in the gift card space. The number of gift cards sold in the casual-dining space increased 6.1 percent over 2009, and for specialty retail stores, that number was 5.3 percent.

Quick serves, though, are enjoying the biggest gift card success. The dollar value of gift cards sold at quick serves from January to June increased 14 percent in 2010 over 2009.

The increase in the number of gift cards sold over 2009 peaked in March, when quick serves sold 21.9 percent more cards than they did in March 2009.

Though Hursta says mobile gift card programs are not yet significant enough to be making a big enough impact, he believes it’s only a matter of time before they dominate the gift card space.

“There’s going to be several years’ time where the technology is going to get better, consumer adoption is going to get better, the equipment at the point of sale is going to improve and make it easier for people to use their phones … to affect payment,” he says.

“There’s a convergence of things happening both in the technology space and in consumer awareness that are going to continue to drive growth in this.”

With the data from the first half of the year proving that gift card programs—and as an extension, Hursta says, loyalty programs—are gaining in popularity with consumers, Hursta believes it would be wrong for operators to ignore their potential.

“Establishing loyalty programs; establishing reload and registration sites; communicating to your consumers over e-mail when they’ve registered a card; establishing a bulk sales program to make your cards more accessible, maybe at a small discount, to get more cards out there on the street—these are the sorts of things that some of your competitors are doing,” he says.

“If you want to keep up with them, you should start considering that yourself.”

By Sam Oches

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