Gift cards can make a fabulous addition to any small business and even have some built-in advertising benefits. There are several gift card programs that can help you get started, offering both plastic gift cards and e-gift cards, but you’ll want to do your homework before choosing a program. Once your gift cards are out in the wild, you'll have to honor those gift cards even if you've switched to another gift card provider.
Regardless of what type of store you have or how big your business is, you'll likely benefit from carrying gift cards in your shop. The reason? People who use gift cards tend to spend more than those who don't. In fact, the National Retail Federation estimated that last year's holiday shoppers spent $32 billion in gift cards alone. Moreover, most people love to receive gift cards as they are convenient and easy to use, making them a gift that the receiver is guaranteed to love. Don't let this opportunity pass you this holiday season. Start selling gift cards now!
More than 10% of gift card recipients aren’t regular shoppers at the gift card’s merchant and many have never done business with that merchant at all. One out of 10 gift cards you sell will bring a new customer through your doors. There’s also an opportunity to earn the business of the person purchasing the gift card if they aren’t regular customers and purchase the gift card for someone else who they know visits your business.
For every gift card sold, you’ll have at least two customers - the individual who purchased your gift card and the recipient. Gift cards can definitely spread the word about your business more effectively than standard word-of-mouth advertising since your loyal customers are actually paying you money to get new customers. It is also a cost-effective advertising tool as your customer will be reminded of your business when they see the gift card and be compelled to visit your store.
Unlike discount coupons, you aren't giving discounts to customers, therefore you won't lose profits. Gift cards give customers the perception of having the money to spend. This means that when a customer uses a gift card they’ll need to return more than once to deplete their cards.
For most businesses, paper gift certificates are fossils. Not only are they less convenient than gift cards, but they often must be hidden from sight to prevent theft or improper use. Out of sight and out of mind means that your sales staff will be less likely to discuss gift certificate sales with customers and that your customers are less likely to inquire about them. Gift cards can be put on display because they aren’t activated until purchase. As an extra measure of safety, you can simply put a few in a showcase or use point-of-sale display materials to advertise the availability of your gift cards.
First, you will hear a lot about two types of gift cards: open loop and closed loop. In basic terms, the main difference is that an open-loop gift card can be used at multiple merchant locations (like a Visa gift card) whereas a closed-loop gift card can only be used at one location (like a Starbucks gift card). For your purposes, it’s most likely you only need closed-loop gift cards.
You'll want to investigate the options available through your merchant processing provider. Typically, the gift card options that are available for your merchant card processing provider are inexpensive or may even be free. However, choosing a gift card program that’s tied to your bank or credit card processing company can be limiting as you may wish to switch credit card processors at some point in the future and there may still be some older gift cards or e-gift cards in circulation.
The easiest method to start offering gift cards is by talking to your existing card processor or merchant bank. Though gift cards aren't their primary business, credit cards and merchant banks can offer one that you can use at your store.
Third-party gift card vendors offer a full-feature solution for small business owners. This is an excellent solution if the gift card program offered by your payment processor or merchant bank is restrictive or if the features are limited.
An open-loop gift card is not tied to your bank or point-of-sale system, as opposed to processing payments through well-known credit card brands such as Discover or Visa. The potential downside to utilizing open-loop gift cards is that in most cases the gift cards can be used elsewhere, which means you aren’t guaranteed future traffic or additional business from an open-loop gift card.
Unlike traditional solutions where money is loaded onto the card when the customer buys it, open-loop gift cards require the business owners to prepay the gift cards in advance.
If you want to capitalize on the holiday season, you’re already well aware that shopping begins in earnest in November. You’ll want to start well before the season begins so that you have time to analyze your options, have cards printed, perfect your point-of-sale displays, and, of course, wait for your cards to be shipped.