There's an expression in retailing that says: "You don't leave money on the table." Yet with the recent proliferation of gift cards, retailers may be doing just that by missing out on customer data opportunities.
Gift cards come in several versions. In addition to retailers, gift cards can also be offered by credit card companies as well as banks. The most popular are branded cards such as Amazon, The Gap, The Apple Store and Target, sold at retail stores or through the Internet. Barnes and Noble during the past holiday season had a $1,000 gift card available. Sales of gift cards across all retail categories have grown 25 percent for each of the past four years, according to a Bain & Company report. For the 2004 holiday shopping season gift cards made up 10 percent to 13 percent of total volume or about $20 billion, according to the International Council of Shopping Centers.
With the cards there is an opportunity to collect information on both the purchasing customer and the recipient customer, but most retailers are missing out on it. "Retailers are not asking for information," says Michael Wexler, VP of strategy and analytics,
e-Dialog. "[Gift cards] are available for purchase at the register, and they can be immediately activated. It is a missed opportunity. They are not making the gift card purchase or redemption a learning experience."
And they could. E-dialog has identified gift card opportunities as one of five important strategies for 2005. It says using gift card sales more strategically presents "additional opportunities for list growth." That means retailers could drive information as well as incremental dollars from the consumer infatuation with gift cards.
According to Wexler, here's how this process could be implemented. If Clothing Store A sold gift cards near the register, those cards could have a code on the back. The customer would be invited to register the card at a website in return for some incentive, such as an additional discount or the promise of future product information from the brand. If the consumer chooses to register the card, or to redeem its value online, the retailer then would gain customer intelligence as well as the short-term revenue from the card's redemption. Too often, he says, a gift card recipient returns to the store, redeems the gift card and the retailer has minimal interaction.
However, retailers have a love-hate relationship with the whole concept of gift cards. They love them because they often represent an incremental impulse purchase. But from a bookkeeping perspective, gift cards can be tough. Although a department store chain may sell $1 million worth of gift cards during the holiday season, they can only book the revenue as and when the cards are actually redeemed. So if a company is driving to hit fourth-quarters sales figures, gift card revenue doesn't count. This is yet another good reason for companies like retailers to track their success in terms of Return on Customer
sm, rather than simply current-period financial metrics.
Most holiday gift card sales aren't redeemed until January, and therefore can't be counted as revenue until then. According to the ICSC, January sales were up 3.6 percent this year over 2004, and gift card redemptions were a major factor.
Wexler believes more customer data can increase redemption time for the gift cards and then enable retailers to customize marketing and messaging to the most valuable customers.
"If you can capitalize on customer data, you can at least get contact information from gift cards," he says. "That can be valuable long after the gift card is redeemed