Retail
Digital Gift Cards On the Move
By Donna M. Airoldi
January 13, 2012
“Virtual gift cards” has been an industry buzz phrase for a few years, yet adoption of electronic gifting has been slower than initially anticipated. But with the growing number of merchants offering egifts and mobile applications this past year, digital gifting finally could live up to its hype in 2012.
Two early egift platform providers, CashStar and Giftango, have seen their merchant partner lists grow significantly from a couple dozen in early 2009 to more than 200 today, and both are adding new ones every month.
“When we started [in 2008], fewer than five percent of retailers had electronic offerings,” says CashStar CEO David Stone. “In a recent survey, 59 percent of the top 100 retailers now have egift cards.”
These include some big players in the incentive channel, such as Target, Starbucks, Best Buy, Home Depot, Williams-Sonoma, Gap, L.L.Bean, and CVS/pharmacy. But there’s plenty of room for growth, as new companies add egifts and as early adopters enhance and expand their programs from ecards to mobile and social media delivery systems—all three of which fall under the digital umbrella.
“I do feel 2012 will be massive for digital fulfillment, because some of the biggest brands did not have digital cards until last year,” says David Nelsen, CEO of Giftango, “and others still haven’t signed on.”
Make Room for Mobile
The National Retail Federation’s holiday shopper survey, released last October, found that 52.6 percent of smartphone owners use their devices to research products, redeem coupons, tap into apps to assist in their purchases, and purchase holiday gifts and items.
Target was one of the first major retailers to offer pure mobile gift card purchasing capabilities, in February 2010. A month later, it launched a mobile coupon program that sent deals via email. Other retailers followed suit, and that became a key driver of sales promotions this holiday season.
Some companies even are adding mobile first. Starbucks has had tremendous success since expanding its mobile service in January 2011. More than 26 million transactions were recorded by early December, and users reloaded $110.5 million onto Starbucks cards through the company’s mobile apps, which allow customers to reload cards, find nearby stores, make purchases, and track their My Starbucks Rewards—all by just tapping their iPhones or Android smartphones. The company eventually added egifts.
“The customer response to our mobile apps has been phenomenal,” says Adam Brotman, senior vice president and general manager of Starbucks Digital Ventures. “[Customers] are not only using their phones as wallets, but also as connection points to Starbucks as they manage their Starbucks Card accounts and send egifts.”
Best Buy recently launched an app for its Reward Zone consumer loyalty program, which allows participants to view and redeem their points, receive and see the latest sale promotions, see what’s in stock in stores and online, read customer reviews, scan 2D/QR codes, and share deals through Facebook, Twitter, email, and text messages.
The latter feature demonstrates how social media apps are coming on strongly too, with about 30 retailers now selling ecards and offering promotions through social media sites.
Incentive Companies Buy In
B2C offerings have dominated digital card usage, but B2B programs are catching up, particularly when suppliers see the benefits of digital cards’ instant delivery, promotional, and data-tracking capabilities.
“The core of our business is providing ‘plastic’ services to the incentive and loyalty space, but in June 2011, we added egifts with both digital and mobile delivery,” says Jim Leroux, president of Des Plains, IL-based SVM. “We think it’s going to grow. It won’t beat plastic, but there are real benefits to digital delivery in terms of speed of delivery and instant gratification for participants.”
Maritz Motivation Solutions introduced a mobile app in mid-2011 to provide Deal of the Day promotions to program participants. “It’s our first foray into mobile, and it’s gone well,” says Paula Godar, director of brand strategy.
“We have several thousand people who look every day and place their orders for specially priced items from normal rewards programs.”
The big incentive house also soft-launched egift capabilities in November. “Even without a big announcement, people found it and started placing orders,” says Godar. “The first one was for 30 different ecards.”
It’s still too soon to know how mobile cards will impact the timing of redemptions, but most sources imagine they will speed them up, and those already using digital cards have been “tremendously happy,” says Stone.
Another benefit of mobile payments is reintroducing the loyalty brand at the point of redemption, says Carlo Pirillo, vice president of digital solutions for Maritz Canada and Maritz Loyalty Marketing. “If you use the Starbucks card to buy coffee 50 times, that brand will be reinforced 50 times,” he says. “You can’t do that with plastic. A disadvantage becomes an advantage.”
Remaining Challenges
Few see digital overtaking plastic in the incentive channel anytime soon, especially since many merchants still offer only plastic. Still, the flexibility and immediacy of digital rewards is appealing.
“Last year was big for retailers getting their feet wet with B2C egifts, so more may decide to do B2B in 2012,” says Leroux.
“In several channels, more than 50 percent of a client’s card base is moving from plastic to digital,” says Giftango’s Nelsen. “For those who step in quickly, they can gain volume first in B2B.”
Then, there’s the question of adoption by enough retailers to get consumers aboard. “When 80 percent of retailers have ecards, you’ll see a dramatic shift,” says Stone. “We’ll be there in the next 18 to 24 months.”
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