Mar 15, 2023

Selling gift cards: Is it profitable?

Absolutely. In fact, you could argue there’s never been a better time to sell gift cards.

That’s because the global gift card market is expected to reach £1.6 trillion by 2027.

Big business, indeed. But how did this market become so lucrative?

Essentially, the answer is twofold: people love receiving gift cards and gift cards drive revenue.

Their popularity has been peaking ever since the iPhone was invented back in 2007. And the stats speak for themselves; 62% of consumers bought a gift card in the past year (Blackhawk Network EQ Global State of the Union Insights, 2022) and 85% prefer to receive a gift card over a gift selected for them (Blackhawk Network EQ Superlative Research, 2022).

But gift cards aren’t just a desirable present for the recipient; they can actually drive revenue above and beyond their value for your enterprise too.

Customers spend more with gift cards

There’s no doubt about it, customers are willing to spend more when they use gift cards.

According to our own research (Blackhawk Network EQ Global State of the Union Insights, 2022), 90% of consumers are willing to shell out more than the amount on the gift card when using it to make a purchase.

In fact, the amount they’re willing to spend only goes up as the gift card value increases:

● 47% spent +£106 more with a £500 gift card

● 60% spent +£74 more with a £100 gift card

● 74% spent +£57 more with a £50 gift card

● 90% spent £51 more with a £10 gift card

But these impressive spend uplifts aren’t the only way gift cards can drive revenue for your company.

Unused gift cards are big business

There are a variety of reasons why people don’t redeem their gift cards. Our own EQ Global State of the Union Insights revealed that reasons for not using gift cards include:

● 19% haven't found the right item

● 18% are saving it for a larger purchase

● 17% forgot to use it

● 15% are spreading out their spending

This can amount to a considerable amount of profit for the seller, and there’s even more of an untapped opportunity when selling to younger consumers. Our research suggests as much as 77% of Gen Zers have unused gift cards. And considering any unused money on these counts as 100% profit for your business, even unused products aren’t a lost opportunity.

But just how profitable could your reward programme be? Essentially, that depends on your business.

How to start your own gift card programme

Depending on your business, our clients see gift card programmes average 3–5% of overall revenue. Very large retailers like Sanisbury’s tend to be a little less, while restaurants such as Pizza Express gain a bit more. For context, the very best programmes get to around 8% of company revenue.

Great. So now you’ve got an idea of the potential, where do you start?

Getting the fundamentals in place

Firstly, start by establishing three basic building blocks:

1. Insurance and processing - take the time to understand issuing rules (these will vary by state or country law)

2. Distribution - decide on your distribution strategy and which channels you’ll use

3. Fraud prevention - importantly, ensure you’ve set up compliance and fraud prevention programmes.

Get these pieces of the puzzle in place and you’ll be on the path to gift card profitability. What's more, getting these solid foundations in place means you’ll also be able to comfortably start expanding your gift card programme into new areas, e.g. B2B sales, customer appeasements, employee incentives and social media; all of which lead to new revenue streams.

But that’s not all.

Promote your gift card programme

According to our research, gift cards as incentives outperform discounts, coupons and special offers. So whether you’re trying to increase foot traffic, boost basket sizes or bring in revenue during those slower times of the year, gift cards are perfect for helping you achieve your goals.

So what sort of promotions should you try?

Start by considering any number of these tried-and-tested tactics:

● Spend £50 in-store and get a £20 bonus gift card

● Buy a £50 eGift and get 100 loyalty points

● Buy a £50 gift card and get a free product

● Spend £100 on gift cards and get 20% off

● Spend £50 and get a £20 gift card to the store next door

Just don't forget to remind your customers of the benefits and bonuses. This is especially effective during last-minute holiday shopping seasons when customers begin to panic. Our own data shows that 22% of all gift card purchasing takes place at the last minute, with 6.8% of last year's gift card sales made on December 23rd, 24th and even Christmas Day. Simply put: there’s no off-season when it comes to selling gift cards

Looking for some additional insight into the profitability of gift cards? Download our eBook Gift Cards 101: Fundamentals for Success for more ideas.

As you can probably tell, there’s a lot you can do to boost your profits from gift cards. And the good thing is, you don’t have to go it alone.

Instead, reach out to a partner that can help with every aspect of your programme.

At Blackhawk Network, we’re not just gift card experts-we’re a one-stop shop. That means we can either manage your entire programme or provide only the tools and products you need. With a full range of gift cards, including our exclusive Blackhawk Originals™, we promise a very rewarding experience.

Ready to talk to the experts?

Give us a call on 0207 419 8100. We’d love to hear from you.