Gift card adoption is on the rise.
And despite inflation hitting double figures, not to mention the cost-of-living crisis affecting consumer confidence, this is one industry that’s still growing - digital cards, especially. In fact, all signs are beginning to point towards this becoming the dominant product type of gift card sales in 2023 and beyond.
But we’ll get to that in a minute.
To better understand the trends for 2023, it’s important to put things in perspective. Despite the steady demand for physical gift cards and increased growth rate in digital products, 2023 could be a year of two halves for the industry. That’s because although retail experts predict a "challenging start" to 2023, they also suggest things could brighten up in the second half of the year.
In fact, retailers may find that although low to mid-earning individuals are reducing their discretionary spending, they could look towards gift cards as a way to attain benefits and savings. Of course, this does depend on whether or not the cost-of-living crisis worsens. But the general consensus is that inflation will stabilise as the year progresses and consumers can loosen their purse strings a little again.
But regardless of how much consumers are looking to spend on gift cards, there will be one trend that trumps all the rest in this market: finding innovative ways to encourage spending beyond the value of gift cards. The good thing is, our own data suggests consumers shouldn't take too much encouragement. According to the 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. So we can expect this tendency to continue throughout 2023.
Now let’s look at who the key players are and what future trends you can expect this year. From emerging technologies to expansions into new markets, here’s everything you need to know about the gift card industry in 2023.
An increased focus on sustainability
Sustainability is becoming a major concern for consumers - and rightfully so. The latest research into Earth’s current state of carbon removal suggests our efforts are not in line with what’s needed to meet the Paris Agreement targets. And potential customers - especially Millennials and Gen Z - are well-aware of this. In fact, 54% of Gen Z would actually pay 10% more for a sustainable product, compared to just 23% of Baby Boomers. That means businesses that consider their impact on the environment when creating and distributing gift cards could win the hearts of younger buyers.
The sustainability aspect is even more important when 71% of Gen Z will stay loyal to a brand that they can trust - even if that business makes a mistake. Essentially, more consumers will simply expect businesses to be transparent about how sustainable their practices are. Products that have the B Corp stamp of approval will go a long way in obtaining their trust, but climate-savvy consumers will see through any attempts at ‘greenwashing’.
Again, millennials and Gen Z customers in particular will not engage with businesses that don’t share their values around fairness, sustainability, diversity and inclusion. That means businesses that see ESG (Environmental, Social, and Governance) as a cost rather than a benefit could be missing out on the commercial opportunities it brings.
Adopt good sustainable practices into your gift card programme to prove your values
The good news is that there’s plenty you can do in your gift card programme to demonstrate your commitment to the planet and its communities:
● Eco-Friendly Packaging: Some businesses are now using eco-friendly packaging materials, e.g. recycled paper and biodegradable plastics, for their gift cards. This reduces waste and minimises its environmental impact
● Charitable Giving: Other businesses demonstrate their commitment to ESG by offering gift cards that support charitable causes. For example, reforestation or clean water initiatives. This is a great way to make gift-giving more sustainable and impactful
● Reduced Carbon Footprint: There are also brands that are seeking to reduce their environmental footprint by carbon offsetting or using sustainable production methods and materials. One of which is by promoting the use of digital gift cards.
The rise in digital gift cards
E-gift cards aren’t just a popular choice for the conscious consumer; they’re gaining traction because of just how easy they are to purchase, send and redeem. And with the rapid rise of e-commerce and mobile shopping post-pandemic, digital gift cards are fast becoming the first choice for time-strapped consumers.
The thing is: whilst physical gift cards will continue to be a popular choice, especially as an alternative to cash, digital gifting can happen from anywhere - at any time. The lack of shipping and handling makes it the perfect choice for consumers who've left present buying until late; our own data suggests that 22% of all gift card purchasing takes place at the last minute.
Of course, late December will always be a particularly fruitful period, so it’s important to ensure your online channels are optimised and ready for the footfall. Not sure where to start? Don't worry, we've got some tips for making a success of the holidays here.
The benefits of digital gift cards
On top of this, there are even more reasons why the gift card market will continue its transition into digital this year.
Reduces production and distribution costs
For sellers, digital gift tokens and products have lower production and distribution costs than physical gift cards. This can result in big cost savings for businesses; more important now than ever before. Not only that, but digital gift vouchers are more accessible to a wider range of customers; this includes those who only use online channels and who don't have access to physical retail locations.
Personalised gifts can boost profits
Another good thing about digital gift cards is that they can be easily personalised and customised. This is already a no-brainer in your marketing strategy - especially when 90% of leading marketers say personalisation significantly contributes to business profitability (Google).
Digital gifts offer enhanced personalisation options like custom faceplates, different photo options and personalised messages. And these are features that consumers want more than ever and are all quick and easy to do
In fact, research suggests that 58% of gift recipients would be more likely to tell others about their present if it was personalised (as opposed to generic). And in today’s climate where social proof leads to sales, this is a great way to get your brand loyalists to spread the word online. Essentially, this is one trend that will never change: customisation drives sales.
Integration with emerging technologies
It’s easy to see why 2023 will see a rise in digital gift cards, and what’s also important is that they can be easily integrated with mobile and online shopping platforms, especially when 73% of consumers are now omnichannel mobile shoppers.
And this isn’t the only way gift cards are integrating with modern technology in 2023.
Expect the integration of gift cards with emerging technologies to become increasingly widespread throughout 2023. This could be via the blockchain for trust, transparency and data tracing purposes or by entering virtual realities like the metaverse. The latter, in particular, will allow businesses to offer exciting and innovative experiences to their customers. Not only that, this experiential style of gifting will give brands a unique competitive advantage; ideal in such a crowded marketplace.
So, what sort of advancements will we start to see becoming more mainstream?
What sort of integration can we expect?
As always, there’s a rapid evolution in tech and nothing stands still for long. So here's what to look out for:
● Artificial Intelligence and machine learning: AI and machine learning technologies are being used more frequently to enhance the customer experience. They do so by making it easier for the buyer to find the right gift card. Essentially, they can offer insightful personalised recommendations based on previous buyer behaviours
● Augmented Reality and Virtual Reality: AR and VR technologies are being used to create immersive and interactive experiences for customers when purchasing and using gift cards. You can use this type of digital technology as a powerful marketing tool for product launches - perfect for making a PR splash and driving customer loyalty. In fact, Meta is now entering the gift card market which will undoubtedly have applications inside Zuckerberg’s metaverse down the line.
● Internet of Things (IoT): IoT technologies will also be used to integrate gift cards with smart devices. This is particularly useful as it can provide customers with real-time updates on their gift card balance and usage
● New payment options: Between digital wallets, crypto and whatever comes next, your customers will have more payment options than ever before. So if you want to attract their business, it's all about offering them choices.
But while these innovations in product offerings are exciting for retailers, they come with their own set of technical considerations that just can't be overlooked.
Tightened security measures
With countless breaches and scandals being made public throughout the years, data security has become a major consumer concern.
So with the increasing popularity of digital gift cards as payment methods, businesses will need to implement advanced security measures to cover their customers' sensitive information. To protect both consumers and businesses throughout 2023, organisations will tighten up any lack of security using a blend of these measures:
● Encryption: Essentially, encryption helps to protect sensitive information, e.g. the card number and balance, from unauthorised access
● Multi-factor authentication: Multi-factor authentication adds an extra layer of security to this by asking the user to provide two or more forms of identification to access the gift card; this could be a password, fingerprint or facial recognition
● Monitoring and Detection: There are also advanced monitoring and detection systems that can help detect and prevent fraud. They do so by tracking any suspicious activity, e.g. such as multiple card activation attempts from different locations
● Blockchain technology: Blockchain technology is also becoming popular to improve the security and transparency of gift card transactions. That’s because each ‘cryptographic chain’ is almost impossible to tamper with, helping to prevent fraud.
However, you don’t have to worry about these issues when you team with a global leader in gifting. Partner with a trusted industry leader like Blackhawk Network and you can rest assured digital gifting will be taken care of safely and securely. Then prepare to join a market that’s set to flourish around the world.
The growth of the global gift card market in 2023
The covid-19 pandemic caused travel restrictions and disruptions to supply chains across the board. And this was no different for the gift card industry. Thankfully, times have changed and the gift card market is projected to expand again throughout 2023 and beyond.
By how much, exactly?
According to the latest industry research, the gift market size is expected to grow at a rate of 15.4% CAGR until 2028. And following the pandemic, especially, digital gift cards are fast becoming big business.
But who are the biggest industry players and key vendors in 2023?
Gift card movers and shakers
Well, this market looks much the same with the likes of Amazon, Walmart, Apple, Target, Google, Home Depot and Starbucks leading the pack. There are also Visa and Mastercard which both offer cash cards that can be used at any merchant that accepts those payment networks worldwide.
Countries leading in the gift card industry
Speaking of which, the global market potential continues to look lucrative. In 2022, North America had the largest market share in the market, but Asia-Pacific is now expected to become the fastest-growing region in the forecast period of 2023-2032 (The Business Research Company), so there’s a huge market opportunity here. For example, gift cards have gained prevalence as payment methods in South Korea over the last five years. This is partly down to technological advancements in the industry, expanding the market growth of prepaid gift cards. And personalised digital gift cards are gaining a lot of popularity in the country too; leading retailers like Homeplus, Shinsegae and Lotte are now incentivising customers by integrating gift cards with mobile applications.
It’s also well worth looking at the regional markets of South Africa, Latin America, Saudi Arabia and South America as well. These countries are fast becoming key market players in the gift card industry and will only continue to grow throughout 2023.
Work with a company you can trust
Whatever market or demographic you're hoping to tap into this year, Blackhawk Network can help.
That’s because Blackhawk Network partners are growing nearly 45% faster than the industry average. So If you want to optimise your gift card programme for 2023 or are looking to become a gift card seller, it’s time to talk to the experts.
Want to chat about any of the latest market trends and insights? Maybe you’re looking to increase the sales of gift cards in your business. Whatever it is, just drop our team a message or give us a call: 020 8142 8688. We’d love to hear from you.