Online Gift Cards Pick Up Steam

Oct 01, 2010 9:30 PM  By

Not only are gift cards still hot, the medium has quickly gone from paper to pixels, according to Lauren Freedman, president of ecommerce E-tailing Group.

A look at the 152 online retailers polled for E-tailing Group’s annual merchant survey for 2010 shows e-gift cards are responsible for at least 15% of their business.

That popularity is expected to keep growing. Javelin Strategy & Research says online gift card sales are projected to hit $5.86 billion in 2014. So what’s driving online gift card sales and redemption? Consumers have become more comfortable with digital transactions, Freedman says, pointing to the growth of alternative online payment methods such as PayPal and BillMeLater.

And David Stone, CEO/cofounder of digital gift card provider CashStar, says consumers appreciate the personalization options now possible with e-gift cards, such as the capability to include an image, photo, message and/or video. The speed of delivery, ease of use and security, and the notification of when the digital gift card was sent, are other benefits.

If done right, Stone says e-gift cards can serve as a valuable multichannel marketing tool, rather than a siloed initiative. If the consumer chooses to shop in-store instead of online, he or she can print out the gift card and have the barcode scanned as a payment method in-store.

In some cases, the consumer can upload his gift card to his mobile device and have access to real-time stored card values, and have the device scanned at the register.

Going mobile and social

Cynthia Mielke, manager of national accounts for J.C. Penney Incentive Sales, says e-gift cards have been successful when added to the general merchant’s incentive and loyalty programs.

“Customers like being able to take their phone into a store, opening up an e-mail and having their gift card code right there,” says Mielke, whose company is using Giftango’s platform. “And customers can and do bring the paper printout to the store in programs where delivery via a mobile phone is not an option.”

Health and beauty merchant CVS Caremark used CashStar to tie an e-gift card program into social channels. The “Give One, Get One” incentive program, in which CVS customers received a $5 e-gift card for every $25 spent, launched to little fanfare on Nov. 8. But it picked up steam when mommy bloggers started writing about it on Nov. 19.

In the two days that followed, the offer drove 11.2 million social media impressions and resulted in a 10-fold sales increase for the merchant.

What’s more, the promotion proved to be a great customer acquisition tool. During that two-day stretch, CVS acquired 20,000 unique e-mail names from the promotion.