Q & A: CashStar’s David Stone on the Growth of E-gift Cards

Ecommerce has helped gift cards quickly evolve from paper to pixels. Last year, between Black Friday and Christmas Eve, digital gift card provider CashStar saw e-gift card sales increase 1,129%. Christmas Eve was the highest selling day of the year, with an eye-catching 39% being purchased after 6 p.m. EST.

So what’s driving e-gift card sales, and what’s expected for holiday 2010? Multichannel Merchant senior writer Tim Parry sat down with David Stone, CEO of CashStar, to find out.

Is there a stigma over giving digital gift cards vs. a physical plastic gift card?
Consumers are embracing e-gifting for many reasons, including the ability to personalize the gift with an image, photo, message and/or video, ability to choose the specific amount and time of delivery, avoidance of shipping and other related charges, speed of delivery, ease of use and security, as well as the notification of when the digital gift card was sent.

Consumers today seek choice and convenience in every aspect of their shopping behavior, and digital gift cards include convenience drivers that allow recipients to print out secure, barcoded e-gift cards for use online or in-store.

Beyond convenience, consumers have become comfortable with digital transactions. The adoption of alternative payments is a good example both PayPal and BillMeLater have grown in adoption and are fueling spending across all demographics. Lastly, mobile computing and commerce are becoming more and more ubiquitous and, as a result, digital gifting will become even more convenient.

If I receive a digital gift card, how do I redeem it in a bricks-and-mortar environment?
Digital gift cards are typically delivered by an email with a barcode and a 16-digit number that can be read off a printout or a smart phone, redeemed online or scanned through a barcode reader. So, if you receive a digital gift card for a restaurant, the recipient would print it and bring it with him or her to the establishment.

We’re seeing merchants starting to accept payments via mobile. Does this mean mobile gift cards are around the corner?
Yes, mobile and social are emerging as part of the increasing shift to a digital marketplace. Mobile is still in the early adoption phase, but as it gains traction with retailers, it will fuel additional e-gifting growth. We are currently developing mobile applications and promotional programs for several of our customers.

Are merchants seeing a lift in sales because of gift cards, or is it still just a gift alternative?
Gift cards are one of the top drivers of incremental sales for merchants and are evolving from simply gifts to an integral, strategic tool for marketers. Retailers with established, successful gift card programs understand the incredible sales-generating potential of their gifting programs and leverage digital gifting to capitalize on the explosive growth of the digital gifting category.

Deployed creatively, e-gfting can serve as a valuable multichannel marketing tool, rather than a siloed initiative. E-gift cards act as a cross-channel bridge, driving customers into retail stores once again, and have applications well beyond simple gift giving.

The broad opportunities range from digital marketing programs/promotions that help grow qualified customer email lists to customer satisfaction strategies that elevate brand position and customer preference. Merchants might also use e-gifting capabilities to effectively adopt or extend social responsibility.

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