Gift Vouchers - US Vs UK

The gift card market - US

According to U.S. research by Faulkner & Gray the total gift card marketplace has shown exponential growth while paper continues to decline.

Overall Potential Market

• According to an Andersen Consulting study commissioned by Visa in the United States, host-based stored-value card market could equal $77 billion by the year 2005
• Gift cards are just a portion of the total opportunity

• In the same study, industry experts predict that 16% of all internet purchasing is projected to be made using host-based, stored-value cards
• A major issue for suppliers of gift cards is therefore to offer safe Internet solutions

• A recent survey commissioned by ValueLink in the United States shows that there is potential to market pre-paid cards that can be used at multiple retailers or locations.These are widely seen as valuable and are preferred over both single retailer and mall gift cards

The gift voucher market - UK

Paper based

• According to the UK Voucher Association, voucher sales rose by 16.4% in the final quarter of 2001. With 21.8% growth, the performance of corporate sales of vouchers in the B2B sector was particularly strong. Direct sales of vouchers to consumers rose by 10%. The association's research valued the total voucher market at £1.15billion

Purchase versus experience

• Non-retail voucher campaigns offer novelty and can help entice loyalty from both staff and clients. Euro RSCG Worldwide found that modern affluent people value experiences more than tangible goods. With research from various other sources identifying experiences or activities as the most attractive motivation option for both consumers and corporates, the debate purchase versus experience has been launched (Source: Promotions & Incentives; Supplement: Vouchers/Non-Retail: Active options)

The paper vs. plastic debate

Challenge of paper-based systems

• Lack of marketing, promotional and merchandising excitement. They do not offer the flexible options that plastic gift cards do.
• Offline paper gift certificate transactions are difficult to control and track and offer virtually no management information.
• Possibility of unauthorised production
• Laborious POS transaction
• Lost interest opportunity as paper gift certificate balance is cashed out

Benefits of plastic cards

• Great merchandising opportunities - As the cards need to be processed at the register to become valuable, unprocessed cards can be displayed in stores without any risk of losses due to theft.
• Improved customer convenience and speed of service through quicker transaction time. Howard Schulz, Starbucks chairman, said: "With the introduction of the Starbucks Card, we have the immediate opportunity to improve our customer service, shorten lines and make a person's daily stop at Starbucks quicker and more convenient." (Source Restaurant News, Feb 11th 2002)
• Effective revenue and loyalty builder. In the company's first-quarter conference call with analysts, Orin Smith, Starbucks' President and Chief Executive, categorised the Starbucks card as one of the most important initiatives in the recent history of the U.S chain. The cards accounted for a sizeable portion of the chain's 7 percent same store sales increase in January and a 3 percent rise in December. (Source Restaurant News, Feb 11th 2002)
• Powerful marketing tool to boost brand and corporate identity: excellent platform for partnerships, special events and seasonal opportunities.
• Accurate, real time information management ,tailored to the retailer's requirements
• Expedient time to market solution
• Greater accountability
• On-line transactions reduce opportunity for fraud
• Flexible location of issuance and redemption
• POS and back-office cost reductions
• Income opportunity for retailer - Interest income, breakage income opportunity for not redeemed card value

Opportunities for plastic gift cards

Consumer Statistics - US

• A U.S. consumer survey of plastic card usage found that 80% of consumers were aware of gift cards, up 65% from last year (Source: Cardline Newsletter, March 9, 2001)
• 45% of those consumers had used a gift card, up 34% from last year (Source: Cardline Newsletter, March 9, 2001)
• Consumers who bought prepay gift cards spent an average of $200, up $61 from last year (Source: Cardline Newsletter, March 9, 2001)
• Industry forecasts expect 60-70% acceptance within the next 5 years (Source: Cardline Newsletter, March 9, 2001)

Retailer Statistics - US

• In the U.S. nearly 50% of retailers without a stored value card programme today plan to launch one within the next five years (Source: 2000 Consumer Card Usage and Awareness Survey - Standard Register)
• 12% of all retailers state that a gift card programme is a "highest" future priority and 17% state that it is a "second highest" priority (Source: 2000 Consumer Card Usage and Awareness Survey - Standard Register)
• 77% of retailers with existing gift card programs state that the program has created more sales and revenue (Source: 2000 Consumer Card Usage and Awareness Survey - Standard Register),
• The most popular reasons for offering gift cards is:
• 36% - A way to boost sales and profits
• 30% - Consumer demand (Source: 2000 Consumer Card Usage and Awareness Survey - Standard Register)
• Savings on costs to tender - Increasing gift card sales can positively affect overall profitability since gift card tender costs are typically less than other payment tender costs (Source: FMI member survey)

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