Retailers Keen To Accept Gift Cards At The POS

22nd October 2003

US retailers ''are not just asking for gift cards, they are demanding the capability to generate and accept the gift card at the point-of-sale'', the Green Sheet reports.

With First Data Merchant Services reporting 75 to 85 per cent of US consumers to be aware of gift cards, and 45 per cent to have used one, the onus is on solutions providers to help merchants benefit from gift cards. With 58 per cent of top 250 US retailers accepting gift cards, the average purchaser spending USD 200 on four gift cards per year, and 61 per cent of gift card recipients spending more than the amount on the card, the math already speaks for itself.

Over 46 per cent of consumers responding to a survey by retailer, Circuit City, similarly plan to buy gift cards in the coming holiday season. Retailers offering gift cards stand to gain profits upfront from prepay sales, to reduce payment interchange rates and to benefit from 'breakage' if the full amount on the card is not used. Typical 'breakage' rates on the Starbucks prepay card, for instance, run at about 15 per cent, and analysts estimate that at any time, over USD 1 million has been prepay on its cards. In light of this, retailers now see ''stored-value gift cards as a necessity and not just a benefit'', the Green Sheet states.

Americans have also ''embraced the gift card with a fervor unmatched by anything short of the credit card boom of the 1980s'', with Visa reporting USD 300 billion to be spent annually on gift cards. Retailers using gift cards to displace certificates, cash and checks stand to gain new incremental volume and revenue in the coming holiday season. Over 60 per cent of consumers prefer gift cards suited to use at multiple retailers, according to Synergistics Research, while recipients preferring multi-purpose cards, with 57 per cent favoring a Visa gift card, versus 13 per cent for MasterCard, and 8 per cent, for American Express