Are Gift Cards Worth it for Small Businesses?

Offering gift cards toward purchases at your small business can be an easy strategy to increase sales, particularly during the holiday shopping season.

Here are 3 ways your small business could benefit from physical and digital gift cards redeemable for your products or services.

How Gift Cards Build Brand Awareness and Attract New Customers

Gift cards are your opportunity to amplify your brand and expand audience reach. They create a direct path to new customers, including people who wouldn’t know about your business if they hadn’t received a gift card.

In short, a gift card program provides a sure-fire marketing opportunity.

The purchaser of a gift card is going beyond recommending your products or services to family and friends — they’re sending the gift recipient straight to your business to shop.

“Gift cards are great at getting new customers into your store since receiving free money is typically plenty of incentive to get someone in your doors and eager to look around,” says a blog by Electronic Payments, a New York-based payment processing and fintech company.

Further, if a gift-card shopper has a positive experience at your business, they will become one of your loyal customers, and in turn buy gift cards for people they know.

“When one customer buys a gift card for another, that means you are guaranteed of more sales in the near future,” says a post by Nationwide Merchant Solutions on its website. “This is an inexpensive way to advertise your store and it is also just as effective as word of mouth.”

Customers who buy gift cards are “brand ambassadors” for your business, explains a Shopify article.

“Once someone redeems a gift card, you can engage them with marketing and sales strategies to drive repeat purchases, like product recommendations and access to VIP programs,” the post advises.

How Gift Cards Increase Holiday and Year-Round Sales

Most gift card purchases occur around the Christmas season, according to shared research.

Gift card purchases are also popular for birthdays and 20 percent of gift card purchases are given as “thank you” gifts, according to First Data, which is part of fintech and payments company FiServe.

“When you structure gift card marketing programs to directly align with such occasions, you can inherently position your brand as a year-round gifting destination,” says an Entrepreneur article by Kristen Gramigna.

Also, digital gift cards can help drive sales at your business this time of year.  They offer shoppers an easy option for a last minute gift, whether it’s for “a nearly forgotten token of appreciation for an acquaintance or in response to an unexpected present,” adds the Shopify blog. 

“Even if holiday shipping deadlines have passed, customers can receive them in time.”

The National Retail Federation (NRF) estimates more than $29 billion was spent on gift cards last year. “Selling gift cards can help you receive higher-value orders, especially during the holidays,” the post by Shopify says.

A gift card recipient often spends more than the gift card’s worth, which adds to your revenue. Seventy-four percent of consumers spend more than the amount of their gift card, and on average they go over its value by $59 or more, reports First Data.

The majority of gift card recipients spend nearly 40 percent more than the face value of the gift card they receive, according to the Entrepreneur article, which cited information from CreditCards.com.

How Gift Cards Can Improve Cash Flow and Profitability

When a gift card is purchased from your small business, the transaction is straightforward, adding to your revenue and cash flow, even if it’s never redeemed.

“Unlike the physical items that you sell as gifts, gift card sales don’t result in exchanges or refund requests post-sale,” writes Gramigna in the Entrepreneur post.

“For small business owners, these inherent aspects of gift cards are a win-win for maximizing profitability, and reducing the likelihood of lost sales, customer complaints and chargebacks.”

Also, check out Customer Appreciation: Building and Keeping Customer Loyalty in Your Small Business. 

Learn about holiday shopping trends in Holiday Shopping Trends to Boost Small Business Sales