Shoppers plan to buy a lot of gift cards this holiday season.
Gift card sales—both physical and digital cards—typically spike during the holiday season. They make easy gifts for hard-to-shop-for family members—but the coronavirus pandemic is fueling even more sales for this product.
U.S. retailers sold 114% more digital gift cards in the third quarter of 2020 compared with Q3 2019, according to survey data from 1,182 U.S. stores that use Rise.ai Inc.’s re-engagement software. Plus, the revenue from selling the digital gift cards increased 65% year over year in Q3, according to Rise.ai, which helps retailers manage gift cards, loyalty programs, referrals and refunds. The data does not include Amazon gift cards nor multi-store gift cards, such as a gift card that could be used at more than one store. For example, a parent brand like Gap Inc. could offer a gift card that could be used at Gap, Old Navy and Banana Republic.
Digital gift card sales are growing for a few reasons, Rise.ai says. With the fear of contracting the coronavirus still looming, consumers are avoiding both in-store shopping and using cash as a form of payment. Purchasing gift cards is also one way consumers have been supporting local businesses during the pandemic. More corporations are giving gift cards to employees to help small and medium businesses too, according to Rise.ai.
Merchants also helped fuel the increase in gift card sales during the pandemic, as many were keen to market gift cards while their stores were closed or overall sales were hurting, as a way to keep revenue flowing in, says Yair Miron, CEO at Rise.ai.
Plus, when a shopper makes a purchase with a gift card, she often spends more than the value of the gift card, generating additional revenue for the retailer, Miron says without providing specific stats. Retailers did generate a greater portion of their online revenue from digital gift card sales during the pandemic compared with 2019, according to Rise.ai data. In September 2020, on average 2.14% of a retailer’s online revenue came from gift card sales compared with 1.77% in September 2019, according to Rise.ai.
Online retailer overstockArt.com (No. 1090 in the 2020 Digital Commerce 360 Next 1000) also noticed this increase in gift card sales during the pandemic with gift card sales at least doubling in 2020, says Amitai Sasson, vice president of ecommerce. During the pandemic, overstockArt.com’s sales have roughly doubled year over year, and gift card purchases have kept up with its rapid sales growth, he says.
“We’ve already seen more gift card sales than ever before,” Sasson says. “We’re definitely going to see a surge [during the holidays].”
And the holiday season will likely only spur more digital gift card buying. In Deloitte’s annual holiday survey of 4,012 consumers released in October 2020, 48% of consumers (the No. 1 response) plan to buy a gift card—physical or digital—as a gift for the 2020 holiday shopping season. Plus, 42% of consumers would like to receive a gift card as a gift, a top response only behind money (43%).
OverstockArt.com’s gift card sales surge over the holidays. Gift cards purchased through its website generate roughly 10% of sales during the holiday season, compared with 5% during any other season of the year, Sasson says.
Sasson predicts gift card sales will increase even more during the 2020 holiday season because of earlier shipping deadlines due to COVID-19. OverstockArt.com, like other retailers, has noticed delays or slower shipping times from shipping carriers. To ensure it can deliver purchases by Christmas Eve, overstockArt.com is going to set its shipping cutoff date for ground shipping for Dec. 18, before the final weekend of Christmas shopping. In those six days, gift cards will be a big part of its holiday marketing strategy as it will be the only way to capture more holiday sales, Sasson says.