Digital Gift Cards Poised For The Holidays

By Matt Pillar, editor in chief

Ten years ago, we debated the viability of the gift card. Would consumers buy in to the convenience they afforded, or would gift cards be deemed too impersonal for holiday gift giving?

Somewhere along the way to $100 billion in gift card sales per year, that question was definitively answered. $100 billion. That's the forecast for gift card sales next year, according to TowerGroup.

Today, just as e-commerce represents the fastest-growing retail channel, digital gift card sales are growing faster than that of their physical PVC counterparts, according to CreditCards.com (a part of the BankRate Online Network).

CreditCards.com surveyed 63 gift cards from major brands and found that more than half have made e-cards available. For many of those brands, 2011 marked the first year for a digital gift card offering. American Express, Best Buy, and Gap are among the major companies offering e-gift cards for the first time this year. Even those gift card issuers who haven't yet gone digital with the cards are showing movement toward that direction — 55 of the 63 surveyed offer online tools that let consumers check their gift card balances on the Web.

That said, virtual gift cards still represent only about 6% of total gift card sales, so the plastic kind aren't soon going anywhere.

If you're trying your hand at offering digital gift cards, here's some advice:

• Make their purchase intuitive on your site. Consumers are expecting to give you payment information, an e-mail address to which the "card" should be sent, and an e-mail address to which confirmation — of both delivery and receipt — should be sent. You'll cause your purchaser stress and confusion (and cost yourself credibility) by ascribing your standard checkout page (asking for physical shipping information) to virtual card purchases. Unfortunately, many retailers do this.
• Make sure you're configured to accept "cards" across channels. Shoppers don't live in channel vacuums, so the "cards" they receive in their inboxes HAVE to be redeemable in your stores. Make physical cards redeemable online, too. It's amazing how many haven't gotten there yet. Did I mention this is a $100 billion market?

Consumers who have tried virtual cards enjoy the convenience of sending them to family and friends from their smart phones and computers, and many analysts and industry observers are anticipating more of that if consumers hold the line on their promise to throttle back on credit usage. Of course, that would leave debit as the likely payment medium for virtual gift card givers, much to the chagrin of Bank of America cardholders.

This time around, we know better than to even think about questioning whether gift-giving via e-mail or Facebook will be deemed to impersonal for American consumers. Gift card issuers are leaving little room for that objection, many of them offering consumers an opportunity to create personalized audio, photo, and even video messages to accompany the delivery of the gift. That's cool, but I still prefer to tear wrapping paper from my presents and thank gift givers with a hug. If that's just not feasible, remember — it's matt.pillar@jamesonpublishing.com.