E-Gift Cards Fitting the Bill for Consumers, Retailers

2020-12-22 12:10:37

Consumer shopping patterns continue to settle into new options after holiday digital and e-gift card sales soared at the close of last year.

A Blackhawk Network BrandedPay Post-Holiday Report on consumer spending showed a more than 80 percent increase in digital gift card sales. That research also showed a nearly 40 percent increase in overall e-commerce gift card sales during the holiday season.

The report's findings come as a sign of consumer trends continuing to shift away from in-store shopping when suitable options are available. The new shopping trend could provide a needed boost for e-commerce companies considering how to build on the digital momentum in 2021.

As consumer behavior continues the rapid, digital migration, gift card programs are no exception. This is a huge win for retailers, as gift card recipients show up ready and excited to use them, according to Theresa McEndree, global head of marketing and corporate brand at Blackhawk Network.

The research, which came from Blackhawk's own U.S. sales data, found consumer spending exceeded projections from the organization's earlier preview for both e-commerce and digital gifting.

"Digital adoption will continue and is here to stay. This stream of digital shoppers will benefit retail sales in the first quarter of the year. Nearly half of consumers surveyed expect to spend at least $25 more than the value of their gift cards. Many plan to spend them within the first few months following the holiday season," said McEndree.

Top Findings and Trends A breakdown of e-commerce and digital gift card sales surged as surveyed consumers in the study reported doing 68 percent of their holiday shopping online on average. This exceeded the anticipated 60 percent surveyed consumers reported before the holiday season.

Following that trend, e-commerce gift card sales growth beat pre-holiday projections and more than doubled the 12 percent growth seen in 2019. E-commerce gift card sales ahead of the 2020 holiday season were trending at a 21 percent increase over 2019 and jumped to nearly 40 percent growth during the holiday season.

The build-up to last year's end-of-the-year shopping period was marked by a growing use of digital and e-card purchases year-long. Those sales hovered at 74 percent before capping the year at six percentage points higher.

E-Spending Here to Stay

The adoption of digital and e-card spending is a trend Blackhawk expects to continue. That prediction is based on consumer reports of having a different buying experience over previous years with other forms of payments.

For instance, 41 percent of consumers surveyed said the payment methods they used to purchase gifts in 2020 were different from those they used in previous years. Nearly one-in-four shoppers surveyed reported shopping using a mobile wallet for the first time during the 2020 holiday season.

Those same consumers said the experience will stick with them. More than one-third (37 percent) said they are likely to permanently adopt the new payment methods they used to shop this year.

Half of those consumers noted they planned to use their gift cards within a month after the holiday. Another 23 percent said they planned to use their gift cards by the end of the first half of this year.

The average denomination for gift cards purchased was about $45. This is good news for U.S. retailers, predicted Blackhawk's researchers, as six-in-10 surveyed shoppers also reported that they plan to spend more than the value of their gift card.

Newfound Uses

Consumers are finding other uses for this e-gifting trend. They are buying the digital gift for themselves much more frequently -- and also as a way to support local businesses.

"Do not forget that many are buying gift cards not as gifts, but as investments in retailers to support their business," Nikki Baird, vice president of retail innovation at retail enterprise solution provider Aptos, told the E-Commerce Times.

It is a great way to show support and faith that the retailer will stick around without requiring the shop owner to do anything. There is no need to find inventory, staff a store, or in the case of a restaurant, buy food and ingredients.

"So that has been a sustained bump in gift card purchasing as well," she said.

The convenience factor is very high, and the stigma of the impersonality of a gift card has fallen off significantly, Baird explained. When you can only see each other through video chats, sending a gift card suddenly does not seem as impersonal as it used to.

"I think that reluctance around gift cards will not come back. The convenience factor of buying, gifting, and redeeming are all just too high for consumers to discontinue the practice," she added. Expanded Convenience Driving Adoption

Convenience was a large part of the changing consumer trend to favor gifts cards, along with the fact that more families are now living distributed lives. Both situations make the e-gift process more attractive to consumers.

While the convenience of sending an actual gift has gotten better thanks to online shopping, if the recipient needed to exchange it, there was still that hassle, Baird explained.

"Gift cards remove all of that, and it has been getting harder for kids to use cash anyway," she continued.

If a kid wanted to use a gift to buy apps from an App Store, it requires parental intervention to make that happen if the kid has cash as their spending method. Those trends were already at play before the pandemics, Baird observed.

Even before the pandemic, shoppers prioritized convenience. Digital gifts are a great option for friends and family that live far away or people that are difficult to shop for, agreed Meaghan Brophy, retail and e-commerce analyst at Fit Small Business.

"Digital gifts are also a favorite option for last-minute shoppers since there is no need for wrapping or shipping," she told the E-Commerce Times. Old Trend, New Appeal

For years, the National Retail Federation has reported that gift cards are the number-one most wanted gift during the holiday season. It became one of the top items shoppers planned to buy and give as gifts, noted Brophy.

"So, it is no surprise that digital gift cards are a popular gift when people are not gathering together to exchange gifts in-person," she said.

During the pandemic, shipping has become increasingly expensive. Delivery time has also taken longer and with little-to-no service guarantees. Digital gift cards are a reliable way to ensure gifts arrive when they are supposed to without incident, she added.

Post-pandemic, there may be a surge in traditional gift giving, as people are eager to connect in person. However, long-term, digital gift cards will continue to be a popular gift choice because of the convenience and flexibility they offer both the gift giver and the recipient, predicted Brophy. Research Parameters

Blackhawk Network works with more than 1,000 brands and card partners and is in more than 200,000 retail locations serving 28 countries. The company delivers branded payment solutions through prepaid products and technologies; and connects with more than 300 million shoppers worldwide each week.

Two separate survey samplings were used by Blackhawk Network to accumulate its research results.

The first was based on the findings of an Internet-based survey conducted by Leger on behalf of Blackhawk Network from Aug. 24 to 31, 2020. The sample size included 1,500 respondents. The analysis included gift card category findings from 2018 to 2020.

Survey Monkey conducted the second phase of the Post-Holiday Shopping study from Dec. 27 to 29, 2020. Blackhawk analyzed the findings of an Internet-based poll of over 2,000 respondents ages 18+. Researchers used the network's sales data from over 50,000 merchant locations across the U.S