It’s always someone’s birthday: gift cards remain evergreen

Inflation and rising living costs have turned consumers into paranoid penny-pinchers, who are cautiously awaiting the next fiscal catastrophe to empty their wallets once again. According to Barclays, nearly six in 10 Brits are actively curbing their discretionary purchases, which has led to just a 5.5% uplift in year-on-year spending on non-essentials in February than in January when it grew to 10.4%.

However, this information is in stark contrast to recent footfall and location visitor behaviour data gathered by Place Informatics, which shows that during the most recent Christmas shopping period of 2022, footfall across 371 UK shopping centres increased by an average of 11.95%. 

Logic would dictate that feeling obligated to purchase gifts for a holiday played a large role in this spike in footfall, yet this isn’t isolated to just Christmas. Despite the current economic landscape, analysis by the Gift Card and Voucher Association (GCVA) and KPMG UK found that sales for the association’s retail members increased across every channel, with in-store accounting for over 58%, and gift card malls experiencing 20.5% like-for-like growth.

Gail Cohen, the director general of the GCVA, says that the association aims to represent all the key players in this market. 

“We have over 90 members, many of which are retailers, and provide a platform for these members to collaborate, share ideas and access the latest data, insight and innovations,” she says. “Retail members include Aldi, B&Q, Argos, Boots, Currys, Tesco, Sainsburys, John Lewis, WHSmith and New Look.”

Gift cards first emerged in 1994 as an evolution from the paper gift certificate and gained popularity in the subsequent years as major brands began to offer them. Over time, they have evolved significantly, with innovations such as multi-store gift cards and digital products entering the space. Gift cards in recent years have been widely adopted by businesses and consumers, and as a result, the gift card and voucher market is now estimated to be worth in excess of £7bn.

What makes this year’s GCVA findings so special, Cohen tells me, is that data demonstrates the “real resilience of the industry”, as it has maintained a strong performance against economic challenges. 

Cohen continues to say: “The data shows that investment in digital innovation has clearly paid off for retailers. With new concepts such as reloadable gift cards growing in demand, retailers will need to ensure they are continuing to invest in this area to drive sales and keep up with evolving customer expectations. 

“The research also highlights the diversification of use of the gift card, something that we have explored in our ‘What’s in a Name’ whitepaper, in partnership with KPMG. Whilst gift cards continue to play a vital role in gifting, they are now used extensively for rewards and incentives, which has seen growth of 44.6%, and to support people through the cost-of-living crisis.”

In regards to the rise of gift cards as incentives, this figure has shown a shift in how businesses are using gift cards also, as employee benefits retained the biggest market share at 55% despite showing a small decline from the previous year. That was said to be due to pandemic-induced staff benefit boosts beginning to moderate. 

According to gift card company Blackhawk Network that manufactures and distributes gift cards on behalf of retail brands, the global gift card market is expected to reach £1.6tn by 2027. Its company insights from last year found that 62% of consumers bought a gift card in the past year, while 85% would prefer to receive a gift card over a gift selected for them.

What’s more encouraging is that 90% of consumers are also willing to spend more than the amount on the gift card when using one to make a purchase, according to Blackhawk Network. 

The manufacturer and distributor also found that the amount a consumer is willing to spend also goes up as the gift card value increases, as 47% reportedly spent over £106 more with a £500 gift card, 60% more consumers spend more than £74 with a £100 gift card, 74% spend over £57 with a £50 gift card, and 90% spend over £51 with a £10 gift card. 

Cohen also sees a correlation between the surge in gift card purchases and the cost-of-living crisis, saying that: “Gift cards have a vital role to play in helping people through the cost-of-living crisis. For example, the research shows that grocery was the highest retail growth area, as consumers seek discounts via vouchers and gift cards to help combat the rising cost of essentials. Gift cards have also enabled people to keep on gifting through challenging times and provide loved ones with a treat that doesn’t get swallowed up by expenses.”

The GCVA’s findings along with the input from Blackhawk Network shows that consumer confidence is still robust despite the economic climate, while the role of the high street in facilitating the gift card and voucher market is still strong. 

However, the report did reveal that digital products have contributed significantly to gift card sales last year, showing a 19.3% growth on the previous year. The jump in the adoption of digital gift cards could be due to a huge number of retailers making gift cards part of their offering, having recognised the benefits that a gift card programme can bring to customer retention, loyalty and the introduction of new customers to the brand. 

“Over half of those who have received a gift card in the past three years have been introduced to a new brand or organisation via this format” Cohen says. “There isn’t a single retailer that couldn’t benefit from a gift card programme. They’re easy to set up and run, and the GCVA can help provide guidance to retailers looking to do so. Gift cards help guarantee future custom, increase spend, and drive loyalty so all retailers should look to offer them.”

In addition, in recent years at least, gift cards have been used to make the gift-buying process more affordable and to reduce any wasted spending by giving “the gift of choice”. Cohen concedes that as inflation rises, gift cards also enable consumers to avoid higher costs associated with physical gifts. Gift giving remains a priority for people and the spirit of gifting remains. When budgets need to tighten, people simply change their priorities.” 

The GCVA’s research shows that consumer spending on gifts is largely unaffected, but people are changing how they spend their gifting budget. Spending on those closest, such as partners, children and parents has increased, whilst people have reduced spending on friends and extended family.