Marketers who have traditionally relied on fourth-quarter sales to make or break their fiscal year may want to consider shifting some of their ad dollars to January and February. The reason: new distribution outlets for gift cards could mean that more consumers won’t be redeeming their cards until months later, giving new meaning to Christmas in July.
According to research from Deloitte & Touche USA, by the end of January ,39% of holiday gift cards still weren’t redeemed, leaving around $9 billion in potential sales still off the books at that time. Retailers can’t book sales from such cards until they are redeemed.
And even if the percentage of card recipients who wait to redeem cards remains flat, the growing popularity of cards could get even more of a boost if Comdata Corp.’s Stored Video Systems (SVS) unit and Coinstar have their way
SVS has joined with Coinstar – the owner of 12,000 self-serve kiosks that charge people 8.9% to count the mountains of loose change they’ve accumulated– to broaden the distribution channel of gift cards. Instead of receiving cash minus the fee, Coinstar users can opt to receive a gift card from an SVS-affiliated merchant with a Coinstar kiosk for the full face value of the money they returned.
What’s more, under a new “gift mall” program, SVS merchants can offer their own gift cards in addition to a wide variety of retail gift cards in categories such as books, clothing, and dining that they can buy at the merchant’s counter.
In announcing the partnership last week, the companies touted the program as a way of offering merchants a “turn key” solution to selling an array of cards at the checkout while expanding the distribution outlets for them. “Merchants are now looking for ways to get their gift cards in customer hands outside the traditional in-store delivery system,” Bob Skiba, SVS executive vice president/general manager, said in a statement
“This promotion is one of the more interesting ones in that it really a true tie-in to the distribution of cards to something else … that might be happening in stores,” says Carl Steidtmann, chief economist/director at Deloitte Research, a unit of Deloitte & Touche.
The average adult received 3.2 cards during the 2004 holidays, compared with 2.5 cards in 2003, according to a Deloitte report, which estimated that their redemption boosted retail sales by about $18 billion. Merchants like gift cards because shoppers who receive them often spend appreciably more than the face value of the cards themselves. Further, it gives merchants cash flow from two avenues: the card buyer and the recipient.
“They’re selling not just the person who gets the card but also the person who’s giving the card,” Steidtmann says. “In a sense, it’s a multi-pop: a way to pitch goods and services to two customers.”
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