Gift Cards - The talking point in Organized Retail

Retailers in India have already started the concept of co-branded credit cards. A current example would be the aggressive salesperson in any Spencer’s store showcasing the HSBC-Spencer’s offering.

Another vivid example would be the Future Group credit card which had TV ads across channels for quite some time. The response though had been lukewarm.

With organized retail sales looking downward over the last year, especially in Q3 and Q4 of 2008-09, these offering had disappeared from the table. But, Q1 & Q2 of 2009-10 have been particularly good, with around 15% growth in the sector on the back of a successful festive season.

The new buzz word that is coming up in Retail circles is the Gift card, which is basically gift vouchers/certificates in the form of smart cards.

They will be profitable for retailers as it will breed loyalty through repeat purchases. There will also be a significant portion of card value (10% in America: Economist) which are never redeemed.

Retailers in India are still nascent when it comes to maintaining a comprehensive customer database, and this will be a small, yet significant step towards the same.

The future for gift cards will yield many innovatively packaged offerings similar to the trends in America.

A few examples from the Economist:

1) Target: Gift cards that double as wind-up toys

2) Gift cards through email

3) Best Buy: multiple people can contribute small amounts for an expensive gift card to be created

4) Time based gift cards during the day. E.g. Happy hour shopping times for Gift card redeemers

Expiry dates in gift cards will foster consumers to buy within a specified period and this will always help the retailer waiting on the other end. If not redeemed this goes directly into the company’s kitty. But a lot depends on how the retailer will handle consumers who arrive at their store with expired gift cards. A balanced act will go a long way in establishing the customer friendly side of a retailer.

Another interesting trend in America would be the auctioning of such gift cards online. E-bay is estimated to sell 100,000 gift cards every month through the second-hand route. Consumers give up gift cards that they are unable to redeem online at almost half their price.

All this leads to a overall healthy trend for the gift card concept.

Manufacturers are already present in India for smart cards, who are currently in advanced talks with retail biggies.

The advantage for consumers is pretty obvious; a gift card would be the ideal choice for any wedding, birthday and other such occasions.