Amazon to Lifestyle, pre-paid gift cards pack good business for brands

Growing preference for a pre-loaded piece of plastic is forcing retailers to rethink the way they brand gift cards

Popular logic dictates that gift cards are mostly bought by the urban young, looking for a last minute rescue. Either a festival or a special occasion that has caught them short is a situation ripe for its purchase—at least so believed retailers and market researchers. However recent data indicate that consumer behavior is far more nuanced and use of the gift card, much more widespread. And retailers are paying heed by designing their products as an all-weather lifestyle choice, instead of a no-option purchase.

 

A recent whitepaper by Qwikcilver, a SaaS based platform that provides end-to-end gift card and stored-value-card solutions to retail and corporate customers, revealed that over 750 million gift card transactions took place in 2018-19. The market has been pegged at Rs 3,000 crore. From conventional occasions to buying it for themselves, consumers have flocked towards the product leading to a 3X growth in the availability of gift cards at leading marketplaces, offline brand stores, banking catalogues and on curated corporate platforms.

 

“Customers are increasingly opting for gift cards over traditional gifts. What was once considered an easy, last minute gifting option for lazy shoppers, has caught on (as a bigger trend),” says Pratap TP, co-founder and CMO, Qwikcilver Solutions.

 

Sandeep Goyal, chairman, Mogae Media believes that a growing number of fans for what was once considered a rather bland gift option reflects the shift in gifting behaviour. “One can never be sure whether the gift is what the receiver wants. A gift card allows the receiver the flexibility of choice,” he says.

 

Gift cards have traditionally been a corporate gifting option, which continues to be the case because, as Shariq Plasticwala, director, Amazon Payments says, “Distribution management (with gift cards) becomes easy for the corporates.” However while the corporate market might be larger for Amazon gift cards, retail customers are setting the benchmarks today, he informs. The company provides for innovative anytime gift card boxes that a customer can purchase at any given time and load money in when they want to gift it to someone. Greater flexibility is a big win with customers of all age groups today.

 

Plasticwala sees the gift card as the perfect way for a first-time shopper to experience the Amazon store. In fact, he adds, one would be surprised by the geographical breakdown of the demand for such cards. Beed in Maharashtra, Davangere in Karnataka, Eluru in Andhra Pradesh, are big markets. This has led them to create a multi-lingual pitch and information docket for the cards, besides redefining their function. Amazon gift cards can be used for multiple purposes, from shopping and bill payments to flight and hotel bookings.

 

Approximately 85 per cent of gift card users in India are below 35 years of age. And among non-metros, Ahmedabad, Patna, Indore, Jaipur, Agra, Bhubaneshwar, Chandigarh, Kochi, Sonipat and Lucknow are the top 10 cities in terms of gift card consumption. “These cities have shown growth of 3X to 5X,” says Pratap.

 

Ambi Parameswaran, founder, Brand Building.com believes that what we are seeing today is actually a new avatar of an old format. He says, “For many decades State Bank of India had gift cheques.” Shoppers Stop, Crossword and Lifestyle helped spread the culture and now the concept of an online gift voucher is changing market dynamics again, he adds.

 

­­­­While consumers are hooked to the ease and convenience of the cards, retailers are latching on to the proposition as a way for new, first-time consumers to sample the brand and also because as Goyal puts it, the cards are prepaid and hence cash is in the bank much before the product is sold. Also redemptions range between 60 to 90 per cent. Gift cards not redeemed are pure profit for the brand.

Money trail

 

• Over 750 million gift card transactions took place in 2018-19; the market is pegged at Rs 3,000 crore
•  Contribution of non-metros to gift card sales is on the rise, expected to bring in around 40 per cent of overall gift card revenue in 2019-20
•  Market research firm Persistence Market Research projects that the global gift card market will touch $698 billion by 2024 growing at 11 per cent every year.  The Indian market, Qwikcilver estimates, is $50-60 billion, but is expected to be one of the strongest contributors to global growth
•  A study by Woohoo.in shows 90 per cent gift card purchase transactions across India were done via mobile