Gifting goes the swipe way

Shoppers spend 50-400% more than gift card value, says a report

Physical and digital gift cards are emerging a major source of revenue for retailers, besides generating footfall.

Digital or e-gift card transactions have risen threefold in as many years, while physical gift card transactions have grown 41 per cent in 2016-17 from 2014-15. The reason: Customers are spending way more than the value of the gift card received and are redeeming these faster.

A study by Qwikcilver, an end-to-end service provider in the pre-paid gift card space, said issuance of physical and digital gift cards had risen 150 per cent in 2016-17 to 50 million, from 20 million in 2015-16. 

According to the study, retail consumers were spending 50 per cent to 400 per cent more than the value of the gift card received. In 2016-17, the study said, about 54 per cent of customers redeemed within 30 days of purchasing or reloading a gift card. This was followed by 26 per cent redeeming within 60 days, 13 per cent in 90 days and eight per cent within 180 days.

“The act of ‘gifting’ is at the crossroads of social and commerce, arguably the two biggest key drivers of consumer consumption,” said T P Pratap, co-founder & chief marketing officer, Qwikcilver. “The gifting category in India is also undergoing a massive transformation. A continuously widening consumer base, combined with a wide array of gifting options, ensures that the category continues to grow. Qwikcilver is the pioneer in the gift card sector, having powered close to $1.3-billion worth of gift cards across categories.”

The revenue potential has made players such as Future Group and Shoppers Stop launch separate divisions to grow the gifting business. Future Group, for instance, anticipates a revenue of Rs 1,000 crore from this division.

Kishore Biyani, group chief executive officer at Future Group, had recently said at a conclave: “We believe that gifting is one of the biggest social interactions and social events in our society. We believe that gifting will be a very big business for us, which may be touching Rs 1,000 crore very soon. We have launched a separate division and a new organisation to manage this business — called Future Gifting.”

Digital gift cards are rapidly gaining growth, said Qwikcilver, contributing 65-70 per cent to sales. 

The sales mix is expected to stabilise over time, at 80 per cent digital and 20 per cent physical. From a 61:39 ratio between physical and digital gift cards in 2014-15, the mix has changed to 38:62 in 2016-17.

The average load value or ALV — sales value with respect to the number of cards sold — has been observed to be higher for utility as well as premium brands. For instance, in 2016-17, the ALV was the highest for the hospitality sector at Rs 9,750, followed by spa/saloon at Rs 3,067, online travel at Rs 2,848, electronics at Rs 2,649, accessories at Rs 1,573 and apparel at Rs 1,571.