Prepaid cards: A gift to retailers

Tawnie Nelson
Wells Fargo

Your single shop or small group of retail stores might seem worlds apart from the nation’s leading retail chains, but the "big boys" use a financial tool to boost their sales that you can easily adapt to help improve your retailing success.

The financial tool I’m talking about is gift cards, the plastic equivalent of gift certificates that shoppers purchase from stores as gifts for loved ones, co-workers, friends and acquaintances.

Gifts cards are growing in popularity with time-pressed shoppers. The surge also reflects a giving trend toward "experience" gifts – such as eating out, relaxing at a spa or enjoying a weekend getaway.

Here are seven reasons your retail company should consider selling gift cards:

They are popular. Gift cards were the number one gift purchase during last year’s winter holiday season, according to a survey conducted by Deloitte & Touche. The majority of shoppers surveyed said they planned to buy an average of 4.9 cards.

They increase customers. Gift cards bring in new customers, and increase overall revenue and incremental sales. The card brings customers in to redeem their gifts, which provides you the opportunity to turn them into repeat customers. Gift cards can also increase the frequency of visits – the average card accounts for 2.5 transactions.

They increase sales. Research shows that gift cards generate between two and 10 times more sales than paper gift certificates and that purchases made with a gift card are 20 to 50 percent higher in dollar amount than the average transaction. Recipients of the cards frequently purchase full-price merchandise and spend more than the dollar value of their gift cards.

They build brand awareness. Gift cards are billboards in consumers’ wallets. They serve as a referral from the giver of the card for establishments and services that they enjoy, trust and recommend.

They eliminate cash back. Gift cards allow consumers to spend the full amount or only part of it, and the balance remains on the card. Gift cards can also be used as a store credit when customers return merchandise, ensuring the funds are spent in your store.

They enhance cash flow and float. Gift cards are purchased before you provide the goods or services, and they ensure that pre-paid dollars are spent only in your store. Half of the respondents in the Deloitte & Touche survey stated they had received gift cards themselves in the past one to five years and had not yet redeemed them. You benefit from the float.

They simplify operations. Gift cards are easy to issue and easy for your employees to handle in lieu of cash, checks and credit cards. Many of the most widely used debit and credit card terminals can also handle gift cards.

If you are interested in offering gift cards, talk with your business banker or merchant card services provider.

Some financial services companies offer retailers daily and monthly web-based reports – not available from paper-based gift certificate programs – to simplify the accounting process.

Your gift card provider should also be able to offer you a variety of designs and even the opportunity to design your own card, as well as round-the-clock merchant support.

Gift cards are great for all occasions and are so easy to purchase and redeem. Why not cash in on some of these benefits at your stores by offering gift cards to your customers?

Based in Vancouver, Tawnie Nelson is Wells Fargo’s Business Banking manager for Southwest Washington. She can be reached at 360-759-4820.