Retailers are gearing up for the upcoming holiday season, and although various strategies are in place to generate consumer shopping intent, prepaid products, including gift cards, will be key drivers in boosting the bottom line and maximizing revenue.
Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, recently released a report titled Prepaid Holiday Preview, which delves into what retailers need to know as they prepare for this essential shopping season. PaymentsJournal recently sat down with Hirschfield to discuss some of the prepaid card trends he anticipates and what retailers should keep in mind.
Retailers have been prepping for the 2023 holiday season since the 2022 holiday shopping season ended. As they continue to flesh out their plans, what are some of the biggest takeaways from your report?
Gift cards are kind of prime time now. You have to think about: What’s your retail gift card strategy? How do you want to sell them, and how do you want to package them? Because there’s production involved in that, there’s promotion involved in that. And then there’s the strategy of how do you utilize gift cards to help spur additional sales?
In the report, I covered summer sales, and Target, Amazon, and Walmart have been really proactive, utilizing gift cards as a discounting mechanism. Instead of putting something on sale or a class of things on sale, there was a promotion. For example, buy $50 worth of health and beauty items and you get a $10 gift card. There’s really nothing magical about it, but it incentivizes the purchaser to purchase again.
There’s so much more marketing around gift cards, particularly targeting last-minute shoppers. Do you anticipate more of that this holiday season?
Absolutely, that last-minute option is always going to be there. That’s the beauty of the next four or five months—how do you not only get your physical strategy in place, but how you augment that with a digital strategy that can be that last-minute opportunity where you don’t need a stock of cards or a stock of packaging.
In the broad scheme of retail gift cards, we’re going to see a transference of the percentage that’s going to digital, where it’s kind of a 70-30, 60-40 ratio, depending on who you ask. That’s going to be 50-50 pretty soon, and at some point—for a variety of reasons—digital is going to take over.
Is it going to be 50-50 this year, or are physical cards still dominating?
In-store is still going to dominate this year, but by a lesser margin than it has in the past. We’re hitting that tipping point in the next couple of years.
Do you anticipate that retailers will leverage familiar tactics that they used last year?
We’re going to see more of an emphasis on that incentive tactic—instead of a sale price, get an incentive gift card back, which then invites you to shop more.
The stats that we have at Javelin show that’s where the real benefit of the gift card is. It’s that consumer behavior—they usually buy more expensive items than they would have and use the full value pretty quickly, and a lot of times it’s a treat. If it’s an electronic store, for example, instead of buying the $250 TV, I’m going to buy the $350 TV because I have this extra money in my pocket.
Anything retailers should avoid doing?
You want to avoid overstocking, especially themed gift cards that you know will become dead stock. With digital, there are more options to have a themed look and feel. I don’t think there’s a need to over-invest in the pure kind of art of the holiday theme for physical when digital can replicate that in a zero-production-cost environment.
I would also avoid tunnel vision. You’ve got to look at all the various opportunities—the gifting opportunity, the incentive opportunity, the self-purchase opportunity. Consumers use these holiday opportunities to treat themselves, and that’s one that you really shouldn’t avoid.
Also, don’t avoid selling at the multi-retailer displays. Obviously, selling it your own in your own store is going to be the best opportunity. There’s a lot of cost advantage to that if you’re a retailer, but our research says the No. 1 place to buy a card is the multi-retailer displays. Those are huge opportunities, and you have to invest in that the right way to make sure that you’re working with your partners to ensure that you have a good display and you’re in a prominent location.
Learn more about how retailers are preparing for the peak holiday shopping season.