Credit: Getty Images by Adem Percem
Increasing customer loyalty is always top of mind for retailers. Loyal customers spend more money at their favorite businesses, patronize shops more often, and promote the brands they love to other consumers in their networks. To create loyal customers, forward-thinking retailers can utilize the tried-and-true gift card to engage customers and enhance buying experiences.
In January, our team at Carat from Fiserv released its 21st Annual Prepaid Consumer Insights Survey to look at the gift card trends impacting retailers most in 2024. Here’s what we found:
A Balance Between Speed and Tangibility
While the digital age continues to influence consumer purchasing behavior, our survey showed that consumers remain split 50/50 on whether they prefer physical or digital gift cards. Retailers looking to drive loyalty across their customer base must be mindful of the duality in consumer preferences when it comes to gift card types and cater to use cases that deliver both speed and tangibility.
For digital purchasing, consumers seek speed and convenience. Specifically, consumers that prefer digital gift cards do so because they provide them with an immediate delivery option (think last-minute shopping), ease in sending compared to mailing a physical card, and a simple purchasing experience compared to physical cards.
When catering to consumers who prefer physical gift cards, the importance of tangibility takes precedence. To that end, 85 percent of consumers value giving a physical gift to someone and more than half (52 percent) say they want their gift recipient to unwrap a physical item. With that said, a common in-store strategy for selling physical gift cards is to place them near greeting cards or other gift wrap options.
Peer-to-Peer Apps Are a Growing Gifting Channel
For years, gift cards have been the most popular way for consumers to gift money to others. That theme was no different in 2023 when half of consumers said the gift card was their preferred choice for gifting monetary value. With that said, popular digital wallets that allow peer-to-peer (P2P) transfers have risen to the second (27 percent) most popular option. In fact, these P2P platforms have grown in popularity over the past few years and are expected to reach $1.4 trillion in total transactions for 2023, a 28.5 percent increase from 2022.
For merchants, P2P provides a new way to cater to digital customers by making gift cards available to send through digital wallets and P2P apps. This concept is becoming more popular thanks to the ease and convenience associated with digital delivery — and a new channel for building customer loyalty and brand advocacy. In fact, of the 55 percent of consumers who sent a gift card using one of the P2P apps in 2023, 67 percent said the experience was easy and convenient and 36 percent said P2P platforms featured more merchant options than expected.
Gift Cards and Budgeting
With inflation continuing to impact consumer spending, many consumers are looking at gift cards as a creative means for staying on budget. In fact, 39 percent of consumers indicate that gift cards facilitate better money management than holding cash.
Leveraging incentives and promotions connected to gift cards are the most common strategy for consumers using gift cards to stretch their spending power. In fact, incentive programs are the reason that most (55 percent) consumers buy gift cards for themselves. And of the 62 percent of consumers who purchase gift cards for themselves, one-fourth are doing so for budgeting/money management purposes. Financial incentives associated with gift cards help retailers create more value for their customers and deliver their customers with little extras that provide a meaningful boost in loyalty.
Savvy merchants know that gift cards offer an opportunity to increase revenue and create stronger bonds with customers. They’re easy to use, offer consumers flexibility, and help deliver financial value back to customers. Therefore, retailers looking to boost revenue and improve customer loyalty must build gift card programs fit to serve the needs of the modern consumer.
Sam Lituchy is vice president and head of gift solutions at Fiserv, a leading global provider of payments and financial services technology solutions.
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