“Are gift cards good for my business?” - Facts, benefits, and FAQs

Anytime you’re considering adding a new feature to your Shopify store, there’s often a process of weighing up the costs and benefits. New apps and integrations of course mean not only added cost per month, but also additional resources from your team in figuring out how that new feature will impact other areas of your store and strategy. If you’re a smaller merchant, then you typically need to make sure your resources go further and that means adding any new features needs to be truly valuable almost immediately. For larger merchants, you may have more resources but that can also mean it’s much more expensive to implement. 

So, while we want to change digital gifting and improve the experience for merchants, we also understand that it isn’t always as simple as just clicking that “Add App” button on the Shopify App Store. If you’re going to add a whole new app to manage gift cards on your store, you want to know exactly what value it’s going to bring to your store and customers. 

Today, we’re going to take an honest look at gift cards, their benefits, and perhaps some of the trickier questions a merchant might have when looking at installing Govalo. Ultimately, knowledge is power, and we want to empower you with that knowledge so you can better understand why having a gift card app can improve your store experience and grow sales.

Gift cards - the facts and figures

In days gone by, gift cards weren’t seen as a desirable gift either to purchase or receive. Those days are long gone, as more and more customers see gift cards as an attractive option when purchasing gifts. They don’t need to stress about what to pick, is it the right size, will the recipient actually like it, and so on. The facts and figures around this speak for themselves - the global digital gift card market is expected to reach $1101.03 billion by 2030. Rewind to just last year, and during the 2021 holiday season, gift card purchases increased by 43% year-on-year.


Holiday gift card increase


Staying on the theme of the holiday season, the NRF found that for the 13th consecutive year gift cards remained the most popular item on wish lists having been requested by 59% of those surveyed. In another survey by Klarna, they found that 44% of last minute shoppers planned to purchase gift cards.


NRF gift card wishlist data


However, it isn’t all about Christmas when it comes to gift cards - 55% of consumers’ gifting budget across the entire year will be spent on gift cards. They’re also popular year round with younger audiences, as 39% of Millennials and 41% of Gen Z say that they buy a gift card at least once every 3 months. If you’re wondering whether or not having those fixed value cards will lower your AOV, fear not - 33% of consumers will actually spend more on a gift card than on a physical gift.


76% of gift card recipients say they use it as an excuse to treat


We now understand that the gift card industry is booming, and that gift buyers and recipients alike love them. Industry wide facts and figures are great, but let’s get into the specifics - how will gift cards actually benefit your business day-to-day?

4 reasons why gift cards benefit your business

Gift cards have long been something that’s seen as an extra on an ecommerce store. They’re not your primary products, after all, they’re a nice-to-have, right? You sell them seasonally, maybe a couple throughout the year, and they tick along themselves in the background while you strategize the rest of your store. Well, you can certainly implement gift cards in that way however as with any other product in your store, you’ll see a lot more success with them if you apply strategy, resources, and effort to their development. 

We built Govalo because we believe gift cards can do more than just sit at the back of your catalog. The benefits of having gift cards with their own strategy and experience go far beyond a “nice-to-have” in your store.

#1 - Useful for sales consistency when faced with inventory shortages

If there’s one thing we’ve all learned in the last few years, it’s that nothing is 100% predictable. In 2020, Covid19 pandemic caused very high levels of consumer demand which resulted in shortages and increased pressure on ecommerce brands as brick-and-mortar stores closed or ran low on inventory. Just a couple short months ago, the 2021 holiday season was severely impacted by supply chain issues meaning holiday inventory was constantly in question for many stores. This had an impact not only on retailers, but on customers who were concerned about gifts arriving on time making them reluctant to order anything online.

There are plenty more reasons why a retailer may face inventory shortages throughout the year, and without something to mitigate that impact you’re going to see a reduction in sales and will lose out on customers. Customers are always sensitive to product availability, especially when they’re purchasing a gift that needs to arrive by a specific date. As many as 70% of consumers say that they simply switch to another retailer or brand when faced with an out-of-stock product. 

Felix Gray

What gift cards are able to do in these situations is to bridge the gap merchants may face and mitigate the impact these inventory issues have on sales and acquisition. Especially when it comes to key holidays throughout the year such as Christmas, Hanukkah, Valentine’s Day and so on, gift cards are an especially attractive alternative for customers. They’ve already put in the effort to research brands and products, if they have their sights set on one of your products, then the desire to give that product as a gift doesn’t just disappear, therefore a gift card is something they’ll likely consider.

#2 - Boosts your customer experience by solving common gifting issues

These days, customers have access to an infinite number of online brands. This is great for consumers, but it does make it more difficult as a merchant to truly stand out against competitors. Competing on price is difficult as it has a knock-on effect on margin and discounting heavily can impact your brand perception, quality of customers, and retention. Tackling competition on product selection requires product development, resources, and cost, and can take a long time to realize. Where you’ll truly see an impact is competing on customer experience. CX is highly influential in customer decision making, and in many cases it trumps both price and product selection - 73% cite experience as an important factor in purchasing decisions.

Magic Spoon

Gift purchasing adds another dimension to customer experience - the audience is different, as are their needs and familiarity with your brand and products. Their purchasing journey looks different to your average customer, and that experience needs to be optimized in the same way as your usual audience. What may seem like really simple, minor details can make a big difference to their experience with your store and whether or not they decide to make a purchase. 

Gift cards are one of those seemingly small details that make an impact on gift buyers. They help to tackle some of the common concerns and issues customers face when they need to purchase a gift. They may not know much about your products or brand, just that the person they’re buying for likes your store or the kind of products you sell. Equally they may not know specific details that are necessary for purchasing a physical product such as clothing size, or they’re unsure what the recipient already owns. Buying gifts is tricky business, and gift cards are a very welcome, easy solution. By having them readily available, you’re already making the experience better for gift buyers. Push that one step further and deliver on the small details that make a gift special - adding gift notes, sending directly to the recipient, picking the date on which the card is sent. All the small details add up, and will give a great experience to both the gift buyer and recipient.  

#3 - Increase cart spend and improve retention rates from gift card recipients

The benefits of gift cards go beyond when the buyer checks out and sends the card - the journey for a gift card extends much further. The process includes not just that initial purchase, but also the journey for the person who receives the gift card and therein lies further opportunity. 

In one survey, 87% of gift card recipients said they are likely to spend more than the value of their gift cards, and US consumers spend an average of $59 above a gift card’s value. The original customer may only ever have planned to spend $20 regardless of if that was on a product or gift card, but the recipient will likely spend much more, turning what could have been a $20 order into a near $80 one. The psychology behind spending a gift card means that while the recipient may only normally spend $30 on a product, they’ll likely spend more when they’re also using a gift card as they see it as an excuse to spend more - 76% of those who have received a gift card say they see it as an excuse to treat themselves. 

Baboon to the Moon

As if improving cart spend wasn’t enough, gift cards are also a great way to improve retention rates. 83% of gift card recipients said they’d received a gift card for a brand they’d previously tried in the past, meaning there’s a strong chance that those receiving your gift cards are already existing customers. Gift cards then act as a sort of retention strategy with a guaranteed purchase, giving you another opportunity to give that customer another great experience and build their loyalty even further.

#4 - Low cost, low maintenance, high reward 

While gift cards still require their own strategy, compared to most other products and functions in your business they’ll be comparatively low maintenance and low cost. Once you have your gift card app correctly installed, all it takes is for some clever site placement and additional marketing throughout the year and it will largely take care of itself. Compare this to regular inventory that requires warehousing, packaging materials, courier services, fulfillment staff, administrative staff and more just to ship a single order. Gift cards require a much lower level of resource, and can be easily incorporated into your existing customer service processes. 

The other side of that low maintenance is the potential for high rewards. If you put in the effort to really strategize and promote your gift cards, you’ll start to see the impact on customer experience, sales, retention, and more. Especially when it comes to those key gifting holidays throughout the year, having that easy, customer experience led gift card option will be something which stands out from your competitors.

“Are gift cards good for my business?” - FAQ

Going over all the benefits of gift cards is of course valuable in helping make decisions over whether or not to install something like Govalo. However, we also understand that there are additional questions and resistances merchants may have when considering a paid gift card app over whatever native functionality is available to them. To help address these more difficult questions, we’re going to go through some of the most common resistances that a merchant may have before committing to installation. 

“How do I know if my business will actually benefit from gift cards?”

The gifting market is a huge chunk of the ecommerce industry, especially around key holidays throughout the year. If your business targets gifting or specific holidays with promotions of any kind, it’ll almost certainly benefit from having a more robust gift card offering. 

We’ve already covered how it can help ease temporary inventory issues, and this is a major consideration if you want to go into key gifting periods with a stronger sales position. If after BFCM your top product sells out and you run into inventory issues ahead of Christmas, then there’s a strong chance you’re going to lose out on sales from gift buyers looking for that top product. With the gift card option there, you stand a better chance of recovering at least some of those sales. If you aren’t currently seeing a particularly good response to your existing gift cards, then it may be because you aren’t delivering the gift card experience your customers are looking for.

However, let's get more specific. We can’t cover every single business and industry in one answer, so if you’re considering installing a gift card app and want to get a better idea of its potential benefit, do some data digging in your own store. Look at sales and new customer acquisition over key gifting periods for your business, as well as your inventory and out-of-stock strategy. If you’re losing customers at these key times due to products being out of stock, then gift cards are a worthwhile investment. Consider also your industry and product category, if gifting is a big part of your sales or is common in your industry, for example baby products or food and drink, then you want to offer even more strong options for gifts. A basic gift card hidden away somewhere in your catalog won’t cut it for those customers looking for a thoughtful gift.

“How long will it take for me to see a return on investing in a gift card app?”

This question is tougher to answer, as seeing a return on your investment in gift cards will be different for every business depending on category and the time of year. If you install closer to the holidays, you’ll likely see a much higher initial pickup in sales than if you install during a low sales period with no gifting holidays. A great example of this is with Shop Lantix, who saw a 400x increase in gift card sales over the holidays. It also depends on the metric you’re looking at - if it’s pure sales figures, then chances are you won’t truly see the impact on hard numbers until your next key gifting holiday. After all, while people buy gift cards throughout the year, you’ll only see that large, noticeable influx of gift related orders when it’s a holiday that involves a high level of gifting such as Christmas. 

Shop Latinx

There are however other metrics that you can also look to in order to gauge the value of having a gift card app installed. One of those metrics is in customer support tickets, which can be a good indicator of customer satisfaction. If prior to installation you received tickets regarding gift cards - not being able to find them, inquiring around the shipment status assuming it’s a physical card, missing features etc - you should monitor support tickets after installation to see if there’s a noticeable reduction in enquiries related to gift cards or gifting in general.

All that being said, it will also depend on the level of effort that you put into promoting your gift cards once the app is implemented. If you only install the app and don’t draw attention to it in some way, there’s a more likely chance that you won’t see as high a return. Customers need to know your gift card exists without any effort to look for them off their own back. No one wants to hunt through your store to find them, as they may not even consider a gift card as an option right away so you need to present it to them in a way that will catch their attention. The more you do to improve visibility of gift cards, the better the return.

In many ways, the return will be instant if you’re looking to improve your customer experience, but if you’re looking for tangible figures, then you should look to your next gifting opportunity. In the run up to that opportunity, promote your gift cards as you would any other product, and appeal to those gift buyers that maybe don’t know what to buy, or are grabbing something last minute. 

“Why can’t I just use Shopify’s native gift card functionality?”

Short answer - you absolutely can, but your gift card will lack a lot of the features customers want.

Investing in a separate app for any part of your store is an investment in improving that particular aspect of your experience. You can offer individual orders only, but installing an app like Recharge will allow you to offer those as subscription products and improve the experience for customers who frequently purchase specific items. You can send emails through Shopify Email, but installing Klaviyo will allow much more nuanced, strategic email marketing and SMS. The same applies with Govalo - you can offer gift cards natively through Shopify, but Govalo will give you the ability to make your gift cards a strategic part of your catalog and add to your customer experience in a way the native app simply can’t. 

The Shopify native gift card functionality is very basic - you can’t add a gift note, you can’t schedule it to send on a specific date, you can’t even send the gift card directly to the recipient. In fact, that lack of features is one of the big motivators we see come up frequently with merchants who have made the switch to Govalo. Gifting by its very nature is personal, and the gift buying experience should feel personal even if they’re sending a gift card and not a physical product. Having these additional features allow customers to personalize their gift cards and make it that much more special for the recipient.

Magnetic Me

Beyond the customer experience, there are also features which make it easier to strategically place your gift cards throughout your site. One example is through Govalo’s out-of-stock feature which will automatically display the option to buy a gift card if a variant is out of stock. Having a separate app to handle your gift cards makes it that much easier to strategize something which should be a major element on your store, especially around key sales periods.

“Aren’t gift cards more popular during the holidays? What do I do for the rest of the year?”

While gift cards certainly sell in higher volumes during the end of year holidays, they’re something which customers look for year-round. The increase in sales you likely see for gift cards during the holiday season can skew perspective on their value throughout the rest of the year. However, consider other products in your catalog - they also sell more during the holiday season, but you wouldn’t query their place on your store throughout the year. Depending on the product, they may also sell better seasonally, for example bathing suits and trunks may sell better in summer months but that doesn’t mean customers won’t still buy them year-round, just in lower volumes.

People buy gifts no matter the month or time of year, whether that’s for other gifting holidays like Valentine’s Day, occasions like birthdays, or even “just because”. That variety of reasons means it’s going to come down to awareness, placement within your store, and promotion. If you treat gift cards like any other product in your store with proper promotion and visibility, your gift buying audience will treat them similarly.

If you want some more information on how to promote gift cards year-round, check out this blog post.

Customers have so many options available to them online, and especially when they’re looking for gifts the little details matter. Ultimately they may not go for who has the best price or even products, but for who provides the best experience. More often than not, they’re buying from brands they know their recipient loves, and if that’s your store you want to do as much as possible to ensure that gift buyer has a great experience and makes a purchase. Gift cards are just another way for merchants to add value to that experience, and give more much needed attention to a growing audience of gift buyers looking for gift cards. With time, attention, and resources to properly develop gift cards as part of your store, you’ll see a strong return on your investment in a gift card app.

Want to join brands like Baboon to the Moon, Magic Spoon, Shop Latinx and Felix Gray in building a better gifting experience? Click here to learn more, and click here to get in touch with our team.
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