Why gift cards are growing in popularity

In days gone by, gift cards weren’t always the most exciting thing to receive as a present. Retailers wouldn’t really focus on them - they’d rather sell products. Customers would turn to them as a last resort. Today, the perception of gift cards has changed, and sales are growing at a rate faster than most analysts had predicted.

So what’s behind the surge in popularity?

Looking into the gift card sales boom

The global prepaid card market surpassed $2 trillion in 2020, according to Global Industry Analysts, thanks to gains in gift cards. With this accelerated growth, they also expect the market to top $4.1 trillion by 2027, 50% higher than their pre-pandemic estimate. Therein lies one of the reasons behind recent gift card sales growth - the Covid19 pandemic. 

Throughout 2020, the number of digital gift cards U.S. retailers sold in November 2020 increased 25% year over year and increased 106% YOY in December 2020. Seasonal spikes in gift card sales are expected, but compared to 2019 figures these increases are far beyond average gift card market growth. During the height of the pandemic in 2020, people shopped in-store far less and therefore gift cards became the preferable option. They also increased in popularity as employee gifts and incentives, with studies showing employees preferred gift cards over other incentives. Moreover, shortages became more common due to increased supply chain pressure as a result of global pandemic rules and restrictions and therefore customers turned to gift cards as an alternative.

Speaking of supply chain, that’s also an issue that we’re currently facing in 2021 with ports being congested, labor shortages worsening, and businesses along with their customers left to face the consequences. When inventory becomes an issue, gift cards are seen as a desirable and viable alternative. Customers have a gift from a brand they want, and businesses don’t lose sales due to circumstances beyond their control. Many experts have weighed in on the issue, citing gift cards as a smart option for businesses to mitigate the impact of supply chain problems. 

All of these factors combined have seen the fast adoption of gift cards by large retailers and companies, looking to get in on the gift card boom. Airbnb recently announced their own gift card, and traditionally cash-only retailers such as Aldi in the UK have also started selling gift cards in the face of seasonal supply issues. Gift guides from large publications are also now recommending people spend their holiday cash on gift cards. 

Why customers are driving gift card sales

So gift cards are great for businesses, but we also want to understand why customers are purchasing them in record numbers. After all, they’re the reason why sales are growing so rapidly.

Perceptions around gift cards have changed

The growth in sales for gift cards reflects a very clear change in perception with customers over the value and sentiment of giving gift cards. We’ve mentioned already how employers use gift cards as incentives, and this perception of cards as rewards and something to strive for has definitely contributed to how employees then see them in their personal lives. Add to this the Covid19 pandemic, where gift cards served as a way for estranged friends and family to give gifts throughout varying lockdown restrictions. In the run up to the 2020 holiday season, they also eased consumer worry over supply chain issues. 

What this means now is that it’s no longer seen as a “lazy” idea to give someone a gift card, in fact the tables have turned and it’s seen as more crass to give cash instead of a gift card

Popular with customers of all ages

Particularly in recent years, gift cards have grown in popularity with Gen Z and Millennials. In one survey, 72% of millennials said they’ve used digital gift cards recently, and 39% along with 41% of Gen Z said they buy one at least once every 3 months for various reasons. If we look to older generations, 60% of Baby Boomers indicate that they’d prefer to receive gift cards as gifts. They provide customers with convenient gifts they can purchase quickly, and can guarantee with relative confidence that the recipient will like the gift.

Solve customer problems; picky recipients, uncertain buyers, last-minute

The last point leads us into a key point of why customers like gift cards - they solve problems. There are a number of reasons why purchasing a gift card solve issues customers face in the purchasing process:

  • Shipping concerns - Especially during times of supply chain uncertainty, customers become increasingly worried about gifts arriving in time. 38% say they’re worried about gifts arriving late for the holidays. Gift cards are not only easy, but they’re instant and don’t require a delivery lead time.

  • “Picky” gift recipients - Everyone worries about buying the “right” gift. Especially if a customer is unfamiliar with someone’s interests, or not sure what specific product to buy, a gift card can be a way to show they care about the recipients interests without the pressure of picking a product.

  • Last-minute gifts - If for whatever reason a customer needs to purchase something last-minute, gift cards are there to save the day. During the holidays, 44% of last-minute shoppers say they buy gift cards.

  • Out-of-stock products - Hitting an out-of-stock can be disappointing, especially if the customer had their sights set on a specific product. Having a gift card option when a product is out of stock gives customers a great alternative.

By having gift cards as an option, merchants can improve their customer experience by solving real problems their customers have.


As consumers are given more reason to trust and purchase gift cards, the market will continue to grow and thrive. Gift cards are now not just a “nice to have” on an online store, but a viable and necessary strategic tool merchants can take advantage of.

Back to blog