Gift Card Purchase & Redemption Trends

The rich gift transaction data collected in the Ernex database over the past years allow us to now shed even more light on what's been going on, and likely to continue. We looked closely at differences between 2005 and 2006 for this article, specifically, gift card purchases and redemptions across all our clients. Of course, the information we quote below is consolidated and, as a result, suggests "typical" performance. It does not in any way depict the actual performance of any single client.

Gift Card Purchase Trends

Not surprisingly, according to our records, December is the busiest month for purchases of gift cards. The five busiest gift card purchasing days of the year are all in December for both 2005 and 2006, with the week leading up to December 25th being the busiest week of the year in both years.

But if we exclude the typical December data from our graph and look closer at the rest of the year other interesting trends emerge. While there is still an obvious ramp-up in gift card sales in October and November in both years, the second quarter in both years (April - June) is the second strongest quarter of gift card activations.

This leads us to a couple of obvious conclusions for merchants:

One, Gift card sales have increased dramatically year over year, and this trend will likely continue on. You are probably missing great opportunities if you don't have a Gift card program. This data is also telling us that any time of the year is a great time to launch a gift card program. There is no need to wait the fourth quarter peak, you're likely to start selling them right away!

Two, although it is unlikely that the peak in fourth quarter sales will change, Gift cards are becoming more of an "everyday" sale item. Those merchants with Gift card programs need to make sure they maintain appropriate card inventories throughout the year, especially before the fourth quarter kicks in.

Gift Card Redemption Trends

December is also the busiest month for redemptions of gift cards. However, it is the days after December 25th that are the biggest contributor, with a high redemption rate driven by consumers who received gift cards for the holiday season. Most research has shown that a large portion of gift cards are redeemed within three to six months of initial purchase, and our data also substantiates this.

Again, if we remove the December peak, and look closer at the rest of the year, January continues to stand out as the next highest gift card redemption month. In 2006, this is even more pronounced and continues to support the effect gift cards have in shifting retail sales into January.

Conclusion

As a merchant selling products or services to consumers, whether you are a restaurateur or retailer, it is difficult to argue the fact that gift cards have become a mainstream product you can't afford to be without. You cannot be "out-of-stock" in December, or the months leading up to it, as it can have a serious impact on your gift card sales volume.

Don't already have a gift card program? No need to wait to the end of the year to get one, do it now and our customers' experience suggests you will start selling them right away!

From a redemption perspective, merchants should provide ample inventory for redemptions from December 26th onward through January, and expect a fairly consistent redemption level through the first six months of the year.