In Depth

Getting Online With Digital Gift Cards

Gift cards — particularly in digital form — certainly aren’t waning in consumer popularity. The fact that retailers aren’t paying a commensurate amount of attention to the digital gift card experience is, in the words of Steve Rowen, managing partner at Retail Systems Research (RSR), “a real missed opportunity."

Rowen is the co-author (along with RSR managing partner Nikki Baird) of the company’s digital gifting benchmark study, “Digital Gift Cards: A Key Indicator of Omni-Channel Alignment,” released earlier this month. The study evaluated how effectively — or not so effectively — 100 top retailers were utilizing gift cards, and came away with some key insights that could help merchants of any size improve their ability to take advantage of the massive opportunity.

As he shared in a conversation with PYMNTS, Rowen found that the core characteristic of retailers who scored highest in the RSR analysis is simply that they prioritize gift cards. Companies like Home Depot and Sephora put digital gift cards top-of-mind and continually evaluate their consumers’ experience with them…while the same cannot be said for others — some of whom are powerful retailers.

Powerful or otherwise, any retailer that doesn’t prioritize digital gift cards is, in Rowen’s words, “leaving money on the table.” Such a description is as close to literal as possible in the very common instances when purchased gift cards go unredeemed.

Rowen recommends three key “checkboxes” for retailers to meet in building their digital gift card experience and differentiating themselves:

1. Make the card easy to find in any format — desktop or mobile.
2. Make sure that the buyer has the ability to set a low-cost denomination for the card.
3. Make the card customizable, incorporating options to add a photo, or a video or audio clip.

What’s causing retailers to lag in the digital gift card space? Rowen points to the difficulty of managing omnichannel as a potential obstacle.

With consumers shopping across mobile phone, tablet and desktop, “there’s just so much pulling retailers in so many different directions,” says Rowen, “that I think a lot of them have not even the proper mindshare to what an opportunity digital gift cards really are."

In the case of many retailers that RSR analyzed, Rowen found that digital gift cards “would look really great in one channel, and really poor in another.”

“That’s a surefire indicator,” he observes, “that someone’s left hand doesn’t know what their right hand is doing.”

Even among retailers that did prioritize digital gift cards, Rowen was “stunned” by how many — given the amount of real estate dedicated to them on their home page — were unable to deliver.

Compared to a lack of prioritization, Rowen remarks that “it’s almost a bigger loss [for a retailer] to have gone through 95 percent of the work of making [digital gift cards] an attractive process,” — even getting the email address, confirmation and purchase right — and still failing to get the gift card into the (virtual) hands of the recipient.

As Rowen attests, retailers have always had one of three ways to differentiate themselves from their competitors: price, product, and service.

He views price as “kind of a foregone conclusion at this point,” with very few physical retailers being able to compete with the likes of Walmart, and very few digital retailers being able to compete with Amazon, in that regard. By a similar token, Rowen feels that product has become ubiquitous, as consumers today can buy a wide variety of things in a wide variety of places that they couldn’t just a few years ago.

That leaves service as the aspect that offers retailers the strongest opportunity for differentiation. And gift cards, says Rowen, “are one the purest, most fundamental building blocks to a service model."

As important as any aspect of the digital gift card experience is to make it clean, Rowen puts forth.

He has observed that a lot of retailers still treat a digital gift card checkout the way they would checkout for a physical piece of merchandise: “You add it to a cart, then you go into the cart, and then you’re asked to choose a shipping method — which is totally irrelevant."

In addition to removing those unnecessary obstacles, Rowen adds that retailers seeking to “really push the envelope” might want to incorporate notification of digital gift cards into social networks. Digital gift cards are a social experience, after all, yet Rowen has observed that there are “only a couple of retailers that had anything to with social media” — including delivery via text message.

A retailer who can meet those deliverables — as well as making the receiving of a digital gift card a “wow” experience for the recipient — Rowen believes would be well on its way to being “leaps and bounds” ahead of the competition.

That goes double, he asserts, for smaller retailers.

"Just because [a retailer is] small doesn’t mean that [it’s] lost the ability to innovate,” he goes on to say. “In a lot of cases, the smallest guys can be the most innovative. They can use the nimbleness that they have to change a little bit quicker.” While it’s very difficult to turn around a large enterprise on a dime, for a smaller retailer operating mostly online, or with a couple of stores, digital gift cards become “a huge opportunity."

"As technology sort of flattens out the world and bigger retailers are able to enact a lot of these more creative, design-focused, customer-centric, streamlined experiences easier across their huge enterprises, that sort of advantage that the small-to-mid-sized retailer has right now of doing…new and exciting things” — and doing them first — goes away, concludes Rowen.

“The window of opportunity is sort of closing for the small- and mid-sized retailer to differentiate themselves based on their ability to try new things and try them quickly.”

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