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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
1) ThegiftcardindustryachievedaCAGRof6.1%overthepastsixyears,surpassingthegrowthrateofapproximately3%–4%fortheretailindustryoverall.
2) Retailersgenerateadditionalsalesfromgiftcardsbeyondthefacevalueofthecards,asrecipientsspendanadditional38%,onaverage,whenredeeminggiftscards.Giftcardredemptionsoftendrivetraffictostoresandshoppingcenters.AccordingtoanInternationalCouncilofShoppingCenters(ICSC)survey,77%ofgiftcardrecipientsplannedtoredeemthegiftcardstheyreceivedduringthe2015holidayseasoninwholeorinpartatphysicalstores.
3) Thegiftcardresalemarketisestimatedtobeworth$1billion,andanumberofwebsitesspecializeingiftcardresale,whileothers—suchasCardpool,GiftCardGrannyandRaise—serveasgiftcardexchanges.
Gift Cards: An Opportunity for
Retailers to Generate
Incremental Sales Through Higher
Traffic
Deborah Weinswig
Managing Director,
Fung Global Retail & Technology
US: 646.839.7017
HK: 852.6119.1779
CN: 86.186.1420.3016
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
GiftCardIndustryOverviewThegiftcardindustryachievedaCAGRof6.1%overthepastsixyears,surpassingthe3%–4%rateachievedbytheretailindustryoverall.In2015,theUSgenerated$129.7billioningiftcardtransactions,up6.3%yearoveryear.Thesalesfigureisontracktoreach$138billionin2016,accordingtoresearchconsultancyCEBTowerGroup.Closed-loopgiftcards,whichcanberedeemedonlyatdesignatedmerchants,accountforthemajorityofthemarket.
Figure1.USGiftCardIndustry:TotalSales(LeftAxis,USDBil.)andGrowthRate(RightAxis,%)
Source:CEBTowerGroup
Figure2.US:HolidaySeasonGiftCardSales(USDBil.)
Source:NationalRetailFederation/ProsperInsights&Analytics
99110 118 124 130 138
149160
0%
2%
4%
6%
8%
10%
12%
$0
$40
$80
$120
$160
$200
2011 2012 2013 2014 2015 2016E 2017E 2018E
TotalGibCardIndustrySize GrowthRate
$0
$5
$10
$15
$20
$25
$30
$35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E
In2015,theUSgenerated$129.7billioningiftcardtransactions,up6.3%yearoveryear.Thesalesfigureisontracktoreach$138billionin2016.
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
GiftCardsDriveSalesandTrafficforRetailersRetailersgenerateadditionalsalesfromgiftcardsbeyondthefacevalueofthecards.Onaverage,recipientsspend38%morethanagiftcard’sfacevaluewhenredeemingacard.Millennialsaremorelikelytopurchaseadditionalitemsthanotheragegroupsare:accordingtotheICSC,64%ofmillennialspickupadditionalitemseitherin-storeoronlinewhenredeemingagiftcard.
Themostcommonlypurchasedgiftcardsrangeinvaluefrom$21to$50.Whenrecipientsredeemagiftcardatadepartmentstoreorrestaurant,theytendtospendmorethanthecard’svalueinordertocoverthefullpurchase.
Giftcardredemptionsoftendrivetraffictostoresandshoppingcenters.AccordingtoanICSCsurvey,77%ofgiftcardrecipientsplannedtoredeemthegiftcardstheyreceivedduringthe2015holidayseasoninwholeorinpartatphysicalstores.Whenredeeminggiftcardsonline,31%ofrecipientschoosetopickuptheirpurchasein-storeaccordingtothesamesurvey.Evenunwantedgiftscardscandrivetraffictostores,asretailerssuchasGameStopandTargethavedesignatedkioskswhererecipientscancashouttheirunwantedcards.
RobustGiftCardResaleMarketItisestimatedthat$1billionworthgiftcardsgounused,andthishasresultedinanactivesecondarymarketforthecardsintheUS.ThereareanumberofwebsitesthatspecializeingiftcardresaleaswellassitessuchasCardpool,GiftCardGrannyandRaisethatserveasexchanges.Thesemarketplacesallowsellerstoexchangeunwantedgiftcardsforcash.Inthebestcases,sellerscanget$0.80–$0.90perdollarofgiftcardvalue,dependingonthedemandforthecard.
Figure3.SelectedGiftCardExchanges:AverageBuyerDiscountforSelectedRetailers’GiftCards
HomeDepot Walmart Starbucks Amazon Target
Raise 6.4% 4.0% 2.3% 1.0% 2.6%
CardHub 3.6% 1.8% 5.0% 1.4% 2.4%
CardCash 5.0% 2.5% 5.2% N/A 1.7%
AsofDecember9,2016Source:Companywebsites/FungGlobalRetail&Technology
Giftcardredemptionsoftendrivetraffictostoresandshoppingcenters.Giftcardredemptionsoftendrivetraffictostoresandshoppingcenters.AccordingtoanICSCsurvey,77%ofgiftcardrecipientsplannedtoredeemthegiftcardstheyreceivedduringthe2015holidayseasoninwholeorinpartatphysicalstores.
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
Figure4.CompanyGiftCardswiththeHighestResaleValue
Rank Company AverageResellValueper$100GiftCard
1 Nike $93.66
2 Walmart $83.94
3 BestBuy $83.12
4 Safeway $83.04
5 Costco $82.67
6 Target $81.88
7 Shell $81.87
8 Netflix $81.75
9 AppleStore $81.67
10 Ticketmaster $81.31
Average $83.49
Source:WalletHub
StartupsDriveInnovationintheGiftCardMarketAnumberofstartupsaretryingtoimprovethegiftingexperiencebymakinge-giftingpersonal,convenientandsocial.
LoopCommercehasestablishedpartnershipswithmajorretailerssuchasMacy’s,NeimanMarcus,SaksFifthAvenueandCoach.LoopCommercecreatedanalternativecheckouttechnologythatenablesshopperstoe-giftanitem(notjustacard)fromaretailer’sonlineproductselection.Itallowstherecipienttoeditthecolorandsizeofthatitembeforethegiftisshipped.Therecipientcanalsochoosetoexchangetheitembeforeitships.RoyErez,CofounderandCEOofLoopCommerce,notesthatmanyconsumersfeele-giftingisanimpersonalformofgivingthatdoesnoteffectivelycommunicatethethoughtandeffortthatwentintochoosingagift.LoopCommerceprovidesamorepersonale-giftalternativethatallowssenderstopickagiftfortherecipientwhilestillgivingtherecipientsomeflexibilitytofinalizethedetailsofthegift.
CashStarisanemergingB2Bmobilewalletsolutionthatintegratesandmanagese-giftcardsindigitalwalletssuchasApple’sPassbookandAndroidPay.CashStarworkswithmorethan300globalretailcompaniestoprovideaturnkeye-giftcardsolutionthatmakesiteasyforretailerstolaunchandoptimizetheirgiftcardofferings.OneofCashStar’srestaurantclients,Landry’s,sawasalesliftof33%initsonlinegiftcardsafterCashStarimprovedtheredemptionexperiencewithdigitalwallets.
CashStarisalsopartneringwithNordstromtolaunchapersonale-giftingservice.CustomerscanselectaproductasagiftfromNordstrom’ssiteandsendthegiftviaemail.Theemailincludesapersonalnotefromthegiverandarequestthattherecipientprovidedetailssuchassize,colorandshippingaddress.Iftherecipientdoesnotlikethegift,heorshecanexchangeitforadigitalgiftcardwithoutnotifyingthesender.
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
Giftlyisastartupthatmakestheexperienceofgivingopen-loopgiftcards(suchasVisaandAmericanExpresscards)morepersonalbyallowingthegivertosuggestplacesfortherecipienttousethecard;giverscansendapersonalsuggestionbasedontherecipient’slocation.Giftlyalsoenablesthegivertocustomizethegiftcarddesignusingoneofthehundredsoftemplatesprovidedonthewebsite.Intermsofdelivery,giftgivershavetheoptionofsendingthecardviaemail,textmessageorregularmail.
piSocietyisane-giftingwebsitethatallowsrecipientstochoosetheirowngiftcardsfromanextensivelistofmerchantsbasedonapointsexchangesystem.Participatingmerchantsrangefromrestaurantstosellersofhomecategories,toysandwomen’sapparel.Insteadofsendingagiftcardfromadesignatedmerchant,giftgiverssend“pipoints,”whichrecipientscanredeemforgiftcardsoftheirchoiceonpiSociety’ssite.Bothgiversandrecipientsarerewardedforpurchaseandredemptionactivities.Thesitealsoprovidesadigitalwalletthatcustomerscanusetomanagetheirgiftcards.
Giftcardmanagementandredemptionisanotherareathatstartupsarelookingtodisrupt.Eachyear,alargenumberofgiftcardsarelost,neverredeemedorleftwithsmallbalances.Onaverage,about6%–10%ofgiftcardsareneverredeemed.Americanhouseholdshaveanaverageof$300inunspentgiftcards,accordingtoaBlackhawkNetworksurvey.In2015,anestimated$1billionworthofgiftcardswentunused,downfrom$6.9billionin2008,accordingtoCEBTowerGroup.Thesharpdeclinewasdriveninpartbyfederallegislationdesignedtolimitshortexpirationperiodsonthecards.
Giftcardsdonotrepresentlocked-inrevenueforretailers,asgiftcardrevenuecannotberecognizeduntilagoodorserviceisprovided.Retailershavetoconsiderunusedgiftcardsanunearnedrevenueliabilityuntilthecardsareredeemed.Initsfiscal2015year,Starbucksrecognized$39millioningiftcardbreakage.
CoinstarExchangeisaninstantgiftcardexchangesitethatenablescustomerstoexchangetheirunwantedgiftcardsforcash.Coinstarwillmakeanofferand,ifthecustomeracceptsit,thecustomercanprintavoucheroffthewebsiteandtakeittotheissuingstore’scustomerservicedepartmenttoexchangeforcash.Thewebsiteacceptsgiftcardsfrommorethan150storesandrestaurants.
CentzislookingtosolvetheunusedgiftcardproblemintheUSbygivingconsumerstheoptiontocombinethebalancesfromunusedgiftcardsintoonelumpsumaccountwithCentz,denominatedinadigitalcurrencycalledCentzGoldBucks.UserscanthenuseGoldBuckstopurchasenewgiftcards.Thestartupisalsodevelopingadigitalwalletforuserstostoretheirdigitalgiftcardcredit.Thecompany’spatent-pendingtechnologyincludesatightsecuritysystemdesignedtopreventgiftcardfraud.
Raiseisanonlinepeer-to-peergiftcardmarketplacethatmakesresellingunwantedgiftcardseasier.Itsvisionistoallowgiftcardsellerstogetatleast$0.85backonthedollar,whichisinthehigherrangeofgiftcardresalevalue.Thesiteisnowprocessingtensofthousandsoftransactionseverydayandwasatop-ratedgiftcardresaledestinationin2016.Raise’ssitetraffichasexplodedinthepasttwoyears.AccordingtocomScore,thesitehad5.2millionuniquevisitorsinNovember2015,morethanfourtimesthe
Giftcardmanagementandredemptionisanotherareathatstartupsarelookingtodisrupt.
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
numberofvisitorsseenbypeerssuchasGiftCards.com,CardCash.comandCardpool.
GiftingFunctionsAreBeingAddedinMobileWalletsTraditionalwaysofe-giftingviaemailarebeingreplacedbymoreconvenientmobile-giftingoptions.Thetrendisdrivenbynewandimprovedgiftingfunctionsthatdifferentmobilewalletsareexperimentingwithinordertointegrategiftingfunctionalitieswithmobileapps.Sendingelectronicgiftsviamobilewalletmakesitseamlessforrecipientstomanageandspendthegiftcardstheyreceive.
PayPalhaspartneredwiththeNewYork–baseddesignerJonathanAdlertocreatepersonalizeddigitalholidaygiftcardsforPayPalcustomers.Giftgiversareabletoaddpersonalizeddesignelementstoagiftcard,makingthegiftmorethoughtfulandpersonal.
AndroidPayhasdevelopedagiftcardmanagementfunctionthatenablescustomerstosaveandspendalltheirdigitalgiftcardsseamlessly.
ApplePayislookingtoupgradeitsloyaltyprogramsthroughapartnershipwithBlackhawkNetwork.Thispartnershipwillenablecustomerstostoreandmanagetheirgiftcards,andmakepaymentswiththem,viaApplePay.
SocialGiftingMakesGivingGiftCardsMoreFunRetailersandsocialmediaappsaroundtheworldareworkingtogethertoconvertthelargenumberofactiveusersonsocialmediaplatformsintoconsumersandgiftgivers.Starbucksisaleaderinusingsocialmediafore-gifting.ThecompanyjustannouncedapartnershipwithWeChatthatenablesWeChatusersinChinatosendStarbucksdrinkswithapersonalizedmessageviatheplatform.ThecompanyaimstobecomethetopdigitallygiftedbrandinChina.In2011,Starbucksrolledoutane-giftingservicethatallowedcustomerstosendgiftcardsviaemail,Facebook,theStarbucksmobileapporregularmail.In2013,thecompanyintroducedabetatestof@TweetACoffee,wherebyuserswithlinkedaccountscouldsenda$5e-giftviaTwitter.Theprogramranforthreemonths,and27,000peoplesignedup,generatingsalesof$180,000.
Social-giftingappWhiloallowsuserstoadditemstotheirwishlistswhilebrowsingrecenttrends.Usersconnectwiththeirfriendsandfamilywithintheapptosharetheirwishlistsandsolicitgifts.Theappalsosendsoutremindersforimportantgiftingoccasionssuchasbirthdaysandanniversaries.
Differentmobilewalletsareexperimentingwithnewandimprovedgiftingfunctions,drivinggrowthinmobilegifting.
Retailersandsocialmediaplatformsaroundtheworldareworkingtogethertoconvertthelargenumberofactiveusersonsocialmediaplatformsintoconsumersandgiftgivers.
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
TheMostPopularRetailGiftCardsOfferaWideSelectionofProductsManyconsumerspreferretailgiftcardsfromonlinemarketplacessuchasAmazonandbig-boxmerchantssuchasWalmartandTargetbecausetheyofferawidearrayofproducts.Giftcardsfrombig-boxretailersalsotendtomaintainhigherresalevalueduetohigherdemand.AccordingtoWalletHub,a$100giftcardfromapopularmerchantsuchasWalmartcangenerate$83.12inresalevalueversus$61.17onaverageforacardfromForever21.
Figure5.MostPopularGiftCards:2016vs.2015
2016 20151 Amazon Visa
2 Visa Amazon
3 iTunes AmericanExpress
4 AmericanExpress iTunes
5 Walmart Walmart
6 Target Target
7 Starbucks Starbucks
8 GooglePlay Netflix
9 Netflix eBay
10 eBay GooglePlaySource:WalletHub
AccordingtoWalletHub,a$100giftcardfromapopularmerchantsuchasWalmartcangenerate$83.12inresalevalueversus$61.17onaverageforacardfromForever21.
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December21,2016
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJingWangResearchAssociate
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