Gift card programs have become a go-to gift for just about any occasion, whether it’s a birthday, holiday, or a simple “thank you.” They’re not just a convenient way to give—gift cards have been woven into the fabric of how we shop, making it easy for people to give something both practical and personal.
However, behind these prepaid gems lies a rapidly growing market with evolving trends and significant benefits for businesses. From boosting customer loyalty to attracting new shoppers, gift card programs offer a strategic advantage for companies of all sizes.
In this post, we’ll dive into the world of the gift card market, look at the different types available, and explore how businesses can leverage these programs to drive growth. Ready to learn how gift cards can be a game-changer for your business? Let’s start now!
Gift Cards in Numbers: A Growing Market in the U.S.
Gift cards have established themselves as a powerful tool for businesses, and the numbers back it up. According to Data Bridge Market Research, the U.S. gift card market was worth a whopping $304.58 billion in 2023 and is expected to skyrocket to $787.07 billion by 2031, with an impressive annual growth rate of 12.6%. That’s not just a trend—it’s a revolution in how consumers shop and businesses drive sales.
Moreover, gift card programs have become a natural part of everyday life in the U.S. Take Target, for example. In their 2023 earnings report, they revealed $7 billion in gift card sales alone. Amazon is no stranger to this success either, with gift cards making up about 5% of their total revenue in the same year.
This surge is being fueled largely by Millennials and Gen Z, who are all about convenience and digital options. Millennials, in particular, make up 37% of all gift card market purchases, and 75% of them prefer digital cards over physical ones.
But the benefits don’t stop at the sale. Gift cards often lead to higher in-store spending. Research from First Data shows that 37% of consumers spend more than the card’s value, giving retailers an extra revenue boost. This “gift card premium” means bigger baskets and even more potential profits for businesses.
How can gift cards increase customer retention?
Due to unmatched convenience and flexibility, gift cards have become a dominant force in the retail and e-commerce space. Several factors fuel this, such as:
- Consumer Acceptance: With 70% of Americans having purchased a gift card and 91% enjoying it, gift cards are deeply embedded in consumer habits.
- Convenience: They provide a hassle-free option for busy shoppers, making them ideal for those in need of a quick, thoughtful gift.
- Personalization: Unlike generic gifts, gift cards allow recipients to choose exactly what they want, adding a personal touch.
- E-Gift Cards: Digital cards offer instant delivery and easy integration with online platforms, making them especially popular with younger generations. Actually, e-gift cards market is expected to surpass $60 billion by 2024.
Notably, 30% of annual gift card sales occur in December, driven by Christmas shopping. Another 20% happens in November, as consumers take advantage of Black Friday and Cyber Monday deals. This seasonal surge underscores the gift card’s role in holiday traditions, particularly as more shoppers embrace the flexibility and ease of gifting cards.
Gift Cards Success Across Industries
Many industries have embraced gift card programs, recognizing their potential to bring in new customers while keeping loyal ones engaged. Here’s how gift cards are making an impact in different sectors, with real-life examples:
- Retail: Brick-and-mortar stores and online retailers have seen great success with gift cards. Take Walmart, for example. Their gift card program drives significant foot traffic, especially during the holiday season. Similarly, online giants like Amazon make it incredibly easy for customers to send digital gift cards, turning every occasion into an opportunity for future spending.
- Restaurants: Fast-food chains like Starbucks have turned gift cards in restaurants into a cornerstone of their customer loyalty strategies. Their app-based card program encourages repeat visits, offering rewards for regular use. On the fine dining side, The Cheesecake Factory has seen larger group bookings and return visits, thanks to their popular gift card options.
- Travel and Hospitality: Hotels and airlines are no strangers to gift card success. Marriott offers gift cards that can be redeemed at their hotels worldwide. Similarly, Delta Airlines provides them, allowing customers to gift future travel.
- Gaming and Entertainment: The gaming industry thrives on gift cards. For example, PlayStation Network gift cards allow users to purchase games, in-game currency, and subscriptions, locking in future spending and deepening user engagement.
- E-commerce: Online retailers are at the forefront of e-gift card innovation. Companies like Etsy provide digital gift cards used by thousands of small businesses on their platform. The entire transaction—from purchase to redemption—happens online, offering consumers a seamless, convenient experience while driving more sales for sellers.
These examples highlight how industries across the board use gift cards effectively in their embedded finance strategies, not just as a sales tool, but as a powerful way to boost customer loyalty and long-term growth.
Types of Gift Card Programs
Gift cards generally fall into two categories: closed-loop vs open-loop, and physical vs digital (e-gift card) ones. Understanding the difference is key for businesses looking to enhance their offerings and customer retention.
Closed-Loop and Open-Loop
- Closed-loop gift cards are specific to one retailer or brand, like Starbucks or Target. They’re great for fostering brand loyalty and driving traffic to a particular business.
- Open-loop gift cards, on the other hand, are a type of prepaid card that can be used at a wide range of locations, rather than being restricted to a specific store or brand. Major payment networks such as Visa, Mastercard, or American Express typically associate these cards.
When you compare open-loop gift cards with closed-loop ones, open-loop cards are more attractive. They aren’t limited to a single retailer or chain like Amazon gift cards.
Since open-loop cards are part of broader networks, you can use them almost anywhere that accepts the network, whether in retail stores, online marketplaces, or even restaurants. In many cases, they can even be used internationally.
Physical Gift Cards: The Impact on In-Store Purchases
Physical gift cards, often found at checkout counters, remain a popular choice, particularly for in-store purchases. Many people appreciate having a tangible item to present as a gift, making them ideal for face-to-face exchanges.
Benefits:
- Tangible and Personal: Physical gift cards provide a more personal touch for in-person gifting.
- Branding Opportunities: Custom designs and packaging can significantly enhance brand visibility. A well-designed physical gift card can serve as a powerful marketing tool.
- Impulse Purchases: Recipients often spend more than the card’s value, with 61% of consumers spending more than the gift card’s value when redeeming.
E-Gift Cards Leading the Market
Digital gift cards (E-Gift Cards) are delivered via email or text and can be redeemed online or in stores. They’re perfect for last-minute shoppers or people buying gifts from afar. In fact, E-Gift Cards now make up 48% of total gift card spending, outpacing their physical counterparts. Here’s why they’re becoming so popular:
- Personalization at its Best: E-Gift Cards offer a personal touch. You can add thoughtful messages, images, or even videos, turning a simple gift into something meaningful and unique.
- Top-Notch Security: With advanced encryption, E-Gift Cards provide peace of mind, protecting against fraud and unauthorized use. You can gift confidently, knowing your card is secure.
- Seamless Mobile Integration: Thanks to mobile wallets, it’s never been easier to buy, store, and redeem E-Gift Cards. They’re right at your fingertips, anytime, anywhere.
- Growing Digital Payment Use: As more people get comfortable with digital payments, the popularity of E-Gift Cards continues to rise. They’re a natural fit in today’s tech-savvy world.
With the increasing role of smartphones and smarter embedded payment systems, it’s no surprise that digital gift cards are taking center stage. Nowadays, you can store, track, and spend gift cards all from your device, making gifting easier than ever.
By incorporating gift card options into mobile apps, online stores, and digital platforms, the shopping experience becomes more convenient and enjoyable for everyone.
Gift Cards and Loyalty Programs: A Perfect Match
Gift cards and loyalty programs are a natural pairing, creating a win-win for businesses and customers alike. When combined, they form a powerful tool for boosting customer retention and driving sales. Here’s how businesses can make the most of this dynamic duo:
- Rewarding Loyal Customers: Offering gift cards as rewards for earning points in a loyalty program encourages customers to return more often and spend more consistently. It’s a simple way to show appreciation and keep them engaged.
- Attracting New Customers: Gift cards aren’t just for loyal customers—they can also bring in new ones. When recipients join the loyalty program to redeem their gift cards, they’re more likely to start earning rewards, leading to greater engagement.
- Cross-Promotion Opportunities: Loyalty programs can be an excellent platform for promoting gift cards, especially during peak seasons like the holidays or back-to-school time. This incentivizes both gift card purchases and ongoing customer loyalty.
With these two strategies, businesses can not only reward their current customers but also expand their customer base and increase brand loyalty in a highly effective way. Overall, it is a smart and sustainable way to grow.
Building a Winning Gift Card Program: Additional Tips
The gift card industry is evolving rapidly, driven by the rise of digital payments, the expansion of e-commerce, and changing consumer preferences. Gift cards are now a strategic tool for boosting sales, enhancing brand loyalty, and attracting new customers.
To create a successful gift card program, businesses should focus on these key elements:
- Ease of Use: Simplify the process for customers to purchase, send, and redeem gift cards. A user-friendly experience will encourage more frequent use and positive customer interactions.
- Security: Implement robust security measures to prevent fraud and ensure accurate balance tracking. Secure technology helps protect your customers and maintains the integrity of your program.
- Integration: Ensure your gift card program integrates seamlessly with existing POS systems and e-commerce platforms. This integration provides a smooth experience for both your team and your customers.
With the right approach and the right technology, businesses can unlock the full potential of their gift card programs, driving growth and profitability in today’s fast-paced, digital-first marketplace. This is where having the perfect fit POS Software is crucial.
Modern POS Systems Boosting Your Customer Retention Strategies
In today’s competitive market, cloud-based POS systems are essential for customer retention. These advanced tools streamline transactions by integrating digital payment methods like PayPal and gift card acceptance. Additionally, modern POS integrates loyalty programs, digital wallets, online ordering, and marketing tools.
But at iPos, we’ve taken it a step further. Our all-in-one POS solution offers a unique service that manages local advertisements, seamlessly integrated with online and delivery platforms through iPosEats. This means you can manage your gift card strategy, online sales, and marketing efforts all from one powerful system.
If you’re looking for a trusted partner to support your gift card program, iPos is your answer. Discover how the iPos POS system can revolutionize your sales strategy and enhance your business with a fully integrated gift card and loyalty program solutions.
Ready to grow? Schedule a free consultation today!
