The Good, the Bad and the Ugly of Offering Gift Cards in eCommerce

The Good, the Bad and the Ugly of Offering Gift Cards in eCommerce

Thursday, March 10, 2016Kelly Nelson Who doesn’t love a good gift card?! You have been given the gift of choice! They really are magical gifts.

Many online retailers have caught on to this fact and that consumers generally expect to have this option on an eCommerce store when making a purchase. There are generally 2 types of gift cards:
  1. Open Loop Gift Cards – These are offered by major credit card companies and are generally accepted everywhere. These include Visa, Mastercard and AMEX.
  2. Closed Loop Gift Cards – This are specific to the retailer and can only be used at that retailers store (online or offline). Generally speaking in the world of eCommerce, you are dealing with these.
For a customer, a gift card is excellent because it is essentially free money! Who doesn’t want that?

For an online retailer, there are both advantages and disadvantages that you need to weigh when deciding to offer them to your customer base.

The Good!

  • Customers love them. They are an easy gift idea to give to both friends and acquaintances. They’re also an easy way to get sales up.
  • They can increase brand awareness. Someone who has been given a gift card for your store might have never even thought to shop there. Once they fall in love with your product and brand, that awareness can only spread in a positive way. You can easily create brand ambassadors!
  • You get paid before your inventory takes a hit! It’s a win/win.
  • Customers will often pay the difference on an item that is more expensive than what the gift card can afford.
  • Customers will look at their purchase differently. They will generally select something they actually want. This can dramatically reduce your returns.

The Bad…

  • There will be some increased bookkeeping and more room for error if your store experiences frequent gift card usage.
  • They can be expensive to produce and process. There may be additional fees charged by your eCommerce or shopping cart platform provider.
  • There may be an increase in the number of customer issues if your system encounters any glitches.
  • Gift cards can make returns and exchanges difficult leading to an opportunity for poor publicity. It only takes one customer to leave a bad review of not being able to return a bad purchase to ruin a reputation.

And the down-right ugly!

Truth is, there really isn’t anything ugly about offering gift cards from an online retailer’s perspective. They actually provide a whole new channel of buyers.

One thing to really look out for, however, is that there could be an increased chance for fraud. These transactions can be made under fraudulent credit cards and by the time the merchant realizes this, the individual has used the gift card’s funds.
 
Let us know about your experiences offering gift cards on your eCommerce store!

Image source: http://meafordgolf.com/product/gift-card/