As appeared in Business Standard on 2 May 2017 by Vinay Umarji
Issuance of physical and digital gift cards up 150% to over 50 million
Physical and digital gift cards are emerging as a major source of footfalls and sales for retailers across categories. The number of digital or e-gift card transactions has risen three-fold in the last three years, while physical gift card transactions have grown by 41 per cent between 2014-15 and 2016-17.
According to a study by Qwikcilver, an end-to-end service provider in the pre-paid gift card space, issuances of both physical and digital gift cards have risen by 150 per cent in 2016-17 to over 50 million, up from over 20 million in 2015-16.
“The act of ‘gifting’ is at the crossroads of social and commerce, which arguably, are the two biggest key drivers of consumer consumption. The gifting category in India is also undergoing massive transformation. A continuously widening consumer base, combined with a wide array of gifting options ensures that the category will continue to grow. Qwikcilver is the pioneer in the gift card sector, having powered close to US$1.3 billion worth of gift cards across categories through our robust SaaS based platform,” said TP Pratap, Co-Founder & CMO, Qwikcilver.
As per the study, retail consumers are found to be spending anywhere between 50 per cent to 400 per cent over and above the gift card value, with 54 per cent of them redeeming them every 30 days, followed by 26 per cent redeeming them every 60 days. In fact, players like Future Group and Shoppers Stop have altogether launched separate divisions to tackle the growing gifting business. For Future Group, gifting alone is anticipated to touch a revenue of Rs 1000 crore.
“We believe that gifting is one of the biggest social interactions and social events in our society. At Future Group, we believe that gifting will be a very big business for us, which maybe touching Rs 1000 crore very soon. We have launched a separate division and a new organisation to manage this business – called Future Gifting. This will handle all the Gifting related business of the Future Group. In partnership with Qwikcilver, we have launched Gift Cards, e-Gift Cards and Gift Vouchers for all our formats to be sold and managed through Qwikcilver,” Kishore Biyani, Group CEO, Future Group stated recently at the Gift Card Conclave.
According to Qwikcilver, the digital gift card is rapidly gaining growth, contributing almost 65-70 per cent to the overall sales mix in the category, even as the sales mix is expected to stabilise over time, at around 80 per cent digital and 20 per cent physical. From a 61:39 ratio between physical and digital gift cards in 2014-15, the mix has changed to 38:62 in 2016-17.
In terms of average load value, which is the total sales value with respect to the total number of cards sold, the ALV has been observed to be higher for utility as well as premium brands. For instance, in 2016-17, the ALV stood highest for hospitality sector at Rs 9,750, followed by spa/saloon at Rs 3,067, online travel at Rs 2,848, electronics Rs 2,649, accessories at Rs 1,573 and apparel at Rs 1,571, respectively.
What has helped retailers is in form of uplift, which is measured as the increase in bill value over the gift card value. Gift cards have, apparently, led to consumers spending anywhere between 50 per cent and 400 per cent over and above the gift card value, depending on category.
Moreover, increasingly customers are also redeeming their gift cards often, resulting in higher sales for retailers. For the financial year 2016-17, the study found that about 54 per cent of customers redeemed at an average of within 30 days of gift card purchase or re-load. This was followed by 26 per cent redeeming it within 60 days, 13 per cent in 90 days and 8 per cent within 180 days.
Meanwhile, according to Pratap, an integrated omni-channel retail experience across categories of retail, e-commerce, hospitality, travel, gift cards and e-gift cards are fast becoming the preferred gifting choice of the new-age consumer.