The gift voucher, gift card and stored value solutions market is big business in the UK, worth around £5bn ($7bn) per year. It comes as no surprise that the relentless power of social media is making inroads into this impressively sized market. Charles Wheeldon looks at the attempts to drag gift cards into the modern day
The digital gift card provider Giftcloud has announced that UK customers have purchased £1m of its digital gift cards over the past 12 months, which can be bought and sent instantly using an app via text, email or Facebook.
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The service has been available in the UK for the past 18 months and the company predicts that the coming Christmas will see a surge in its sales as consumers turn their backs on the palaver of last-minute seasonal shopping in favour of a far more convenient option in gift-giving.
Less lost, more saved
Giftcloud also emphasises that its gift cards are far less likely to be lost or reach their expiry as the recipients receives several digital reminders before the digital cards reach their expiry.
The company’s founder Greg Le Tocq also maintains that his product has increased in popularity as its advantages over traditional gift cards and vouchers have become increasingly understood – as a result of the viral factor of gift-giving via social media. In addition, he says he’s experienced a surge of interest in digital gift-giving from the B2B market as companies look to gift, reward or compensate both employees and customers en masse.
LeTocq says: "It’s really been a case of working hard to educate the public about digital gifting services. It’s something that most people in the UK had never seen before, let alone used, so we’ve spent a lot of resources on encouraging people to give it a try.
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By GlobalData"There are so many benefits to using digital gift cards rather than traditional ones. We see it very much like other life hacks; you can buy the gift cards, send them, and redeem them all using nothing more than a smartphone. It’s very relevant for our lifestyles now, where we want everything at our fingertips with minimum fuss."
"The hardest challenge we have faced is conveying these messages and getting Giftcloud in front of people, but we’ve seen a lot of customers end up doing the leg work for us. It’s the kind of service which is referred between friends and peers, with an organic growth rate that has seen the uptake snowball far quicker than we could have anticipated. We are thrilled to reach the million pound mark, looking forward to taking it even further at Christmas and pleased to provide something that there’s a genuine demand for to make gift card-giving that little bit simpler."
Taking advantage of the boom
At the UK Gift Card & Voucher Association (UKGCVA), Gail Cohen, director general said: "The gift card market is booming globally, and has never been more accessible thanks to the increase in digital gift cards and apps available on the market. The UKGCVA and its members are continuously looking for ways to innovate and connect with consumers across all channels, in addition to promoting best practice within the gift card industry in the UK."
Stuart Lawrence, UKGCVA executive member and director of fusion business development added: "The gift card industry is showing clear signs of a shift from physical to digital gifting.
"This shift offers new opportunities in social gifting, which then leans on social media marketing, brand association and the ability to reach a vast audience in real-time, which undoubtedly appeals to a Millennial audience.
"Currently the UK has less than a 5% digital share in the gift card industry, growing at a rate of plus-200% year-on-year, as more retailers launch digital gift cards and the ability to redeem gift cards online.
"Moving away from physical to a digital solution is also more cost-efficient, with lower or zero fulfilment costs, and reduces the impact to the environment."
Too much, too late?
However, for David Wall, vice-president of business development at gift voucher and card company Zeek the phenomenon is one that appears to have had its day.
He said: "There was certainly a resurgence of social gifting platforms a few years ago, with Facebook itself even previously acquiring one of these businesses.
"However, it’s no longer a majority focus for businesses. From a merchant perspective, Starbucks is championing social gifting with the idea of being able ‘gift a coffee’, but the appetite is not currently there among most of the bigger players.
"Using social media as a marketing tool is undoubtedly allowing businesses within the UK gift card industry to create a buzz around their products and services.
"Whilst a majority of these organisations use social media for promotional purposes, it also provides the opportunity to educate consumers and provide information on the industry as a whole through blogs and sharing informational content."
Not limited by regulation
In conclusion, adding a legal perspective, Siobhan Moore, senior associate at Locke Lord (UK) LLP said: "The gift card market is made up of a mixture of products, some that are regulated financial service products and those that aren’t. As a result, not all gift cards are subject to the same regulation.
"All gift cards are subject to consumer protection regulations, which require issuers to provide minimum disclosure information about the cards, for example, a fixed validity period, if there are any fees or costs that apply, and key features about the card.
"Gift cards that can be spent in a wide range of retail outlets, for example, general purpose gift cards, are subject to certain financial service regulations, primarily the Electronic Money Regulations 2011, which mean there are regulatory controls over how they are issued to consumers.
"These regulations give the consumer further statutory protections, for example, the funds stored on the card are protected, so in the event the issuer became insolvent, the funds are ring-fenced and kept separate from the issuer’s assets.
"Also the cardholder can claim unspent funds left on the card up to six years after the card has expired. To issue electronic money gift cards the issuer must be authorised in the UK by the Financial Conduct Authority to do so."
