More multichannel merchants find gift cards redeeming

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With gift card sales expected to be strong again this holiday season, multichannel merchants hope to wrap up the category with new programs, cross-channel sales and redemption as well as highly visible catalog and online promotions.

Gift cards reportedly are favored by 60 percent of shoppers, seven out of 10 consumers or more than two-thirds of consumers when it comes to purchasing a holiday gift this season, according to various studies. Their popularity often is attributed to the convenience that gift cards offer buyers, not to mention a sense of confidence that recipients will like and use their gift.

Retailers also stand to gain from gift card purchases. Last year, $18 billion was spent on gift cards, and this year the figure is expected to approach $20 million. Best of all, consumers redeeming gift cards have given a boost to sales in January, traditionally a lackluster month, with many spending more than the card's allotted amount.

"Because [brick-and-mortar] retailers have taken a more aggressive standpoint on gift cards, catalogers need to get their name in the ring," said Andrea Syverson, president of marketing consultancy IER Partners, Black Forest, CO. She cited Cabela's, which promotes its gift card inside the front cover of its recent Gift 2006 catalog and on a full page inside the book, as a multichannel merchant that is doing a good job of promoting the gift card category.

Copy in the Cabela's catalog states that the card can be redeemed online, over the phone and in its stores. Many multichannel merchants still don't offer this type of cross-channel integration.

A recently published Bankrate Inc. gift card study found that of the merchants surveyed, only J.C. Penney allows electronic gift cards to be used to buy merchandise in stores. Wal-Mart, Costco, Target, Macy's, Bloomingdale's and Kohl's allow electronic gift cards to be used only online or for catalog items. And many gift cards purchased in-store still can't be used to make purchases online or via the phone.

Many merchants lack such cross-channel integration because their direct and retail operations remain in separate silos, said Laura Naylor, CommercialWare's vice president of marketing. However, this is changing as new software comes on the market that bridges the channels for merchants.

In January, CommercialWare, Natick, MA, launched CWValueCard. The software package links into any of a merchant's sales channels to manage the activation and redemption of gift cards, providing a centralized database that enables real-time value inquiries. Since its introduction, CWValueCard has been the fastest-adopted package in the company's history.

"We're finding that retailers are striving more and more to provide a seamless view to customers" when it comes to gift cards, Ms. Naylor said. "The ability to offer and honor these cards in any channel enables them to capture the full revenue opportunity."

One drawback to the gift card category right now is that so many cards go unredeemed, Shopzilla chief shopping expert Helen Malani said. The ability to accept gift cards across channels will increase their use, she said.

In addition to standard cross-channel integration, multichannel merchant Peruvian Connection launched a gift card program this year that includes a virtual card with a feature that many merchants were unable to do last year because of the silo issue, Ms. Naylor said. After receiving e-mail notification that they've been given a card, recipients can begin shopping online immediately. Several days later when they receive a physical card in the mail, it will have the correct balance on it. This kind of flexibility can be very appealing to a merchant's customers, Ms. Naylor said.

Gift cards traditionally have been a difficult category for direct marketers lacking much of a store presence because consumers generally are most familiar with using gift cards in stores, and "maybe the recipient isn't comfortable going online," said Lois Boyle, president of direct marketing agency J. Schmid & Assoc., Shawnee Mission, KS.

However, some direct marketers are finding creative ways to use gift cards as a marketing tool without actually selling them in the traditional sense, Ms. Boyle said.

Harry & David, for example, created a program last year in which they used a card as a bounce-back tool in gifts that were shipped, offering a discount on any product the recipient purchased in the future.

"While it didn't actually have monetary value, it was a wonderful way to extend the season, and it felt like it had value because it wasn't just a coupon," Ms. Boyle said.

Other direct marketers are simply introducing gift cards this year, banking on their popularity outweighing any consumer reticence about not using them in stores. DMers introducing gift cards for the first time this holiday season include Hasbro Shop at Home and Company Kids.

Others with a limited store presence are promoting their gift cards aggressively. L.L. Bean dedicates half of the inside cover of its recent holiday 2006 catalog to its gift card and plugs it two more times inside the book. Hanna Anderson also gives space inside the front cover to its gift card program, displaying it with the red-and-white "keeper box" that it comes in.

More merchants need to "come up with a brand-enhancing way to hold [gift cards]," and a clever way to send them, Ms. Syverson said. This will help the card stand out and drive sales. After all, gift cards are "a win-win for both retailers and consumers."

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