The Future of Store Credit

Gift cards, also referred to as store credit or gift certificates, have long been a popular option for holidays and birthdays. In 2012, Americans spent approximately $100 billion on gift cards. As the name suggests, gift cards are often given as presents. They present a flexible and practical option for gift-giving when it comes to acquaintances such as co-workers, teachers, and extended family members. With a gift card, you never have to worry whether the recipient is going to like the gift, as you are giving them the opportunity to choose their own gift.

History

The gift card industry was pretty much nonexistent twenty years ago and has experienced rapid growth in the late 1990s and early 2000s. In 1988, American Express introduced the “gift check.” At the time, some stores offered gift certificates, which were replaced by the modern gift card in 1994. It is believed that Blockbuster was the first company to introduce plastic gift cards as a replacement for paper gift certificates that could easily be copied and counterfeited. Other stores followed suit by making their own gift cards and using technological platforms to process funds stored on a gift card. Another major innovation came in 2001, when Starbucks created a gift card that could be used and reused. The Credit Card Act of 2009 was introduced to prevent gift cards from expiring within five years of their purchase. In 2008, the value of unredeemed gift cards was approximately $96 million in the United States alone.

Predictions

Gift cards will remain a popular with consumers. In the future, the gift card industry will move towards automated and online options. Although many people still purchase physical gift cards, e-gift cards and online options are becoming more and more popular. Between 2013 and 2014, purchases of online gift cards increased from 26 to 34% of all gift card purchases. New applications such as the Apple Passbook, GiftRocket, and Gyft can be used on mobile devices to store coupons and store credit which are then used in-store. For many customers, loyalty and rewards programs that offer store credit are powerful motivators and will remain popular.

Pros

Gift cards have several advantages for consumers. As presents for special occasions, they are a convenient and flexible option. The recipient can use the gift card at any time and any location towards a purchase of their choosing. They place the control in the hands of the customer.

Cons

With the popularity of gift cards, fraud has been on the rise. Often, store employees are behind gift card fraud. This is more of a disadvantage for merchants as opposed to customers. For customers, the major disadvantage of gift cards is the possibility that they can get lost or stolen. When this happens, the balance of the gift card cannot be redeemed.

Quick Wrap-Up

The gift card industry barely existed twenty years ago and yet, today, it’s become one of the most popular ways to shop. Gift cards present a number of advantages to both customers and merchants and will remain popular in the coming years, with the use of online and e-gift cards increasing.