Optimize gift card sales during Christmas thanks to your distribution strategy

by | 30 Nov, 2021 | INSIGHTS

For all brands with their own gift card programs, the holiday season is a very important time in the calendar. Every year, physical but especially digital gift cards are becoming more and more popular among consumers. Brands must be careful not to miss the boat and should think about boosting their programs during this decisive season.

From logistics to marketing, nothing should be left to chance. And gift card distribution strategy – or in other words your cards’ sales channels – is a key lever to develop your program. Unfortunately, brands very often limit distribution to their own channels, without necessarily considering how third-party distributors could add significant value to their program. 

How big is the market of third-party gift card distributors?

The challenge of a holiday distribution strategy

Brands must look beyond their own boundaries and think of ways to sell their gift cards on new distribution networks. During the holiday season, consumers are looking for gifts everywhere (including gift cards), but they won’t necessarily think of going on the brand’s website or in its stores to purchase its gift card. They will first look in more visible, high-traffic locations, such as third-party distributors.

Therefore, brands can consider building relationships with third-party companies to boost their year-end results. Preferably companies that would be interested in selling gift cards to their own customers. This way, brands gain visibility and awareness, while retailers gain traffic and commissions. In fact, in 2018, 45.2% of annual restaurant gift card sales were made through third-party retail sales, and a 2021 research paper on the global gift card market found that collaboration with third-party companies enabled brands to be more competitive on their own markets. Figures in past years have set the trend for the future of this sales channel. 

It is therefore clear that exploiting all possible channels is relevant for brands, it amplifies the benefits they already gain from having a gift card program, especially over the holiday season. Careful, however, when selecting third-party players. There are many questions to be asked in order to make the most of this strategy. Are they relevant to your brand? Which ones perform best? Have you taken advantage of all the distribution channels possible?

The various existing distributors

To find your way in the crowd of gift card distributors, here is a non-exhaustive list of the different types of players to approach for Christmas:

  • Gift card resellers – There are many distributors who are interested in reselling other brands’ gift cards as products to attract traffic. Online, there may be professionals who specialize in reselling gift cards, or vendors who wish to expand their product lines. In brick-and-mortar, there may be retail chains or stores wishing to sell gift cards or to offer them for specific Christmas promotions.
  • Loyalty programs and rewards– Most companies offer a loyalty program to their customers to foster relationships with them. Very often, customers earn points as a reward for purchases or other behaviors. These points can then be converted into gifts previously chosen by the company. One of the most recurrent gifts is the gift card, of course. Although players will often only offer their own cards, there are exceptions. This is the case, for example, with credit card companies or travel companies, where customers have a wide choice of gift cards, among other things.
  • Marketing and loyalty agencies– There are many marketing and loyalty agencies offering brands – especially very small and small and medium-sized businesses – all-in-one loyalty program solutions. They offer comprehensive solutions containing the software, processes, and above all a gifts catalog for which they are looking for new partners, and gift cards are among the most sought-after products.
  • Incentive programs– In human resources management, companies themselves offer incentive programs to motivate and thank their employees. Christmas is part of the major events during which it is traditional for companies to reward their employees. A fruitful market on which brands can position themselves thanks to their gift cards. In Europe, brands can target work councils looking for partnerships. Globally, they can look for companies specialized in incentive, which are constantly looking to expand their catalogs.

The benefits of implementing a holiday distribution strategy

Increased benefits for brands

Offering a gift card on third-party channels means that brands and retailers have to cut back on the price of the card. Each distributor will take a commission or negotiate a favorable price. So why not just sell your gift cards on your own channels, where you can control your budget?

Simply because the lower margin is quickly paid off if the distribution strategy is well managed, especially during a busy period like Christmas. Partnering with third-party companies means that the brand can increase its presence in numerous digital and/or physical points of sale. The cards gain visibility and consumers are more likely to buy them to give to their loved ones during the holidays. As a result, gift card sales increase significantly, as does revenue.

Moreover, for each card purchased, a sale will be made in the physical stores or on the brand’s website. Not only will this boost traffic on the channels, but it will also generate additional revenue. Since it is difficult for the beneficiaries to spend the exact amount on the gift card, they will tend to exceed the initial amount. Moreover, because they are buying themselves a gift, they will tend to make compulsive purchases on more expensive products.

But the real strength of a gift card program lies undoubtedly in the visibility and awareness it generates. The more gift cards are present at different points of sale, the more visible the brand will be to consumers. Each card is like an advertisement, promoting the brand. And if consumers decide to buy it or if they receive a card, they can then discover the brand’s universe, visit its stores, and potentially become a regular customer.

In addition, during the holiday season, many companies are running special campaigns to generate traffic. Gift cards suddenly become the ideal tool, brands will be able to offer them at the right time and place to increase their brand awareness.

Help consumers with their holiday shopping

And in terms of benefits, consumers are not left out. The holiday season is the kick-off for the traditional frantic race for gifts. Everyone has their own strategy to hit the bull’s eye. Some will take their time and be very organized, others will want to do everything last minute, and some will want to go as fast as possible. But they all have one thing in common: they will never say no to brands trying to make their job easier.

To encourage gift card purchases during this period, brands should require as little effort as possible from consumers. To do so, you must meet them in the places where they are used to going. Consumers will not visit the website of each and every brand they can think of to find a gift card. The process is simply too long and tedious. But they are more likely to visit a website where all the cards are offered or come across a gift card stand in a store while shopping.

Some consumers might be unaware of a brand’s existence or might simply not know a brand they like offers gift cards. It’s very unlikely that they will bother to look for an unknown brand or for its gift card. In this case again, offering your card on other sales channels will increase the chances that consumers will come across it, and buy it.

Key points to consider when distributing gift cards for Christmas

Developing a distribution strategy is an opportunity to seize to make the most of the holiday season. However, there are pitfalls that the brand must be aware of. Otherwise, mistakes can easily be made, and management can quickly become time and energy consuming.

Brand image

Brands’ must always remain aware of the impact a decision can have on their image. Each location where a brand’s gift card will be displayed must be in line with the image that the brand wishes to convey to consumers. Let’s take an extreme example to better understand our point: offering a gift card from a luxury brand in a hard discount store would not benefit the brand. It is therefore necessary to select and control the distributors’ positioning and image before getting started.

The second key point to keep in mind, besides the location, is the target. Brands have specific targets in mind, even for gift cards, ant they must also be able to reach them via third-party players.

Build long-lasting relationships

In order to start developing a gift card distribution network, researching and approaching third-party players is essential. And beyond that, building a relationship and then maintaining it over time is a major part of the process.

Gift card distribution requires exchanging information, carrying out several operations with the third-party company, and being in constant contact for a perfectly coordinated plan. It’s a time-consuming process.

Negotiations and partnerships

Each partnership involves negotiating conditions between the two parties: the brand and the distributor. When you have a network restricted to a few players, it’s manageable. But when you expand your network, each distributor will want to have its own conditions. Some will ask for discounts to cover costs; they will want higher or lower prices or even exclusivity.

You must be able to quickly analyze which third party player deserves a greater commitment based on performance, especially during a peak period like Christmas. It is therefore necessary to have a structured framework to avoid getting lost in the process.

Developing and maintaining a network of gift card distributors for Christmas is a relevant strategy for brands. In the middle of the Christmas rush, consumers will be looking for several gifts for their loved ones. To increase their visibility and their reputation, brands must use gift cards to be on the consumers’ path when they are visiting distributors. However, they must be careful to manage their network effectively. Using a specialized service provider can be worth their while to maximize performances.

Suggestions for further reading

Why have a B2B gift card program for the holidays ?

White paper e-gift card for Christmas

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