The gift card market in Australia is booming. In 2022 the market was valued at just under AU $9 billion and is expected to reach AU $13.9 billion by 2027 as projected by a strong 9% CGAR (compound annual growth rate). With the average Aussie reportedly spending $1,479 this Christmas on presents, food, alcohol, eating out and travel, product and service providers are looking at new and innovative ways to attract more of this lucrative spending their way.
As the digital evolution rolls on, an increasingly compelling solution is shifting retailers from traditional plastic and paper gift cards over to digital versions that shoppers can send to loved ones with just a few taps on their smartphone. But why are digital options gaining so much traction, and what’s really driving their growth?
Let’s break down some of the major benefits digital gift cards offer retailers as they look to maximise sales this festive period.
- Reduced production and distribution costs
One obvious draw of digital is the savings realised from eliminating physical card expenses. Producing plastic or paper gift cards at scale requires printing, packaging and shipping — costs which start to really add up.
For larger companies issuing millions of cards annually, these production and distribution activities come with substantial price tags. Smaller retailers ordering in smaller batch sizes means per-unit printing and packaging expenses are relatively higher. Storage and inventory management of physical cards also requires valuable retail space and resources that could otherwise be used for merchandise display or customer service.
Making a partial or full transition to digital gift cards directly drops significant overhead costs. Physical encoding of cash values onto cards is replaced by simple database entries. Packaging, warehousing, and shipping of physical products are no longer needed when gift cards exist virtually, allowing retailers to either boost profit margins or reinvest the savings into other growth initiatives like new products, store upgrades, or marketing campaigns.
- Increased redemption rates
Billions of dollars’ worth of gifted value goes unredeemed each year in physical gift cards. Statistics show an estimated 47% of US consumers hold over US $21 billion in unused gift cards annually. Millennial consumers average the highest unused balances of $226 per person with Gen-Zers averaging at $149.
Physical cards often go unused when lost, stashed away and forgotten, or expire before redemption. Digital formats help solve this unused value problem in meaningful ways by eliminating the tangible nature of physical cards. Going digital means balances are just a click away through online tracking or mobile wallet access. Shoppers appreciate the convenience and security of always having their balances at their fingertips via apps or online accounts. There’s little to no risk of losing a digital card or letting funds expire unexpectedly.
- Increased sales opportunities
Going digital makes last-minute gifting as easy as a few clicks. Being able to buy and instantly send a gift creates a lower barrier than rushing to stores — and people are more likely to treat themselves or loved ones on a whim. They’re also likely to spend more than the value of their gift cards, with 65% of shoppers spending an average of 38% more than the card’s initial amount.
Retailers have an opportunity to capitalise on this impulse behaviour through strategic notification campaigns and well timed marketing. Push notifications with timely offers activate unused balances, while promotional messages showcase upcoming seasonal sales or offers, enticing planning for future spends. Retailers can even divide large cards into smaller amounts for multiple use cases.
By fuelling convenient discoveries and activating balances creatively, digital gifts translate more fully into additional purchases and higher basket sizes for retailers.
- Aligning with preferred payment methods
Australians have rapidly become early adopters of cashless payment technologies in recent years. Popular finance apps like Apple Pay and Google Pay, as well as major banks’ own “tap and pay” systems have meant that 98.9% of banking interactions now occur digitally, while nearly all customer transactions are conducted through mobile apps or online platforms. As a result, cash usage has declined to just 13% of payments, significantly down from 70% in 2007.
Shoppers want payment options that fit conveniently into busy modern lifestyles. Digital gift cards neatly align with these burgeoning preferences. Customers can easily buy, send and redeem e-cards right alongside other preferred cashless transactions through their phone.
Staying competitive means retailers need to meet consumers where they are increasingly conducting commerce – and that’s through smartphone apps and cashless payments rather than handling plastic or cash.
- Generate actionable customer insights from data
Perhaps the most exciting of all benefits of digital gift cards is the rich customer behaviour data that comes with digital transactions. By analysing purchase histories and items frequently bought together, retailers can better understand customer preferences and buying patterns.
Location data from purchases also reveals patterns of high sales potential areas, while browsing habits provide insight into popular product categories and items. Utilising this data means retailers can improve their digital and location-based marketing campaigns by focusing on what is more likely to resonate within different regions. Customer journeys can now also be accurately traced to assess campaign influence on subsequent purchases.
Understanding what influences purchase decisions allows retailers to tailor both their website and app experiences in a way that enhances the customer journey. Questions that customers frequently have can also be easier to anticipate.
- Target shoppers through personalised experiences
Personally engaging shoppers through their journey is a powerful advantage of digital membership platforms like Litecard. By leveraging transaction data and location insights, targeted communications can be delivered to customers wherever they are – whether at home, in transit or in-store.
This level of personalised reach extends far beyond traditional SMS or email options. Shoppers can be notified of unused balances, inspired by timely offers curated to their interests, or informed about upcoming sales tailored for their purchase history. These engagements are designed to activate spending and drive higher basket sizes for retailers.
Precise geo-fencing abilities (which Litecard technology also enables!) prompts reminders to customers of loyalty points or gift cards when entering a shopping centre, intelligently guiding them in-store. Dynamic push messages showcasing specials for items frequently purchased together further encourage discovery.
Valuable insights for strategic targeting can be gleaned across each interaction too. Analysing responses helps refine outreach strategies, aligning communications more closely with what motivates individual customers. What results is a continuously improving feedback loop with effective personalisation leading to greater customer engagement and insights, which then feeds back into even better personalisation options.
Setting your business up for success
As the Australian gift card market develops, digital innovation provides a straightforward path for progressive retailers to gain an edge. The ability to unlock lower costs, drive higher revenues and acquire deeper customer insights are compelling alone. Together, they make a truly convincing case for embracing this rapidly expanding digital gifting channel.
Worried about your customers’ privacy concerns when going digital? Litecard’s commitment to responsibly handling sensitive customer information means transaction and behavioural data is encrypted and remains completely secure. Customers also have full visibility and control over how their anonymised data may be used to improve their personalised experiences through transparent privacy policies.
If you want to know how Litecard can help optimise your marketing campaigns, increase your sales, and create an engaged membership base well beyond the festive season, contact us today and start unwrapping the benefits of digital gift cards for your business!