How the $160B gift card market can catch up to the modern age of retail

The following is a guest post from Roy Erez, CEO and co-founder of Loop Commerce. Views are the author’s own. 

Retail has evolved rapidly over the last 20 years, and shoppers are now able to browse and purchase seamlessly via smartphone apps, social media platforms, online marketplaces and, of course, brick-and-mortar stores. They can interact with products in fun, new ways via augmented and virtual reality technologies, and choose from products that are recommended for them personally based on their past browsing and purchasing behavior. Once they’re ready to check out, they can choose from an array of payment options, many of which have been introduced only in the last five years or so.

Despite these major improvements in the customer experience, there’s one area retailers have largely ignored: the global gift card market, which Statista estimated was worth $160 billion in the United States last year. For both the giver and the receiver, the gift card experience has barely evolved and it remains underwhelming.

Just as they did 25 years ago, gift cards still fail to provide the personal or emotional experience that is core to most exchanges of gifts. Many people consider them a fallback option, a “check-the-box” item reserved for last-minute gifting or something to choose when the giver doesn’t know enough about the recipient’s likes and dislikes to confidently pick a thoughtful gift. Redemption rates are lower than they should be, likely because gift cards don’t reflect much of a spark in the relationship between the two people involved in the exchange. As Lifehacker put it, gift cards are widely regarded as “the lazy man’s way of gift giving” or taking the easy way out when gift moments are intended to ignite excitement, thoughtfulness and an enhanced social appreciation.

The truth is gift cards were never the right gift option. They were a utilitarian solution for the consumer dilemma of not knowing what to give or running out of time to get a physical gift. Although the cards are an integral part of a more holistic gifting economy, the experience of giving and receiving them fails to foster the personal connection that drives brand loyalty. Today’s gift cards do next to nothing to encourage repeat store visits or additional sales and they offer little, if any, personalization. They focus mostly on the dollar amount rather than the experiential aspect of gift giving and receiving. They do not delight recipients, who are left to figure things out and find their own gift. The customer journey they send shoppers on is likely to be frustrating. Put simply, gift cards have no “wow” factor.

This presents a significant opportunity for retailers, which can not only increase gift card usage, but also use gift cards to elevate the overall brand experience for customers. While people would often rather give and receive something more personal, the demand for gift cards is huge and always will be, because there certainly are situations when they are called for and there will always be gift givers who appreciate not having to risk picking a gift the recipient won’t like. But by building interactivity, seamlessness and excitement into the gift card experience, retailers can ensure that it deepens brand engagement with both the giver and the receiver. Gift cards, with the right updates, hold the potential to evolve from a last-minute, thoughtless gifting solution into an interactive, dynamic and personal gift that customers are excited to give, receive and use.