Holiday Gift Card Sales Improve January Numbers!

It seems that everyone has jumped on the gift card bandwagon and for organizations that don't already have a gift card program, the pressure is on to get their gift card program launched for the December holiday season.

For organizations that already have a gift card program, the holiday season often brings a special focus to their gift card program due to the extra marketing and advertising in support of the gift card program.

But what not everybody knows is that great gift card sales numbers in December can really give your New Year a great start. And this isn't just on a financial basis. There are operational and marketing opportunities that your gift card program provides that can benefit you in the New Year as well.

The Financial Benefits

Variances in accounting practices by merchants may result in gift cards having an interesting impact on a company's sales patterns. If you are following Generally Accepted Accounting Principles (GAAP), gift card revenue is only recognized when the card is redeemed for merchandise or a service. According to several sources, due to this accounting practice, gift cards are having an interesting impact on January numbers.

When the National Retail Federation looked at 2005 holiday gift card sales last year, they said that "some of the $18.48 billion spent on gift cards this holiday may not show up in 'holiday' sales, but instead as sales in January or February, when the gift card is redeemed…" ¹

According to Statistics Canada, the usual drop off in sales from December to January has started to moderate, and the attribute this in part to the redemption of gift cards in January. ²

And consumer surveys conducted by NPD in January 2005 demonstrated that over half of all holiday gift cards from a specific retailer were fully redeemed before the end of January 2006. ³

But do the Ernex numbers back this up? While we don't have specific numbers from our merchant partners on whether their sales have increased or decreased in January, we found it interesting to compare our gift card activation and redemption numbers from December to January to see what trends developed.

Not unexpectedly, gift card activations (when someone purchases a gift card) drop off precariously from December to January. According to Ernex statistics, January 2004 activations were only 18.6% of December 2003 activations, January 2005 activations were 18.6% of December 2004 activations, and January 2006 activations were 13.6% of December 2005 activations.

The surprise is that January redemptions (where someone uses a gift card to purchase something from your business) were a significant percentage of December redemptions, which is supposedly the hottest time of the year. According to Ernex statistics, January 2004 redemptions were 87.5% of December 2003 redemptions, January 2005 redemptions were 87.9% of December 2004 redemptions, and January 2006 redemptions were 79.7% of December 2005 redemptions.

Most merchants we know would be ecstatic if they had January sales that were 80-90% of their December numbers. These numbers also seem to point to a significant increase in the financial recognition of your December gift card sales early in January, giving the start of your next year a significant financial boost in a traditionally slow time.

The Marketing Benefits

One of the other significant benefits we think you can derive from successful holiday gift card sales is by using the Ernex Promotional Tool Kit receipt messaging functionality to communicate promotions and sales coming up in January or February.

From a marketing and promotion perspective, using the receipt for messaging about events and specials that are coming up in the New Year are also an excellent way to take advantage of gift card sales. This low-cost promotional tool is part of every Ernex powered gift card program and lets our clients add customized receipt messaging for both gift card purchases and redemptions. So you can notify both the person that initially purchases the gift card, as well as the recipient of the gift card about these promotions or sales.

The Operational Benefits

Stop and think about it for a moment. Gift card sales in your locations are one of the lowest cost sales you can make. The labor costs for making the sale are very low, they don't require a lot of space for storage, and they don't take long to ring up at the register. They end up shifting the costs of redemption to a time of year (January) where you can staff stores easier and have less issues with inventory running out for the redemption items. Another reason that gift cards are a great item in your product inventory.

So there you have it. Gift cards are an excellent tool for getting the New Year off to a great start! Financially they can give your January numbers a boost, operationally they can improve your labor and inventory costs, and they can help you create awareness during the holidays that can drive your marketing programs in the New Year. Who wouldn't want a tool that can do all these things in one small package?