Feature: Vouchers and gift cards: Into the loop

For some years now, the prophets have been anticipating an upsurge in the number of gift cards available in the UK in line with their popularity in the US. Two-and-a-half years ago, specialist consultancy Giftex produced a report predicting that the gift card market in Britain was set to more than double by the end of 2007.

At the time, only 15 card programmes were up and running, but a quarter of retailers said they would have one for Christmas 2005, while over 80 per cent expected to launch one by the end of 2006.

The reality was that this growth took a little longer but, last year, the rate of new cards began to increase significantly.

Over the past few months, PrePay Technologies has worked with high-street retailers, such as BHS and New Look, as well as online retailers Buyagift and Lovefilm, to launch new cards. First Data International came up with a new card for the Vue cinema chain, while B&Q launched its first plastic offer last October.

Marks & Spencer wanted to create a “wow factor” through innovative use of technology for its gift cards launched in October last year. The retailer worked with BemroseBooth, leading manufacturers of vouchers, which had designed and manufactured its vouchers since 1998.

BemroseBooth won the contract to carry out complete print management of the M&S gift cards, including design. Jenny Chambers, bespoke sales executive at BemroseBooth, said: “M&S was keen to launch its cards with a wow factor and be seen as the industry market leader. In order to do this, we included innovation in the range such as shaped and lenticular cards. The M&S gift cards have been incredibly well received and feedback to date has been fantastic.”

The advent of gift card centres, or “gift card malls”, in Sainsbury’s, followed by other retailers, just over a year ago has opened up a new channel. InComm Europe, the company behind the multi-retailer stands in Sainsbury’s, Asda, Woolworths and Shell, has grown the range to include not only big-name brands but smaller operators such as the London Eye, Manchester United and Nationwide Paintball, which runs paintballing venues across the UK.

The development of gift card technology has created entry points for single-site retailers and other small businesses, either on their own or as part of another network. Technology companies such as First Data ValueLink are now targeting this sector of “small merchants”, pointing out that they can tap into the revenue-growing benefits of gift cards. “It is easy to sign up and get started with minimal upfront investment,” a spokesman said.

According to research by First Data ValueLink in the US, 56 per cent of consumers spend more than the initial value of their gift card, although there are varying estimates of this “incrementality” in the UK. “Gift cards can be displayed in-store or be used as a promotional tool to generate awareness and drive traffic,” First Data ValueLink suggests. “You can offer them to local businesses or to a local radio station as an instant giveaway.”

Many retailers have been able to access the benefits of gift cards through being partners on shopping centre prepaid cards, such as those operated by Bicester Village and Capital Shopping Centres’ 13 developments across the UK. This means that at, for example, Manchester’s Trafford Centre, owned by Peel Group, shoppers can use a gift card at single-site fashion stores that otherwise have not invested in card programmes. The only confusion is that, while some operators charge only for the cost uploaded onto the card, other malls charge an extra fee of £1 or £2 to create a prepaid account.

Independent convenience stores have also been entering the market. Since November, gift card centres have been available in a growing number of outlets linked to the PayPoint network, which has dedicated terminals in over 18,500 convenience stores, forecourts, supermarkets and off licences. It is also now possible to buy a multi-store card at over 30,000 retail outlets using the Payzone cash acceptance network operated by Alphyra. Using motivation company P&MM’s Spree Card platform, it features high-street retailers such as Boots, Waterstone’s, Halfords, Debenhams, JJB and HMV.

Cards are beginning to make an impact on the corporate incentives market, although many suppliers still say that paper vouchers remain more popular with this audience. However, new products are coming online, including the first multi-store prepaid card, Compliments from Capital Incentives & Motivation, and, most recently, the plastic version of Grass Roots’ multi-store Bonusbond voucher.

Kevin Harrington, research and development director of voucher and card supplier Sodexho Pass, believes that new arrivals, whether large or small, can help to grow the market. “The current card technology means that cards are more accessible than ever before, and so they should be,” he says. “Ultimately, if cards are going to ‘work’, they need to be widely acceptable and consumers need to be comfortable using them.

“The only way this can be achieved is if cards are available on many levels. So, for smaller businesses to be able to access the technology and use it for their benefit means wider availability and accessibility.”