Gift Card 101

How to Start Selling Gift Cards

3 Reasons You Need a Gift Card Program. Now.

If you’re reading this guide, you must be curious about starting a gift card program for your business. That’s fantastic, because gift cards have become a must-have for B2C companies.

But don’t just take our word for it—check out these stats:

Gift Card Sales Are Increasing

$750 billion worth of gift cards will be sold globally by 2026.¹ It’s time to get your fair share of this burgeoning business opportunity.

People Want Gift Cards

People still really love gift cards. In fact, a First Data Corp. survey revealed 93% of consumers surveyed would prefer a $25 gift card over a $25 item.

Gift Card Sales Are Profitable

You can wrap up the year with a stellar Q4. For 14 years in a row, gift cards have been the number-one, most-requested holiday gift, according to the National Retail Federation (NRF).

Closed Loop VS Open Loop

The minute you start looking for gift card companies that can help you get started, you hit industry jargon. Let’s start by clarifying what we mean by closed loop vs open loop cards.

CLOSED LOOP

/kloʊzd/ /lup/ adjective

Describes a type of electronic payment card that can only be used at one company. These days, “one company” can include a family of brands—think TJX, with T.J. Maxx, Marshalls, HomeGoods, Sierra and Homesense. A TJX closed loop card can be used at any of these stores.

Synonyms: gift card, store gift card, store voucher, gift voucher, gift certificate

OPEN LOOP

/oʊpən/ /lup/ adjective

Describes a type of electronic payment card that’s accepted by an extensive array of merchants. We’re talking Visa, Mastercard, etc., which use their own global payment networks. From airlines to zoos, open loop cards are easy to use nearly everywhere.

Synonyms: prepaid card, Visa gift card, reward card, universal card

And Everything
In-Between

The gift card world isn’t quite so black-and-white. There’s a whole lot of gray in the middle, such as filtered cards, Restricted Authorization Networks (RAN) cards, multi-merchant cards and more. We’ll leave those for Gift Cards 201.

Top 8 Gift Card Program Benefits

You’ve heard about the benefits of having a gift card program, right? Increased sales, more repeat customers, overspend on gift card value—the list is pretty long. Let’s take a look at the top eight reasons you’ll love gift cards as much as your customers do.

Keep your brand top-of-mind.

Your gift cards boast your logo, and that’s why they’ve long been called “pocket billboards.” Rightly so—a gift card stays in a physical or mobile wallet, a constant reminder of your brand.

Enjoy increased sales, thanks to gift cards.

Gift cards add one more product (two, if you count plastic and digital versions) to your mix, and open up additional selling opportunities.

Boost repeat business.

Want to increase visits to your establishment? Use gift cards to run promotions. The options are endless. A popular restaurant industry example is “buy $100 gift card to give, get $10 gift card to keep,” which encourages both gifting and returning.

Encourage overspend with gift cards.

Overspend is the extra money shoppers spend above and beyond their gift card balances. Customers are often less price-sensitive when they use a gift card, and are more likely to pay full price. A study from First Data showed 72% of gift card shoppers spent more than the original gift card value when using their cards—an average of $59, in fact—and:

25% purchased an item they had not planned to spend money on
8% bought a more expensive version of an item they already planned to buy
3% purchased an item from a store they don’t normally shop at for such an item

Handle returns without cash.

For retailers, accepting returns without receipts can lead to inconvenient cash payouts. Put that money on a gift card instead, and you’ll also guarantee it’s spent at your business.

Take the edge off customer complaints.

Unhappy customers are inevitable, but gift cards can be a powerful way to acknowledge a wrong and make it right. For example, a hotel guest who complains can be appeased with a gift card for their next visit, which is more tangible and memorable than a “free night” applied to a future bill.

Increase holiday sales with gift cards.

During the holidays, shoppers splurge on everything from food and drink to presents. That’s why so many consumer-focused industries consider it their make-or-break quarter. Gift card sales usually peak during the holidays, too, as gifting opportunities abound. And they’re particularly popular as last-minute, on-the-way-to-the-party options.

Jumpstart your next year.

When you sell gift cards in Q4, you know they’ll start being used in the New Year. With first-time visitors, repeat customers and overspend opportunities, you can kick off your year with a better post-holiday season.

72% of shoppers using gift cards overspend—

an average of $59, in fact.²

“I Want Gift Cards For My Business!” You Say?

Great! Here’s where you have a really big decision to make: will you run your gift card program in-house, using an issuer and a processor? Or will you outsource your end-to-end gift card program management? Before you decide, here are some questions to ask yourself and your team.

ISSUANCE

Who will be the legal issuer of our gift cards?
You have options: your company can be the legal issuer, or you can assign a third-party company, such as your gift card program manager. If you choose to do it yourself, make sure you have an experienced lawyer on hand. We suggest you outsource this responsibility so you don’t have to manage escheatment laws and liabilities.

COMPLIANCE

Who will make sure our gift card program is compliant?
There are some very important Financial Crimes Enforcement Network (FinCEN) requirements when you’re setting up a gift card program. They’re focused on fraud, money laundering and other misconduct associated with financial transactions. It’s mandatory that your program stays compliant, even when the rules change.

REGULATIONS

Who will keep up with gift card laws?
There are a lot of rules and regulations surrounding gift cards, and they vary by region. For example, should you charge tax on gift card sales? What about expiration dates—when do gift cards expire? These questions are just a start, and all need up-to-date answers, all the time.

PROCESSING

Who will be our gift card processor?
You need a reliable gift card processor, too, such as Stored Value Solutions (SVS). This is one part of your program that you will definitely outsource. And if you choose to outsource to a gift card program management company, they’ll coordinate with your processor to keep everything running smoothly.

DISTRIBUTION

Where will we sell our gift cards?
In your brick-and-mortars, of course, and through your ecommerce site. It’s easy enough to keep your in-store displays stocked. But your online fulfillment must be automated—after all, digital gift card buyers expect instant delivery. Even online orders for plastic cards can’t be handled by someone in the back office—this fulfillment, too, must be automated.

ACCOUNTING

Can our finance team take on gift cards?
The back-office bookkeeping work associated with managing your gift card program has its own nuances, involving two-phase entries for sales and redemptions. More complex financial issues—such as sales taxes and escheatment—must also be actively tracked.

DISTRIBUTION 2.0

How can we sell your gift cards to other businesses?
Bulk B2B gift card sales are a great way to get your brand—attached to dollars to spend—in lots of people’s hands. Make sure you’re connected to a B2B gift card sales network so other companies have access to your cards for their employee rewards, sales promotions, wellness incentives, market research rewards, fundraising drives and more.

PROMOTIONS

How will we market our gift cards?
Gift card promotions can drive foot or site traffic, attract new customers, grow basket sizes, increase online conversions and build loyalty—think “buy $50+ between 8 and 10 a.m., get a $15 gift card.” Gift cards can help optimize your sales, so be sure your promotional calendar is full.

FRAUD

How will we protect our gift card program from fraud?
These days, a robust, ever-evolving security solution is a must-have. It’s especially true for gift card programs, which are frequent targets of new attacks. Your best option is to choose one of the gift card companies that offer a full array of future-proof fraud solutions as part of their comprehensive services.

CARDHOLDER CARE

Who’s going to answer cardholders’ questions?
It’s inevitable: no matter how many instructions you include, some cardholders will have questions that can only be handled by a real person. If your staff can’t resolve the calls quickly, this is another area you should definitely outsource to a gift card program management company.

Time to Decide: In-House or Outsource?

Now that you understand the ins-and-outs of running a gift card program, assess your options. If you choose to go in-house, remember that you’ll need issuing, processing and legal partners.

Let’s start a conversation.

If you don’t have the bandwidth to keep your gift card program in-house, TOTUS can help. We are a full-service, end-to-end gift card program issuer and manager. And with our processing partner, we can do all of the heavy lifting for you. You can enjoy all of the benefits, and none of the hassle.

Plus, you can also count on our decades of experience—we’ll implement best practices and brand-new technology to help you maximize your gift card sales.