How Coronavirus Could Change the US Gift Card Landscape

The stay-at-home orders that have been issued in most US states amid the coronavirus pandemic have shuttered all but essential retailers, creating a disproportionate impact on small and local businesses. As a result, these businesses, and the payments providers that serve them, have looked for creative ways to help maintain cash flow and allow these companies to open their doors following the pandemic.

To help these businesses stay afloat, payments providers and fintechs are enabling merchants to easily sell gift cards for use after the pandemic.

These initiatives benefit both parties by strengthening merchants’ cash flow and potentially helping providers acquire customers. Small- and medium-sized business (SMB) alt lender Kabbage, restaurant point-of-sale (POS) provider TouchBistro, and Square all offer easily accessible and low- or no-cost gift card offerings that merchants can enable, for example. For merchants, the proceeds from these gift cards offer an instant cash influx that can help cover costs until brick-and-mortar stores reopen. And for payments providers and lenders, these sales can help maintain relationships with clients or even bring new merchants into the fold.

Preliminary data shows that sales are on the rise, indicating that these offerings could be working. Gift card provider Blackhawk Network found that e-gift sales are up 44% annually and gift card e-commerce sales are up 54% in the same period. And consumer interest remains: 38% of respondents to a Blackhawk survey are interested in using gift cards or e-gifts for charitable action, and just over a quarter (26%) are interested in buying one from a business they care about. Rising sales, usage, and interest indicate an upward trend in gift card engagement that could persist through the pandemic.

Though economic uncertainty makes it challenging to know the extent to which the gift card campaigns will work, they could reverse the expected negative trend in gift card spending. In-person gift spending was on the decline before the coronavirus pandemic, with customers turning to other methods, like digital gift cards. Prior to the pandemic, we predicted in-store gift card spend to decline slightly from $135.2 billion last year to $132.5 billion this year, as part of a broader downturn. And though we don’t know how much the pandemic will move the needle on in-store gift card spending — since not all customers may be able to use their gift cards if some retailers have to permanently close their doors, and in-store spending is set to decline overall — the current gifting trend will likely help soften the blow, at least in 2020 and perhaps into 2021.

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