Should My Business Offer Gift Cards?

Kids love them. Adults prefer them. And it doesn’t matter how last minute the shopping trip is, they’re always the “right choice.”

Gift cards have become the mainstream gift of choice in the US, and businesses not offering branded cards are potentially losing a great deal of money during the holidays.

Yesterday we looked at five questions to answer before starting a small business. Today, we ask two questions every established business should answer.

Does your business offer gift cards? If not, should your consider them?

According to the National Retail Federation‘s holiday survey from 2011, eight in ten holiday shoppers planned on giving gift cards last winter. Furthermore, almost 60 percent of those surveyed indicated they preferred receiving gift cards.

Last year’s gift card spending was up as well. Last year’s expectations were that holiday shoppers would spend the highest amount on gift cards since 2007, spending an average of $155.43 on gift cards, up from $145.61 in 2010.

The value of an individual gift card is rising, too. Last year, consumers spent an average of $43.23 per card, up from $41.48 in 2010. In total, gift card spending rose 18 percent for the 2011 holidays.

Business owners cannot ignore these statistics, but many small and new businesses don’t know how to join the gift card game in time for the November and December rush.

Here are a few thoughts for business owners considering gift cards this year.

  • Gift cards can be a recommendation.

Popular destinations for gift cards include the bigger players – department stores and electronics stores – but some of the most popular places are bookstores, restaurants and coffee shops. For local shops, the purchase of a gift card can be one customer’s way of recommending your business to a friend.

  • Offering gift cards can lead to more business.

Once gifted, a gift card can bring a new or repeat consumer into your store on more than one occasion, and a positive experience can lead to that gift card recipient coming back after the card has been exhausted.

  • Gift cards are excellent marketing.

If a customer has a branded gift card in their wallet, they’ll see your logo every time they reach for money. It’s hard to argue with quality brand placement like that!

  • Choice is king.

In these tough economic times, people are looking for value more often than not. A gift card not only allows the recipient the ability to choose what they ultimately receive, but also affords them the opportunity to make the dollars given last longer by shopping at the right times.

At Popular Community Bank, we have partnered with First Data to provide our business customers outstanding expert advice and support from a group of specialists in gift card sales. If you have any additional questions on how to begin offering gift cards today, click here.

There are a few important things every business owner needs to know before offering gift cards, though. In early 2010, consumers received protection under Title IV of the Credit Card Accountability, Responsibility and Disclosures Act (CARD Act), which passed in 2009. This Act, in addition to more recent guidance from the Federal Reserve Board and IRS, will require any business that offers gift cards to be aware of the restrictions and potential tax implications. We recommend you speak with a professional tax advisor if you plan on offering gift cards.

Banco Popular North America, its parents, affiliates, subsidiaries, agents, or employees do not provide tax or legal advice. Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances. The information contained in this Internet site is for general informational and educational purposes only and should not be construed as professional advice or a legal opinion on specific facts or circumstances. The information or opinions contained in this Internet site should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular product or service. Links to other sites are for your convenience in locating related information and services.

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