How do businesses do gift cards?

Growing your business can be tough. With so many other merchants in your area offering similar products and services, attracting and retaining customers can be quite the challenge. In many cases, your loyalty and incentive programs are the main opportunities you have to set your business apart from the rest. Among the most impactful are gift card programs.

Running a gift card program serves two purposes: increasing revenue and improving customer loyalty. When you’re seeking a new and creative way to give yourself a leg up on the competition, a gift card program may be the solution you didn’t know you needed. 

Buckle up: we’re going to teach you everything you need to know about gift cards. In this post, we’ll cover:

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How do gift cards work?

Using a gift card is extremely simple. 

When customers purchase a gift card in-store, typically:

• An employee collects payment up front, as in any other transaction

• The employee then selects the gift card program from the POS and swipes a new gift card through the terminal

• The employee keys in the dollar amount on the POS system to processes the payment

• A receipt with the card value is printed, which can then be presented with the card to the customer

When a customer chooses to redeem a gift card in-store:

• An employee will take the card, as with any other payment type

• The gift card option is selected on the POS interface

• In similar fashion to chip-less credit cards, the gift card is run through the card reader with its magnetic stripe

• The

  merchant account processor

  takes care of the approvals and the purchase balance is removed from the card

• A receipt prints to indicate the remaining balance

• If the purchase depletes the full balance of the gift card, an alternate payment method such as a credit card may be required for the remaining transaction balance

• The customer receives their card back, or, if the balance is used in full, the employee may dispose of or recycle the card

When a customer wants to purchase (and redeem) a gift card online (an egift card):

• A shopper visits your online store and adds a gift card to their cart, either selecting a value or inputting a custom value

• They pay for their cart as usual

• If they bought a digital egift card, an email with the code will be sent immediately

  • If they bought a physical gift card, you’ll ship it to them the way you’d ship any other order

• Using either the digital code or the numbers associated with the physical gift card (either on the card or on the accompany receipt), the shopper pays for their next purchase online by selecting gift card at checkout

What is a gift card program?

A gift card program allows customers to buy cards that carry a small balance to be used in your business, usually at a later date. Similar in size and appearance to a credit card or debit card, gift cards are typically made of recyclable PVC plastic and can be loaded using a POS system with gift card capabilities.

In the grand scheme of commerce, the gift card concept is relatively new. While gift certificates have had a long history in retail shops and restaurants, cards themselves are only several decades old. The original gift cards, introduced in the 1980s, were thin pieces of plastic that could be used to track purchases and redemptions.

The appeal of this type of loyalty program began to gain momentum in the 90’s, replacing previous gift certificate systems, as stores quickly realized that these loyalty cards not only enabled the tracking of sales, but they provided free revenue from the volume of cards that went unredeemed and customers who spent over the value of their cards.

Gift card programs are popular with shoppers. According to Yahoo Finance, the global gift card market is expected to be worth a staggering $2.6 trillion by 2030. That’s a compound annual growth rate of 12.3% over the period they analyzed, from 2022-2030. 

Why gift card programs?

With so many other ways to drive business, from successful marketing campaigns to loyalty and discount programs, you might be wondering how a gift card program would benefit your business.  

Do businesses make money on gift cards?

Yes—for two reasons.

First, someone using a gift card isn’t getting something from your shop for free. The item was prepaid, and now they’re cashing in. Businesses don’t lose money by honoring gift cards.

Second, and most important, 65% of gift card users spend more than the face value of the card. Gift cards are a way to get shoppers in the door, at which point they’re likely to want more. 

Do gift cards help growing businesses?

Gift cards help with customer acquisition. They’re a way to introduce new customers to your business and to reinforce loyal customers. 

If a shopper has never visited you before, a gift card provides them a reason to. Once they’re in the store, you have the chance to make sure they come back again and again. And, with well-designed gift cards, featured on the front and/or back will be your brand—so you’ll reinforce your business’s identity every time they see your card. 

Even if a gift card recipient isn’t a new customer, getting a gift card can help remind them of why they like your business and give them an excuse to visit sooner rather than later.

Why are gift cards the best for business?

Offering gift cards to your customers can help you: 

• Increase sales and generate cash flow, regardless of whether cards are redeemed

• Bring in new business, especially when given as actual gifts

• Promote impulse buys, as shoppers are more comfortable investing in additional goods or services when part of the purchase is covered

• Improve brand awareness, as most gift cards are branded with logos and business colors

• Offer real-time tracking, simplifying reporting and management

• Possess superior security measures to reduce fraud and minimize duplicate usage

• Offer speedy transactions with immediate benefits to the user

• Track sales trends and monitor outstanding activity

• Offer an easy promotional gift you can use to entice loyal customers to keep shopping

Affordable and practical for you and your customers, gift cards can provide plenty of opportunity for your business. With so many advantages, the better question is: why not gift cards? 

How can I sell gift cards for my business?

Starting a gift card program is relatively simple and affordable. Most retailers, especially modern operations utilizing high-tech POS systems and other customer loyalty programs, will have few issues in setting up gift cards for their business.

Despite this, launching a gift card program will require some minor preparation and considerations. 

Select a gift card system

Most modern POS systems offer gift card integrations that provide comprehensive tracking such as redemption totals by location or the sales history of a gift card. To ensure maximal functionality, search for programs that come with:

• Transaction reports

• Redemption detail reports

• Outstanding balance reports

Purchase gift cards

Some gift card business vendors will offer access to cards, but others will require you to purchase plastic gift cards from a third-party vendor. If you need to purchase your own cards, be sure to select cards that allow custom designs for branding purposes. Buy cards in an adequate quantity to ensure access for all guests who may want one.

You can also offer digital sales. In this case, you don’t need to sell physical cards. Instead, you issue numbers or barcodes—digital codes—that can be used online or from a smartphone. This is most effective for companies that operate primarily in the ecommerce space, but some companies are beginning to phase out physical gift cards entirely in wake of consumer concerns about plastic gift cards.  

Know the laws

All gift card programs run a little differently, but all must comply with local and national laws. For example, federal law in the United States prohibits gift cards from expiring for at least five years from the time of purchase. Similarly, inactivity fees can’t be charged in the US unless the card has been unused for at least one year. Note that state laws that provide more protection override the federal laws—for example, gift cards can’t expire at all in California.

In Canada, most gift cards legally cannot expire at all, though some provinces allow expiration if they’re promotional gift cards (given out as part of a promotion or loyalty program reward instead of purchased), prepaid credit cards or for a specific service, like a haircut. Inactivity fees are not allowed at all either, unless the gift card is actually a prepaid Visa or MasterCard.

Before implementing anything like purchase limits, usage periods or any other stipulations, be sure to review all regulations thoroughly. If your business is a franchise, go over all company policies on revenue treatment and reporting before moving forward. 

You should also be aware of your liabilities when certain gift cards are not redeemed. Unfortunately, not every gift card sold will be used, and if those gift cards are closed loop—more on that later—then you’re responsible for legally moving the money involved to a default owner. Regulations vary by jurisdiction, so ask your accountant what you need to be recording.  

Train employees

If you’ve never used a gift card program before, your employees will need to understand the ins and outs to avoid improper use or challenges when working with customers. Be sure all employees know how to run cards, sell and load cards, as well as advertise them to customers. 

Track usage

If you don’t know who’s buying your gift cards or in what quantities, how can you know that your program is working? Rather than looking the other way and assuming everything is going according to plan, spend plenty of time going over the statistics involved with use, like sales versus redemption and total gross sales over specified time periods. 

Gift cards for my business: what are the options?

Gift card programs range from small, straightforward operations through your bank to multifaceted offerings from high-tech POS systems. How you choose to proceed is up to you, but be sure you consider all necessary functions before making a decision.

In general, gift card programs come in two distinct forms: closed loop and open loop. 

This table offers a handy breakdown of the two.

Usability

Restricted for use only at your business, branded with your logo.

Can be used anywhere like prepaid credit cards.

Tracking

Transaction tracking is possible through integrated gift card programs and POS reporting tools.

No tracking capability for businesses, making it difficult to assess the performance of gift card programs.

Expiry & Fees

Long expiry time or no expiration (Canada), with no fees for use.

Legally distinct from gift cards, subject to expiration, activation, and inactivity fees, making them costlier to use.

Customization

Options include merchant bank cards issued by payment processors or gift card vendor cards from dedicated gift card service vendors. Limited design options with merchant bank cards.

Offers customization options for designs with gift card vendor cards, although compatibility with POS systems needs to be ensured.

Customer Benefits

Long-term usability with no fees, ensuring a pleasant experience for customers.

Flexible usage but subject to potential fees, expiration, and lack of tracking may discourage repeat usage or hinder customer experience.

Closed loop

A closed loop gift card for your business is exactly that: for your business. These are cards that can only be spent with you, branded with your logo. Because they’re a distinct payment method unique to your store, you can track their use as long as you have an integrated gift card program.

With integrated cards, you can measure many aspects of your gift card program using your POS system’s reporting tools, rather than those of a separate tool. Reports can be broken out by just about any set of criteria, including employee ID, terminal number, date, transaction amount and type. This helps you to keep track of your program every step of the way. 

Closed loop gift cards benefit customers by having a long expiry time (US) or no expiration at all (Canada), and having no fees for use. 

There are a few subtypes of closed-loop gift cards:

• Merchant bank cards:

  these are closed-loop cards issued by your payment processor or merchant bank, if they have that option. They’re sure to work with your payment system, but many have limited options for design and processing options.

• Gift card vendor cards:

  these are closed-loop cards issued by a dedicated gift card service vendor. They offer you a lot of customization options for designs, but may not work with your POS—make sure the vendor you pick has a connection with your system. 

Open loop

An open loop gift card can be used anywhere, because they’re actually prepaid credit cards. 

While these cards give customers the most flexibility, they’re not enough for businesses to rely on instead of closed loop cards. You have no way of tracking their use, which means you can’t see how well your gift cards are performing. And you have no guarantee customers will come back to you to use the balance of their card.

Open loop gift cards have downsides for customers as well. As they’re legally distinct from gift cards, they’re allowed to expire. They have activation and inactivity fees, which makes them costlier to use than closed loop cards.  

How to run a gift card program

Once you’ve picked your gift card program, it’s time to ensure implementation goes smoothly. There are right ways and wrong ways to proceed with gift cards, so take time to consider all aspects of preparation and use.  

Establish employee policies

Employees need to know everything about your gift cards, including how you plan to advertise them.

In many cases, your employees will be the most valuable marketing option you have in your arsenal, sharing the perks of your program to everyone they encounter. If you operate a restaurant, have your employees memorize a pitch to give when they mention dessert before bringing the bill—or advertise your gift cards with the bill as customers are paying. If you run a retail store, urge employees to mention gift cards before closing a sale. When advertising becomes part of your process, selling cards will become the new normal. 

Set goals

You’re not investing in gift cards for your business just to have them around. To ensure optimal results, it’s important to set goals that you can use to track performance. For example:

• How much revenue do you want to generate?

• How many customers should buy gift cards?

• What ratio of purchases to redemptions would you like to accomplish?

Provide online access

Customers like to know the ins and outs of their gift cards. Instead of handing over a card, encourage them to get involved. 

When possible, allow customers to access cards online, check balances and make online purchases. This expands your cards from a one-dimensional in-store program to an alternative method of engagement. 

How can I increase gift card sales for my business?

Gift cards are a great way to drive revenue and bring customers back to your store, but they don’t always sell themselves. Some businesses are content with limited sales, but if you want to build a successful gift card program, a little creative thinking and additional marketing may be required. 

While there’s no need to use every method under the sun, changing up your promotions and advertising techniques to account for gift cards can increase sales. 

Market online

How will your customers know to buy your gift cards if you aren’t making them aware of their availability? Advertising online is an excellent way to market. It offers significant potential in exchange for a small investment, gives you plenty of opportunities to target your key demographic and helps you spread the news in a sharable manner.

If at all possible, make gift card purchases available online as well. When you incorporate a purchase link into your marketing, you’re far more likely to benefit from impulse buys. 

In fact, you can even optimize your website to boost gift card sales. Ensure that gift cards are prominently displayed on your homepage and accessible through a dedicated tab or section. Use high-quality images and clear, enticing descriptions.

Consider implementing a user-friendly interface where customers can choose different denominations and styles. Additionally, make sure the purchase process is straightforward, with options for customers to buy digital or physical cards and personalize them for the recipient.

For instance, Lightspeed customer Melissa Joy Manning has dedicated a section of their website to purchasing gift cards. It’s seamlessly integrated into the website, making it easy for customers to purchase a gift card as an add-on.

Market in-person

It’s often a lot harder to say no to someone in person than it is over the phone, email, or text. As such, marketing in-person can trigger the results you’re seeking.

Whenever you or your employees check out customers, be sure they mention your gift cards. In addition, set up signs in your store, like banners out front or displays on the checkout counter.

Notify all customers

If you want to see sales rise, you should never allow a customer to have an interaction with your business without making your gift card program known (within reason, of course). 

Talking to customers in person, sharing on social media and putting banner ads on your website are all great ways to spread the word. Another great way to grab attention is to display physical gift cards by your registers and announce the program in your email newsletter. No matter how you choose to advertise, make sure everyone you encounter knows about the program.

It may seem like overkill to make your gift card presence unequivocally known, but you never know who’s going to make a purchase. To be successful, it’s crucial to let no stone go unturned. 

Establish employee competitions

Despite the importance of your employees pushing the gift card program, you may run into resistance. Not everyone is a natural salesperson, and some team members won’t necessarily enjoy the prospect of attempting to make a secondary sale.

To inspire all your employees, consider implementing an employee competition. Offer the employee who sells the most gift cards a small perk, like a cash bonus, a better shift, free vacation days or some other benefit that will be in high demand. Alternatively, consider offering a financial incentive, like a percentage of sales as a bonus, to get everyone involved. 

Provide freebies

Customers love getting things for free, so give them something to be excited about. When you advertise gift cards, add a little extra motivation with a free giveaway or gift.

Instead of just promoting gift cards, let customers know they can get a little something extra if they make a card purchase of a certain amount. You don’t have to give away anything particularly valuable—a small trinket will work well. Alternatively, you can use this opportunity to move inventory that you’re having trouble selling. 

Offer discounts

Price is a primary driver for building customer loyalty, ranking above the quality of products or service among a majority of consumers. A discount can help you stay competitive, positioning your company ahead of the rest.

When selling gift cards, sweeten the deal with a promo code for a discount on anything in your store or on your menu. For example, you can provide a 20% promotional code to everyone who buys your gift cards during your pre-specified introductory period. 

Celebrate holidays

Gift cards, as the name implies, are most commonly purchased as gifts. By advertising around key holidays, you’re more likely to catch shoppers primed to buy. Promote gift cards heavily around Christmas, Hanukkah, Valentine’s Day and other events that center on gift-giving.

To get customers to buy, consider adding something to sweeten the pot, like a $5 promo card for anyone who chooses to purchase a gift card during the holiday season. 

Get creative

A cool-looking card is far more likely to sell than one with an average look and feel. Instead of scrimping on design and sticking with a name in plain text, use your skills to put together something worth buying.

When you have a pretty package to show off, your sales will reflect it. Gift card suppliers like Plastic Printers enable you to print fashionable custom gift cards no matter what your graphic design skills are.

Offer customizable options

Customizable gift cards offer a personal touch. Provide options online for customers to add personal messages, choose unique designs, or even upload their images for a bespoke card. This approach not only enhances the customer experience, but also the perceived value of the gift card. Make sure that the customization process is user-friendly and that the final product maintains high-quality aesthetics and functionality.

Collaborate with other businesses

If applicable to your business, work with complementary businesses to create cross-promotional gift cards. This strategy can expand your reach and provide added value to customers. For instance, a bookstore and coffee shop could collaborate, offering gift cards redeemable at both locations. Such partnerships not only boost sales but also foster community connections and enhance brand visibility.

How to measure the success of your gift card program

A gift card program can offer significant benefits to your business, but only if it’s performing as expected. Measuring success largely depends on the results you wish to see, like revenue increases, profit growth, repeat business or any other metrics you identified before implementation. 

Track all metrics

Assumptions have no place in business, and that includes your gift card program. Track all metrics related to usage, such as:

• Total sales:

  the number of gift cards sold.

• Redemptions:

  the number of gift cards used.

• Supply costs:

  the cost of printing and designing

  (or outsourcing)

  your cards.

• Marketing costs:

  the cost put into marketing your cards, be it through ads or printed materials.

Analyze performance vs. goals

Before starting your gift card program, you likely had goals in mind regarding anticipated overall performance. As such, only proper comparative analysis will ensure you are hitting your targets efficiently.

Rather than eyeballing results, take time to keep data organized in tables, charts and graphs. Monitor performance over time, and watch for month-to-month changes. Honing in on the specifics will allow you to identify shortcomings and come up with plans to correct them. 

Run reports regularly

As with other metrics in your business, like revenue, cost of sales and overhead costs, gift card performance should be a part of your regular reporting—be that weekly, monthly or quarterly. Periodic check-ins likely aren’t enough. Instead, incorporate gift card usage and results into all of your financial management practices.

Reevaluate objectives

As your business changes, so will your goals for your gift card program, especially if your overall corporate goals are based on growth. Periodically, whether quarterly, biannually or annually, review your progress versus original targets and reevaluate your objectives as necessary. This may mean scaling back if your initial expectations were too aggressive, or stretching goals to accommodate higher performance. 

Stay on top of accounting

Gift cards can have a significant impact on your business’s financial reporting. It’s important to record gift card sales accurately, recognizing revenue when cards are redeemed. Unredeemed gift cards (“breakage”) could potentially have financial implications, since they’re subject to varying accounting and legal requirements. Stay informed about the regulations in your jurisdiction and keep meticulous records to ensure compliance and accurate financial reporting.

How to keep improving your gift card program

Once your gift card program is up and running, you can fine-tune it to amplify its success. 

Gather customer feedback

Customer feedback is invaluable for refining your gift card program. Conduct surveys or provide feedback forms at point of sale and online. Ask customers about their purchase experience, their experience using the cards, and any suggestions they have for improvement. Analyze this data to understand customer preferences and trends, which can guide your future gift card offerings and marketing strategies.

Implement eco-friendly gift card materials and practices

As sustainability becomes increasingly important, consider eco-friendly practices for your gift cards. Opt for biodegradable or recycled materials for physical cards. Promote digital gift cards as a green alternative, reducing the need for physical production and shipping. Educate your customers about the environmental benefits of these choices and consider partnering with environmental initiatives to offset the impact of your gift card program.

Maintain strong security practices

Like any other aspect of your business, security measures are vital to protect you and your customers from fraud related to gift cards. Implement robust encryption methods for digital cards and secure coding for physical ones. Run a verification program to authenticate transactions and monitor unusual purchase patterns. It’s also important to educate your staff and customers about safe handling and usage of gift cards. Regularly update your security measures to stay ahead of potential threats.

Stay ahead of trends

Research emerging trends in gift card technology to keep your program innovative and appealing. Technologies (blockchain, for instance) could revolutionize gift card security and transparency. Augmented reality and virtual reality tools could provide new and exciting ways for customers to engage with digital gift cards. Also, consider integrating AI to personalize gift card recommendations based on customer behavior, which can improve the user experience and increase sales.

Common merchant Q and A’s

Can you use a gift card to buy a gift card?

One thing merchants who sell closed loop gift cards should keep in mind is that from an accounting perspective, gift cards are recorded as a liability to the merchant, not a sale. In other words, using a closed loop gift card to purchase a closed loop gift card is a revenue recognition concern for small business owners and in our opinion should be avoided. 

Can you use a credit card to buy a gift card?

Once you set up gift card processing for your business, you can accept any tender type approved by your processor, like Lightspeed Payments, to purchase gift cards, including cash, credit card or NFC-payments like Apple Pay. 

How do I create and design my gift cards?

Most gift card suppliers allow you to upload your artwork or personalize gift cards with templated designs via a web page or online portal, similar to how many business owners order custom business cards online. Once you design your gift cards, you can contact your supplier to place an order or submit the request via their online store. 

How do I make a gift card for my business?

So you’ve got your gift card designs ready—now you need to enable gift cards so you can make their codes.

You’ll need to enable gift cards in your POS system so you can make gift cards. Check out your POS backend for a toggle, and make sure to pay attention to any prompts to map gift cards in your accounting software.

You’ll need barcodes for gift cards—we recommend code 128 barcodes, with 6 to 16 alphanumeric characters, non-sequential (to cut down on fraud). You should be able to purchase gift cards with barcodes from your gift card supplier. 

How do you activate a gift card?

Once you set up your gift card program, you can sell gift cards the same way you would any other item at the register. POS systems like Lightspeed will prompt you to swipe the gift card through your credit card reader to activate it and complete the sale.

Do I pay credit card processing fees on gift cards?

No, you don’t pay credit card processing fees on closed loop gift cards when customers use them to pay. Your gift card program supplier may charge their own fees, however, and you’ll pay a fee if a customer buys a gift card with a credit card. 

Open loop gift cards are actually prepaid credit cards, and will have processing fees.

Gift cards for your business: get started today

A gift card program has plenty of potential for your small business, offering a new way to drive revenue without cutting down on profits. 

From expanding purchase options to attracting new customers, a robust gift card program has the potential to take your business to the next level. With these tips and tricks for design, development, implementation and management, it’s possible to see positive results in the momentum of your company.Of course, good looking gift cards are just the beginning—if you want a POS system that lets you sell gift cards easily and track usage, you might just need Lightspeed. We put you in charge of your gift cards, and your inventory, loyalty program, reports and more.

Watch a demo to find out.

FAQ

1. What is a gift card program?

A gift card program is a system that enables businesses to sell and redeem gift cards for goods or services.

2. How does gift card technology work?

Gift card technology utilizes magnetic stripes, barcodes, or electronic chips to store value and track transactions.

3. Who makes money when you buy a gift card?

Merchants profit from gift card sales, as well as third-party retailers and financial institutions.

4. Is there a gift card with no fee?

Some gift cards have no purchase fees, but activation fees may apply.

5. What is gift card activation?

Gift card activation is the process of loading value onto a card for use.

Does your business sell and accept gift cards? If not, you could be missing out on an opportunity to increase revenue, strengthen your brand, and improve customer loyalty. Gift cards are essentially a prepayment to your company, giving you the income upfront before the customer starts shopping. A gift card can be physical or digital.

How do gift cards work?

A customer initiates the purchase of the gift card, either in person or online. If purchased in person, the cashier selects the gift card program from the POS system and activates the gift card with the specified amount. The customer pays and receives the gift card as well as a  printed receipt with the gift card balance. The customer then gives the gift card to the recipient.

If purchased online, the customer inputs the amount or selects from a drop-down list of available amounts. The customer enters the name and email address of the recipient, writes a note to the recipient, and completes the payment. The system automatically sends the recipient an email with the note, gift card amount, a unique number or barcode for redemption, and redemption instructions.

Tip

Running a gift card program is easier when you work with one of the best POS systems for small businesses. Consider our best POS picks, including our Toast review.

How businesses process gift card redemptions

Customers can redeem gift cards with a physical card, a printout of a digital gift card, or even a QR code on their mobile device. For the cashier, accepting payment is as easy as selecting the gift card option in the POS system interface. The cashier will then swipe the gift card if it has a magnetic stripe, scan it if it has a barcode, or enter the gift card number manually.

The merchant account payment processor will approve the purchase if there is a balance remaining on the gift card and will deduct the amount of the purchase from the balance. If the purchase costs more than the balance on the card, the POS will alert the cashier that another payment method is required to cover the overage. 

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If there is a remaining balance on the gift card after the purchase, a receipt will print to show the remaining balance, and the cashier will return the gift card to the customer. If there is no balance remaining, the cashier can throw away or recycle the card.

Redeeming a gift card online

To redeem a digital gift card online, customers select “gift card” as the payment type at checkout. Alternatively, customers who have a preexisting account can log in and add the gift card balance to the profile. Depending on how your website is set up, purchases will draw from the gift card balance until it is depleted, or the customer can choose whether to use the gift card balance at checkout.

6 benefits of selling gift cards

There are many benefits to selling gift cards, such as increasing brand awareness and improving cash flow. Here are six ways gift cards can help your business:

1. Building brand awareness 

Since gift cards are branded with your business name, logo and message, they act as an ever-present ad for your company every time recipients open their wallets. Gift cards are among the most cost-effective marketing you can implement because they offer a compelling incentive to visit your store or website. In addition, the person who bought the gift card acts as your brand ambassador. Their purchase of the card represents a positive recommendation to the recipient.

2. Improving cash flow

When a customer buys a gift card, you get the money immediately and do not have to wait until a holiday or the recipient’s birthday to receive that revenue. If the recipient does not use the gift card or only uses a portion of the balance, your business has a lower cost of goods overall.

3. Appealing to younger consumers

According to the Consumer Pulse study by InComm, millennials buy the most gift cards, comprising 37% of gift card buyers. Gen Xers make up another 28%. Also, if your market is married women without children, you’re in luck – half of gift card buyers meet this description.

4. Expanding your customer base

Gift card recipients may not even have heard of your business before, but receiving a gift card increases the likelihood that they will shop at your store. If you offer digital gift cards, capturing the recipient’s email gives you the ability to send them advertising and promotions.

Tip

Only send promotional emails and messages to people who have opted in to your marketing campaigns. Otherwise, you could run afoul of certain laws and regulations.

5. Getting into the corporate gift market

Gift cards are great options for gifts from business owners to employees or top customers. The cards have a high perceived value but leave the specific gift choice to the recipient. According to a study by Blackhawk Network and Murphy Research, employees appreciate receiving gift cards from their employers, with 69% viewing them as a reward. [Read related article: Creative Ways to Show Employee Appreciation]

6. Boosting sales during the holiday season

Even if what you sell cannot be easily wrapped and put under the tree, you can boost your holiday sales by offering gift cards. Gift cards are a boon for all kinds of service businesses, such as gyms, salons, car washes and restaurants.

How do you start a gift card program?

Physical vs. digital gift cards

First, decide if you want to use physical or digital gift cards. Physical gift cards give customers something to present to the recipient and also serve as ongoing advertising for your business, but they are costlier and more difficult to implement. 

Digital gift cards are growing in popularity, especially in light of the COVID-19 pandemic, and can easily be used for e-commerce businesses. These gift cards are inexpensive and easier to set up.

Whatever type of gift card you choose, you will need a POS system that supports gift card transactions. Here’s a step-by-step overview of how to set up both physical and digital gift cards.

Setting up physical gift cards

1. Research gift card providers. This may be your POS system provider, a merchant bank or a third-party gift card vendor. Look for a provider that offers custom options so you can use your branding and make the gift card appealing to customers.
2. Choose a provider, then design and order cards. Once your cards arrive, put them on display and begin selling them. After a gift card is purchased, you will typically need to activate it for the customer.
3. Establish gift card policies and train your employees on them. This includes how new gift cards are entered into the system, how they can be redeemed, any limitations you have set for them, and how to promote them to customers. Make sure your policies comply with local and federal laws. For example, federal law prohibits businesses from selling gift cards that expire less than five years from time of purchase, or from charging inactivity fees unless the card has been inactive for at least a year.

Setting up digital gift cards

1. Set up digital gift cards in your POS system dashboard. Depending on your POS provider, you may be able to set up digital gift cards for free, or you may pay a monthly fee for this capability.
2. Set up your e-commerce site correctly. Make sure you’re able to sell gift cards and accept them as payment.
3. Train employees on how to accept gift cards. They’ll need to scan a printed or digital barcode, or enter a unique gift card number. Make sure all employees know how to use the gift card function in your POS system.

When customers purchase gift cards, you will usually have to pay a payment processing fee, just as you would for credit card transactions.

Tips for running a successful gift card program 

Simply ordering a bunch of gift cards does not ensure that you will get the maximum value from your gift card program. These tips can make the difference between a halfhearted program and a spectacularly successful one:

1. Enable gift cards to be part of the customer’s digital wallet.
2. If a physical gift card is ordered online, mail it out within 48 hours.
3. Enable purchase, transfer and redemption of gift cards across all channels (online, in-store, and on mobile devices).
4. Allow digital gift cards to be sent via text message. Consider working with a top text message marketing provider for this service.
5. Give customers the option to customize digital gift cards with personal notes, photos and designs, if possible.
6. Set up your website to recognize curated digital gift cards and make appropriate selections. For example, a Mother’s Day theme template might prompt your e-commerce site to suggest jewelry or other appropriate gifts.
7. Use gift cards as thank-you gifts to loyal or high-volume customers. This will increase their loyalty and encourage them to buy more.
8. Instead of offering a discount during a promotion, give customers the same amount in the form of a gift card, ensuring that they will visit your business again.

Tactics to increase gift card sales

Now that you know how a gift card program can benefit your business, here are some strategies for selling as many as possible:

• Display your cards prominently. Place your gift cards near the checkout so customers can grab one for a last-minute gift. You may also be able to distribute them to larger retailers that sell a variety of gift cards in a rack.

• Suggest gift cards to customers. Train your employees to suggest gift cards to customers who don’t know what to get someone as a gift. E-commerce sites can also display banners suggesting gift cards, both during gift-giving seasons and year-round.

• Sell gift cards at other local businesses. Contact local businesses and ask if you can partner with them to sell your gift cards at their location. Consider offering them something in return, such as selling their gift cards or displaying their brochures onsite.

POS systems that support gift cards

Many POS systems support gift cards. Here are some of our top picks.

Lightspeed Retail POS

Lightspeed Retail POS allows you to accept gift cards, but you will need a third-party gift card vendor to create and purchase them. Although you can use any third-party vendor, the barcode on the cards must be printed using EAN-13 or UPC-A standards to be compatible with the Lightspeed POS system. 

Lightspeed can accept physical and digital gift cards if you have enabled Lightspeed eCommerce. Another perk of this POS is that customers can use their gift cards both online and in-store, regardless of whether the cards are physical or digital. One downside is that there is limited customization of the email that Lightspeed sends to gift card recipients. While customers who buy a gift card online can select an image to go in the gift card email, the text of the email cannot be changed.

Square POS

Square’s POS system provides everything you need to offer gift cards in-house. You can buy physical gift cards from them with your logo and choice of background template starting at 80 cents each, or you can design your own. The gift cards have a magnetic stripe and are reloadable. Square also offers digital gift cards. You can sell digital gift cards in person or online, but you can only sell digital gift cards online. Square charges 2.9% plus 30 cents for each gift card purchased online, or 2.6% plus 10 cents for each one bought in person.

Tip

Read our full review of Square POS.

Clover POS

Clover’s POS system also provides physical gift cards in-house, with prices starting at $1 each. They also support digital gift cards that customers can keep on their smartphones. Both physical and digital gift cards can be used in the store, but not for online purchases without a third-party integration. Clover charges a processing fee of 2.5% when the gift card is initially purchased.

Tip

Read our full review of Clover’s POS systems.