The years 2006–2008 can be noted as years in which third-party gift card malls have become available in nearly every retail store type in the U.S. Drugstores, grocery stores, and convenience stores have been equipped with gift card malls for a total of nearly 200,000 retail locations.

Sales in these gift card malls grew 80 percent in 2007 and though the expectation for 2008, especially the second half of the year, is slower due to the recent economic downturn and less consumer spending, we still expect a reasonable and exciting growth rate.

Retailers are excited – the relatively small footprint for the gift card mall allows retailers to display hundreds of cards, and the sales per square foot outperform many other products in the stores.

Recognizing the current economic situation and the state of consumer spending, we predict that gift card sales growth will slow down significantly over the next few years as buyers will look for value when purchasing a gift – it’s all about the most bang for the buck! At the same time, retailers need to perform better across categories in their stores to absorb the belt-tightening due to lower overall sales.

Does this mean a grim outlook for gift card shelf space; with margins already fairly low (how much margin can you make exchanging cash for plastic)? We do not believe so – we already can see developments in Costco, where a $100 gift card package for four Starbucks gift cards sells for $75. Driving the consumer to this category with value is the name of the game. Many card issuers, though, will have a hard time following this example due to the fact that the issuer does not know what actual product will be purchased with the gift card. In our opinion, these specific gift card limitations will open the market for a new category of value-driven offers that are sold in the gift card environment – the next generation value (gift) card.

Smart Circle has developed a leadership role in the past 18 years in developing programs with local businesses all across the U.S. and Canada to drive new consumers into their restaurant or spa, concert seats or sports events – any business in which filling excess capacity is part of the solution to higher overall margins is a potential Smart Circle client.

With a portfolio of thousands of value-driven offers to consumers, Smart Circle is positioned uniquely to “hijack the gift card shelve space” for a higher margin and consumable item – which should result in exponentially more profits per square foot for the retail partner that operates a gift card mall.

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This entry was posted on Monday, April 27th, 2009 at 4:35 am and is filed under gift cards, retail. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.