Online sales of gift cards and eVouchers soars during second half of 2020 as gifting goes virtual

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Year on year sales of online gift cards and eVouchers soared by 117% during the second half of 2020 as Covid restrictions made it more difficult for consumers to shop for physical gifts.

According to the latest analysis by the Gift Card & Voucher Association (GCVA) and KPMG UK, there was strong growth in the online channel for both Business to Consumer (B2C) and Business to Business (B2B) gift cards and vouchers with B2B growth of 292% year on year, and 34% growth in B2Chighlighting the significance and resilience of the B2B growing market.  The market share for digital products doubled in the second half of 2020 to 32.5% (from 16.6% H2 2019).

The research found that sales across all other channels declined in 2020, reflecting the switch to online shopping during the pandemic. Direct sales declined significantly for both retailers and leisure operators. However, leisure operators took the biggest hit with B2B direct sales declining by 74% – significantly higher than the retailers B2B decline of 14.3%. 

Store specific gift cards have increased in popularity, now making up 60.4% market share of sales. Whilst sales of open loop cards makes up the largest like-for-like growth in 2020 (19.5%) for redemption types, closed loop purchases remain the most popular by value (£1.1bn) and has grown by 15.1% over the year.

According to the most recent GCVA figures customer redemption rates remain high, with more than half of shoppers redeeming their gift cards within one month, and 98.6% within a year of receipt. 

Gail Cohen, director general at the Gift Card and Voucher Association, said: “There is no doubt that gift cards and vouchers have grown in stature over the last 12 months, with digital vouchers coming to the rescue of consumers looking to purchase that special something for loved ones in a challenging time. 

‘’We have seen an impressive growth story in the gift card and voucher market over the last 4-5 years, and this £7bn UK industry presents a real opportunity for retail and leisure businesses, as well as the wider economy, to grow. They also had a key part to play in delivering free school meal programmes across the country.

“The growth and resilience of B2B sales demonstrates that this industry has progressed significantly in recent years and is no longer the outdated consumer-only industry we think we all know. With the retention of employees top of mind for many businesses – especially with the furlough scheme continuing – finding innovative ways to reward staff will only grow in importance. Indeed, the GCVA has recently launched the #giftcard500 initiative, calling for the increase in the tax-free employer gifting allowance from £50 to £500.”

Commenting on the latest figures from a retail-perspective, Paul Martin, UK head of Retail at at KPMG, added:  “Performance in the gift card and vouchers market very much mirrors the activity that we have seen on the high street over the last year, with sales of physical cards bought in store falling as digital gifting saw impressive growth. 

‘’There has been a change in the status of gift cards which have re-purposed themselves, particularly with Generation Z consumers with their passion for technology and gaming. Digital innovation has been significantly fast-tracked allowing consumers to manage balances and is proving to be a useful tool in establishing a direct relationship between operators and their consumers.   

“With Covid restrictions in place for at least the next few months, gift card and vouchers will continue to provide consumers with a viable alternative to physical gift buying. Retailers also have an opportunity to build a direct relationship with their consumer and adapt their offering to changing consumer behaviours.  Smaller independent retailers have been proactive in offering gift cards seizing on the consumer desire to support their local businesses, and this is a great opportunity to reach new customers and build a stronger client base in time for when the shops re-open later in the year.” 

The retail sector saw growth of 14.4% like-for-like sales during 2020, compared to leisure sector’s decline of 47.8%, reflecting the impact of Covid on the leisure industry..

Additional key findings from the latest UK Gift Card and Voucher Sales Analysis and Outlook: H2 2020:

·            Overall there was growth of 10.8% in like-for-like volumes for the half year across all sectors, channels and product types, showing signs of recovery since the COVID crisis.

·            Echoing the trends witnessed across consumer industries in 2020, restrictions and lockdowns across the UK resulted in more than £866m was spent on digital and eVouchers in 2020, with £600m spent in the last six months of 2020 alone

·            Business-to-business (B2B) sales – such as those used by employers to reward staff – were up 36.3% in the last half of 2020 alone, when compared to the same period in 2019

·            Sales of physical gift cards declined by 9.8% as the stores selling them were mostly closed in key Christmas shopping months.