How to Gain Extra Profits with Gift Vouchers

It’s October. Retail businesses have been planning their Christmas trade promotions for many months.  Have you thought about the benefits of offering gift vouchers to your customers?

Gift Vouchers are top of the Wish List

One of the best reasons to sell gift vouchers is that customers want to buy them. The Deloitte 2010 Annual Christmas shopping survey, revealed:

“Gift vouchers have now become the most wished for gift in five European countries (including Ireland) in 2010, highlighting how consumers now wish to receive gifts with a high utility value.”

Unused Vouchers - The Gift that keeps on giving

When a customer cashes in a voucher, you stand to make your normal margin on your goods or services. However, the beauty of gift vouchers for a business lies in vouchers that are never cashed in. These represent total profit for a business, given that you receive payment for goods or services that are never delivered or claimed. This is known in the trade as “breakage”.  Mind you, the term “bounty” would be more accurate as unclaimed vouchers are a gift right back to retailers.  The rate of breakage is 10% to 19% according to Grant Thornton’s 2011 report: Gift Cards; Opportunities and Issues for Retailers . That’s 10% to 19% straight onto your bottom line, a handsome reward for selling what your customers want.

Sales Uplift

When a customer cashes in a voucher they often buy something that is greater than the value of the voucher, contributing the balance themselves. These additional sales are called “sales uplift.” One of the larger providers of gift vouchers in Ireland. One4All, estimates sales uplift at 40%. So if a customer has a voucher for €50, chances are they will spend €70 in total and contribute another €20 to your sales. You are not obliged to issue change on foot of a voucher, but, to keep your customers happy, you might consider issuing a new voucher for the change, if the full value of a voucher is not used.

Be Fair

If you do decide to put expiry dates on your gift cards, then make sure the date is clearly displayed on the voucher at time of purchase. Otherwise you could end up in the small claims court. The National Consumer Agency issues advice to consumers about not getting caught out with vouchers. It would be wise to read their advice to ensure that you are being fair to your customers.

One thing is for sure, gift vouchers are very, very popular and represent an opportunity to improve your profits and keep your customers happy to boot.

Whatever you sell, would you consider selling gift vouchers this year?