Prepaid gift cards are not a new thing to most of us in the United States. In fact, the US has been seeing a steady rise in the prepaid card industry for the last 20 years. There are many kinds of prepaid cards to choose from: phone cards, gift cards for local businesses, or even gift cards backed by major credit card companies.
These common items not only represent a large, and growing industry; they’re also a steady source of reliable revenue for many convenience store and gas stations.
Why Prepaid Items?
In short: customers love them. They’re an easy gift, especially at the last minute. While prepaid cards might seem like a heartless gift to some, many people truly enjoy being able to purchase whatever they want thanks to a friend.
A survey by the National Retail Federation (NRF) found that for the past nine years in a row, gift cards were the most requested gift during the holiday season. Being able to purchase a prepaid card for just about anything allows the gift giver to not struggle with trying to find the perfect gift; instead, let the recipient purchase what they want!
The numbers back up the survey’s findings. The three largest holidays for prepaid-card-purchases in order are Christmas, Mother’s Day, and Father’s Day. Not exactly “small holidays,” these are some of the biggest gift giving holidays of the year.
What’s In It For You?
Essentially, prepaid cards purchases mean guaranteed money in your store’s pocket. Whether customers use the prepaid card is an entirely different question. An estimated 50% of all gift card recipients redeem their cards within the first 30 days of receiving them. About 90% do so within 90 days.
When it comes to cards that are intended for use at another business, your sale is easy. Simply load the card, take your % and enjoy the extra revenue. However, gift cards that are specific to your business have an added bonus to them.
Guess what? Gift card recipients often wind up spending more than the face value of the card. This means that stores are generating even larger sales numbers than the value of the gift cards that they sell.
This means more money for your store if you’re selling gas or shopping cards. The odds are that the recipient is going to spend more than the card is worth. For higher value gift cards, the odds are also in favor of the customer making multiple visits.
It’s Hidden Money
Now, while people spending more in your store certainly has its benefits, there is another often-over-looked benefit of selling prepaid proprietary cards: many go unused in various degrees.
Not everyone is as diligent about making the best use of their gift card. Many people leave gift cards hidden in a desk drawer, or the back of a wallet. This means many cards go unused for months, while an equally surprising number go unused forever. There is also an unsurprising number of cards that get thrown away or forgotten with a few cents left on the card.
While that is certainly not a number to bank on, it does happen rather frequently, and that means your business never pays out on value of that card.
Think of it like this:
Customer A purchases a $50 gas card for a friend. As far as your gas station is concerned, that customer may as well have just purchased $50 worth of gas. Your store has received the payment either way.
That card, let’s call it a gas card, is gifted to a friend or family member who may, or may not even use it at all. If they do, they’re likely to make more than one trip to your gas station. Odds are good they’ll purchase something else.
Depending on the value of the card, there’s also a chance that the amount on the card isn’t enough to fill the tank on the first or second trip. As a result, the customer may wind up purchasing more.
Ways to Boost Sales
Simply put, the easiest ways to boost sales of prepaid cards are to make them visible, and to instruct employees to talk them up; especially around the major holidays. Gift cards represent a significant profit center for your business, so be sure to monitor and track sales, especially during high volume times of the year.
Read more about Convenience Store Tips here.
