Boost in sales as gift cards take starring role in combating cost of living crisis
Despite the ongoing impact of the cost of living crisis, inflation and rising interest rates, consumers are using more gift cards and vouchers than they did last year, according to new research from the Gift Card and Voucher Association (GCVA) and KPMG UK.
Data from the GCVA’s members shows that gift card and voucher sales in the first six months of 2023 have increased 8.4% on a like-for-like basis contributing to a resilient performance in H1, demonstrating their enduring appeal and increasing diversification of use.
The leisure sector saw the strongest growth, experiencing like-for-like growth of 16% as consumers sought to gift a treat as the cost of living crisis continues to take its toll.
However, retailers also recorded impressive sales growth of 8%. Grocery retailers led the way, with sales of gift cards and vouchers increasing by more than a quarter (26%). Consumers have utilised gift cards to support loved ones with essentials and employers have also provided staff with means to make savings. Whilst fashion retailers did see minor growth overall, many have been impacted by people cutting back on non-essential spending.
Sales growth within retail was largely driven by B2B, reflecting the continued rise of gift cards schemes as an employee value proposition, enabling staff to access discounts and offers as pressure on household finances intensifies. Rewards and incentives also boosted sales, with businesses seeking to encourage consumers to spend with them as shoppers become increasingly selective.
Use of digital gift cards continues to grow with consumers appreciating the convenience and immediacy of products that can be added to online accounts or mobile wallets. Sales of digital gift cards now represent 48% of the market and it’s expected that they could soon overtake sales of physical gift cards.
Gail Cohen, director general of the Gift Card and Voucher Association (GCVA) said: “The gift card market has demonstrated unwavering resilience amidst a cocktail of challenges. Both retail and leisure have seen commendable growth demonstrating the enduring popularity of gift cards and also their role in helping people to reduce the impact of the cost of living crisis.
“Significant growth of B2B sales reflects increasing appetite from businesses to support and reward both customers and employees. Gift cards offer a flexible way to promote loyalty, allowing recipients to choose whether to discount everyday essentials or give themselves a treat.
“Cash-strapped consumers have also found gift cards are an excellent way to access discounts or to avoid price inflation by capping their spending on gifts.
“Also, continuing the post-lockdown trend, gift cards for leisure are an increasingly popular choice. Whether that’s for holidays and trips out, or for home entertainments such as video streaming or games, leisure gift cards remain a valued option. They allow people to enjoy a treat, rather than a cash gift that might be swallowed up by everyday expenses.
“The versatility of gift cards puts them in a unique position to support people in a multitude of ways and the growth in sales is testament to that.”
Don Williams, Retail Partner at KPMG, added: “Performance of gift cards in the first half of the year against challenging market conditions, high inflation and the cost of living crisis is encouraging and provides strong momentum going into the second half of the year.
“Consumers have returned to stores following the rise in digital activity sparked by Covid lockdowns. Yet the investment in digital continues to bear fruit as digital sales have increased by 15.2%. As consumers increasingly shop across real word and digital channels, the industry must continue to invest in ensuring the customer experience is seamless across all platforms.
“B2B continues to be a growth opportunity as companies seek to provide staff with access to attractive discounts and offers to help with the inflationary environment.
“The pressure on consumers’ pockets is expected to continue as inflation rates moderate. The industry needs to continue to focus on how it can help consumers with that challenge either personally (self-gifting) or through gifting to loved ones. Additional divergence of performance in category is expected rather than by category, for example within fashion, grocery, and homewares, with protection as well as convenience likely to be an increasing consideration for buyers of gift cards as we progress through this year, into 2024 and beyond.”
