Saying “thank you” drives strong growth in gift card and voucher market during first half of 2021

  • New research by the Gift Card & Voucher Association and KPMG UK shows gift card and voucher market sees 25% growth in first half of 2021
  • B2B sales dominate, representing around 75% of the market
  • B2C sales up by 19.5% compared to first half of 2020

Demand for gift cards and vouchers continued to grow in the first half of 2021, as sales were boosted 25% year on year by corporate businesses saying thank you to loyal and new customers and employers seeking innovative ways to reward staff, according to research out today.

Analysis by the Gift Card & Voucher Association (GCVA) and KPMG UK found this demand from businesses and employers drove a 26% year on year increase in B2B gift card and voucher sales.

The new research also showed:

  • B2B sales continue to dominate, representing around 75% of the market.
  • Benefits, employee savings & salary sacrifice, rewards, and incentives now account for 93% of the B2B market.
  • As operators accelerated the number of new platforms available to buyers, digital sales of gift cards and vouchers were the primary drivers of growth, with digital and eVouchers achieving a 90.7% rolling year increase in sales.
  • Online consumer sales were up by more than 50% whilst online B2B sales were up by 30% compared to the same period in 2020.

A greater proliferation of new digital channels, accelerated by the pandemic, has opened up the world of gift cards and vouchers to ‘Generation Z’ consumers looking to make purchases and redeem vouchers via apps and online.

The latest research shows that there has been a shift in behaviour as 41% of gift cards are now being redeemed online, much greater than expected.

Gail Cohen, director general at the Gift Card and Voucher Association, commented:

“There is no doubt that gift cards and vouchers have grown in stature since the pandemic hit and have been increasingly used by the public and private sector to say thank you to customers and staff. We are seeing a growing number of corporate brands using gift cards as part of their strategy to attract new customers, whilst employers are increasingly using them as an innovative way to reward and retain staff forced to work remotely or being placed on furlough.

 “As with many other areas of life, the pandemic has accelerated the move towards online channels, and permanently cemented the greater influence of digital purchasing and redemption. EVouchers and gift cards provided a solution to the problem of lockdown for many consumers looking to purchase that special something for loved ones when the high street remained closed.

“Sales of digital and eVouchers now account for just over a third of the market and over the coming years, there seems little doubt that digital formats will continue to grow. Our industry is fantastic at responding to market demand and, from this, it seems clear that mobile wallets and apps will be a major growth and development area moving forwards, with over two-thirds of our members working towards digital wallets and apps becoming the most popular digital offering in the future.”  

Retail vs Leisure, online vs in-store

The retail sector continues to dominate the gift card and voucher market – accounting for 97.3% of sales, whereas the leisure sector currently represents only 2.7%. With most leisure gift cards needing to be physically experienced to be enjoyed, the sector has continued to be hit harder than retail through the pandemic. That said, with the gradual re-opening of the UK through the second half of the period leisure operators recorded a like-for-like increase of 8.3% in H1 2021 as consumers unleashed pent up demand for social and leisure activities.

Consumers also increasingly embraced greater choice in where and how their gift cards were spent, with ‘open loop’ cards and vouchers having grown by 19.4% – breaking the 25% market share barrier – suggesting these continue to grow in popularity and become more widely offered.

Store specific gift cards and eVouchers remain the most popular format of gifting, accounting for two thirds of the market (66.3%). These ‘closed loop’ sales grew by 28.2% on a like-for-like basis, outstripping the growth of other formats. Multi choice formats saw a rise of 11.6% year on year, potentially as a result of them being much more difficult to redeem online.

Whilst digital sales nearly doubled on a rolling year basis, sales of physical gift cards remain the most popular with 61.7% market share, and the majority being redeemed in store. As stores started to re-open in the later months of the period, transactions directly to consumers started to recover with like-for-like sales growing by 19.5% in the first half of the year. With lockdown restrictions easing, the strong demand for physical gift cards is reflective both of greater ease in physical purchasing, and of physical gifting. Consumers heading out to purchase physical gift cards also helped to drive footfall to high streets as Covid-19 restrictions eased.

Mobile wallets have also been identified as a source of future growth, with a third of GCVA members actively working on the provision of mobile wallets and a further third either considering it, or having ruled it out for strategic reasons.

Paul Martin, UK head of retail at KPMG observed : 

“The performance of the gift card and voucher market is extremely encouraging, with the sector having thrived amidst challenging market conditions, and continuing to go from strength to strength. The areas of growth in this industry very much mirror the activity that we have seen on the high street over the last year, with digital sales recording particularly strong growth.

“Over the coming years, there seems little doubt that digital formats will continue to grow and retailers have an opportunity to attract a growing number of younger, tech savvy consumers to the gift card and voucher market. Retailers that do not embrace digital and mobile app capabilities in addition to their physical footprint will increasingly struggle to compete.

“Customer demands and their use of channels have been evolving rapidly over recent years, resulting in increased complexity for retailers to deliver with limited capabilities and capital. Shopping through mobile devices has become more pronounced, whilst buying through apps rather than websites is becoming more common, and usage of mobile wallets for payment is increasing too. However, the retail sector has moved slowly in terms of provisioning gift cards into mobile wallets and is an area where activity is likely to need to accelerate to keep up with customer demand.

“As the market continues to reshape itself in the wake of COVID-19, the ability to use data to gain a deep understanding of their markets and drive profitability will become an increasingly critical differentiator of retail performance.”

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