Gift Cards Market Analysis

Gift Cards Market (Global, 2024)

Introduction

The gift card market has become a dynamic and growing sector, reflecting changing trends in the gifting and shopping spheres. A growing number of industries are now offering gift cards. The market is characterized by a variety of products and formats, from physical cards to digital ones, catering to different age groups and occasions. And the increasingly digital nature of gift card purchases and redemptions is enhancing the convenience and attractiveness of gift cards, making them a popular choice for both consumers and businesses. This report examines the underlying trends and factors shaping the gift card market, providing valuable insights for all market participants.

PESTLE Analysis

Political

In 2024, the gift card market is affected by various political factors, such as government regulations on consumer protection and financial transactions. For example, the United States government has a regulation that the expiration date of gift cards must be at least five years from the date of purchase. This affects the design of the products. Also, the European Union has a directive that the fees for using gift cards must be clearly indicated, which affects the operation of companies in that region. These regulations are expected to affect approximately 60% of the gift card products in the European Union.

Economic

In 2024 the trend of the economy is one of a growing disposable income, which will average, in the United States, around $45 per head. This increase in disposable income will increase the spending on luxury items, including gift cards. Also, unemployment will remain low, around 3.5 per cent, which will give rise to increased confidence and spending power. The demand for gift cards will therefore increase, and they will become the preferred gift for all festivities and special occasions.

Social

In 2024, a shift from physical to virtual presents will be observed. Gift cards that can be used to pay for an experience are expected to become the preferred gift, with over two-thirds of consumers preferring them to physical products. This preference is particularly strong among millennials and Generation Z, who are less interested in material possessions than in the experience of life. Moreover, the emergence of social media platforms has led to a growing interest in e-gift cards. Approximately half of consumers have already bought such a card in the last year. This trend is in line with a cultural shift towards convenience and personalization in gift-giving.

Technological

In 2024, technological advancements will play a crucial role in the gift card market. A 40% increase in the use of digital gift cards is expected over the previous year. Companies are investing in the development of mobile applications that allow consumers to purchase, send and redeem gift cards with ease. In addition, the use of block-chain to guarantee the security of transactions is gaining ground. Already, a quarter of the companies in the gift card industry are looking into the use of this technology to prevent fraud and increase security. This technological evolution will change the way consumers interact with gift cards.

Legal

The gift card market will be influenced by various laws and regulations on consumer protection. In the United States, for example, the CARD Act requires that all fees and conditions be clearly disclosed, which will affect the way companies market their products. In addition, certain states such as California have laws requiring retailers to give cash back on a gift card if the balance is less than $10. This will have an impact on retailers’ operating policies. At present, around 30% of issuers are modifying their policies to comply with these laws.

Environmental

The environment is becoming more and more important in the gift card market of 2024. As a result of the increasing awareness of the environment, a total of 45 percent of consumers are in favour of eco-friendly gift cards made from recycled materials. Companies are responding to this by introducing biodegradable gift cards and digital alternatives to reduce the amount of plastic used. In addition, the push for social responsibility is leading to 20 percent of gift card companies reducing their carbon footprint, which is part of a wider trend towards a more sustainable retail sector.

Porter's Five Forces

Threat of New Entrants

The gift card market has a moderate level of entry barriers, such as the need for technological expertise and relationships with retailers. While new entrants can take advantage of the digital platforms to sell gift cards, established players have the brand recognition and customer loyalty to make it difficult for newcomers to quickly capture market share.

Bargaining Power of Suppliers

Suppliers in the gift card market, such as retailers and service providers, have little bargaining power. The market is dominated by a few large retailers and platforms that offer a wide variety of gift cards, which weakens the individual suppliers’ position. The wide choice of suppliers also makes it easy for companies to switch to another supplier if necessary.

Bargaining Power of Buyers

The bargaining power of consumers in the gift card market is high because of the abundance of choices. The numerous retail and e-commerce platforms with their competitive prices and promotions make it easy for consumers to compare and choose the best deal. This high degree of choice makes consumers more demanding in terms of service and value.

Threat of Substitutes

“There are, of course, many alternatives to gift cards, such as cash, digital wallets, experiences, and personalization. However, the convenience and versatility of gift cards make them desirable, even though they face a certain threat from the competition.

Competitive Rivalry

The competition for the gift card market is intense, with numerous players vying for market share. Retailers, e-commerce platforms, and financial institutions all compete for the market through marketing, advertising, and product offerings. Competition is also high, which can lead to price wars and squeeze margins.

SWOT Analysis

Strengths

• Wide acceptance across various retail sectors, enhancing consumer convenience.
• Growing popularity among consumers as a preferred gifting option.
• Digital transformation leading to increased sales through online platforms.

Weaknesses

• Potential for fraud and misuse, impacting consumer trust.
• Limited personalization options compared to traditional gifts.
• Expiration dates and fees may deter some consumers.

Opportunities

• Expansion into emerging markets with increasing disposable income.
• Integration of gift cards with loyalty programs to boost customer retention.
• Innovative digital solutions, such as mobile wallets and apps, enhancing user experience.

Threats

• Intense competition from alternative gifting solutions, such as experiences and subscriptions.
• Economic downturns affecting consumer spending on non-essential items.
• Regulatory changes impacting the sale and management of gift cards.

Summary

The gift card market in 2024 will be characterized by a strong acceptance among consumers and a growing trend towards digital solutions. This will result in significant growth opportunities. Fraud risks and competition from other gift solutions must also be addressed. Companies can use emerging markets and integration of loyalty programs to increase customer engagement, but must also be alert to changes in macroeconomics and regulation.