The holiday season is quickly approaching, and consumers and retailers are gearing up for what’s to come in the world of gift-giving. The economic roller coaster of the past year has given rise to a cautious but optimistic consumer mindset where value and deals reign supreme.
Changing consumer sentiment is driving retailers to adapt and provide attractive incentives to draw shoppers in. Not surprisingly, gift cards are emerging as the stars of the upcoming holiday season and are expected to make up a substantial 43% of the holiday budget, according to Blackhawk Networks’ recent “Better & Better: 2023 Holiday Gift Card Shopper Research.”
To shed light on what to expect this holiday season and offer valuable insights into consumer behaviors, gift card trends, and retail strategies, PaymentsJournal sat down with three industry experts: Jay Jaffin, Chief Marketing Officer at Blackhawk Network; Sarah Kositzke, Director of Research at Blackhawk Network; and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. They dug into Blackhawk Networks’ research, which explores:
- The current state of the economy and how it’s affecting holiday shopping
- The increasing role of digital and physical gift cards
- What retailers should focus on to make the most of this holiday season and beyond.
‘Tis the Season for Deals
Although concerns around inflation and job security are top of mind for many consumers as the economy continues to fluctuate, consumer confidence is increasing. According to Jaffin, this year’s retail outlook looks positive, with more consumers planning to shop for the holidays. That said, consumers are erring on the side of caution, shifting toward fewer shopping trips and fewer locations, conducting most of their shopping online. As a result, retailers need to maximize each visit and focus on providing incentives to attract shoppers.
“I would encourage retailers to really focus on value and deals,” Jaffin said. “When we talk to consumers, roughly two-thirds are planning to change their shopping behavior in some way this year. What we hear is that they’re moving more of their purchases to store brands or off-brands, buying more on sale, and using more coupons.
“In general, they’re buying a little less, and that’s some of the things to keep in mind as we enter the busy holiday season.”
Javelin research backs up many of these points, Hirschfield pointed out. Confidence is on the rise, with many consumers planning to buy gift cards this holiday season. The key to capturing their interest lies in providing promotional incentives and flexible choices. “We’ve found that (roughly) 84% of consumers plan to buy gift cards, with 72% motivated to make a purchase if a gift card is offered as a promotional incentive,” he said.
Holiday Planning
Research from Blackhawk Network is finding that holiday shopping will start a little later this year. That’s because there will be five holiday shopping weekends, which will give consumers more time to find promotions and discounts.
“It’s really this mid-late November to early December shopping time when folks are about to begin,” Kositzke said. “For Gen Z, they’re almost entirely beginning their holiday shopping in November and December in particular.” Sarah noted that much of GenZ will be kicking off their shopping on Black Friday, and that they are out there looking for those sales and promotions, and they’re often looking at those new product releases as well.
Consumer Behavior this Holiday Season: What’s Trending
On average, consumers plan to spend about $770 on gifts this holiday season. Although this amount is relatively flat compared with last year, gift cards are expected to account for 43% of that spending, a significant increase from the prior year.
Gen Z specifically is a driving force, with a 12-point year-over-year increase in its share of holiday spending allocated to gift cards, Jaffin says.
Overall, younger generations, including Gen Z and Millennials, are leading the way in purchasing physical and digital gift cards. Gen Z, in particular, plans to purchase approximately 17 gift cards, with a nearly equal split between physical and digital cards. Older generations are more inclined to buy physical gift cards.
“Gen Z loves to gift, they have more people to think about on their holiday list, and the value and the ability to give them those digital options is really where we’re seeing that love for gift cards,” Kositzke said. “Not only do they love to give gift cards, but they want to receive them.”
Hirschfield also noted that there’s a growing interest in multi-brand gift cards and open-loop options, and stressed that retailers should consider offering more choice in their gift card programs, with an emphasis on flexible value loads.
Paying Attention to Gen Z
When it comes to holiday shopping, younger generations are keen on using digital wallets and stored value. Digital wallets enable consumers to store and spend their gift cards conveniently, and as a result, 72% of consumers who prefer digital gift cards are likely to store and spend them through their mobile wallets.
Sustainability is also becoming a crucial consideration. According to Jaffin, 57% of consumers are interested in gift cards made from recycled materials. That’s a key focus for retailers today, as more are focusing on eco-friendly options, pledging to convert plastic gift cards to paper substrates. As sustainability gains momentum, this aspect will become more important for consumers and retailers.
“Consumers are becoming more conscious of not only the gift card brand or type, but what the gift cards are actually made of,” Jaffin said. “We made a pledge last year to work with our partners to convert the majority of their plastic gift cards to paper substrates by the end of next year. This is going to be a trend that gains more and more momentum.”
How Retailers Can Prepare for a Successful Holiday Season
Retailers should take an offline and online strategy this holiday season, making the most of all their channels—including in-store displays, online options, and multi-brand gift card displays. Capturing consumer attention in various areas enhances the chances of gift card sales. In fact, by implementing a “be everywhere” strategy, retailers can see benefits that extend into Q1 and beyond, with increased consumer spending, visits, and engagement.
“We don’t always know exactly what people need or want, so having the flexible options available around every corner for consumers is helpful,” Kositzke said.
Emphasizing flexibility in payment options, promoting the value of digital wallets and stored value, and offering a range of digital and physical gift cards can also help retailers cater to different consumer preferences, Kositzke noted.
It’s key that retailers use all available channels to capture the benefits of gift card strategies. According to Hirschfield, 40% of consumers tend to spend more than they normally would when they have a gift card, and 25% opt for more expensive items. What’s more, 30% are inclined to visit stores more often, leading to long-lasting advantages well into 2024.
Your Employees Love Gift Cards Too!
Shifting the discussion toward employees, Jaffin underlined the value of gift cards as a holiday gesture from employers. He shared insights from Blackhawk Network’s research, which revealed that employees highly appreciate receiving gifts.
“When you hand out gifts at the end of the year, it makes employees feel valued and really helps bring a new energy for the year,” Jaffin said. “Last year, very few employees received gifts and fewer are expecting anything this year, and there’s nothing better than a nice surprise.
“Gift cards are an affordable holiday gift, and they can easily be delivered because with digital gifting, it doesn’t matter where you are.”
Key Takeaways
The 2023 holiday shopping season is poised for change, with gift cards playing a central role. Retailers that embrace digital and physical gift cards, focus on promoting flexibility, and take a more sustainable approach will be well-positioned to meet the needs of diverse consumer preferences and ensure a successful holiday season.
Despite concerns about the economy, consumers are planning to hit the stores, shifting their focus to value and deals. Retailers need to provide promotional incentives and flexible choices to capture consumers’ interest. Meanwhile, Gen Z is playing a significant role in driving holiday spending toward gift cards, favoring physical and digital options—and retailers should take note not to overlook this group.
Finally, retailers are encouraged to take an omnichannel approach, combining in-store displays, online options, and multi-brand gift card displays to maximize their efforts. By offering a diverse range of gift card options—and, again, emphasizing flexibility in payment methods—retailers can create goodwill, increase spending, and enhance brand loyalty during the holiday season and beyond.
To Learn More:
To download BHN’s, Better & Better: 2023 Holiday Gift Card Shopper Research, ebook, click here.
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