The secret holiday bonanza

If you sell to consumers, you know that Christmas is the big selling season of the year.

In the offline world, many consumer retail business operate at breakeven or a loss until the Christmas season rolls around. The term “Black Friday” comes from the fact that most stores are in the red until the day after Thanksgiving when Christmas present sales start to heat up in earnest.

Imagine that.

Keeping physical stores open with all the accompanying expenses of staffing, rent, inventory, utilities, maintenance for twelve months just to squeeze out a profit in a narrow six week window.

Internet marketers sure are spoiled. Here’s an idea that will spoil some of you even further. It’s a product that sells like wildfire, costs nothing to inventory, and automatically stimulates additional sales…

I don’t sell retail to consumers, but in the last few years I’ve been studying this end of the business intensely. Strangely, in all my research, which has included conversations with dozens on sharp online store operators, no one has ever mentioned online gift cards to me.

Gift card sales are not applicable to every business, but it they make sense for your business, this could be the single most profitable article you read all year.

First some numbers…

Of all the online stores surveyed by the magazine Internet Retailer, more than half 52.4% sell online gift cards. Of that number, 40.3% say they are very important to their profitability and another 21.60% call them important.

Here’s just a few reasons why so many gift card sellers like the business so much:

1. Gift cards are a wildly popular gift choice

According to the Consumer Reports Holiday Shopping Poll, 73% named clothing as their most common gift choice and a whopping 60% named gift cards making clothes and gift cards the #1 and #2 winners at holiday time.

2. Gift cards are a cash flow dream

Gift buyers give you cash today for a promise from you to provide a credit for a purchase later.

Not all gift cards are redeemed immediately. In fact, not all gift cards are redeemed at all which means that not only are you getting what is in effect an interest free loan, but also, because of “breakage” (cards that are not redeemed), you’re getting what is in effect free money.

According to the Consumer Reports article, a year after sales, 19% of gift cards purchased have still not been redeemed.

3. When gift cards are used, merchants profit again

As attractive as the idea of “breakage” may be (free money), it’s even more profitable to you when a gift card recipient redeems his or her card.

Here’s why:

1. You may acquire a brand new customer or re-activate a lapsed one – always a good thing

2. Gift card recipients are more likely to pay full retail for their purchases than consumers who pay with their own cash or credit. They’re less likely to wait for sales or negotiate for lower prices.

3. I’ve seen various numbers tossed around, but it appears that 50% or more of all gift card recipients spend more than the face value of their gift card. One study claims that for every $100 card, consumers spend $152 in the store. How sweet it that?

Warning: Some gift card sellers play dirty tricks on consumers like tacking on monthly maintenance fees, short expiration periods, shipping and handlings costs. Don’t do it. It’s greedy and like most greedy moves incredibly bad business. Gift card sales are already a total win for the seller. Why alienate customers with conditions and hidden fees.

OK. Now the million dollar question…

Are their systems you can get to help you manage your gift card sales?

Answer: Yes. but having not personally used any of them, I’m not in a position to recommend, but maybe you are.

If you’ve added gift card sales to your business, how has it worked for you? What management tools do you use? How have they worked for you?

Happy Selling!

– Ken McCarthy

P.S. For over 25 years I’ve been sharing the simple but powerful things that matter in business with my clients.

If you’d like direction for your business that will work today, tomorrow and twenty years from now, visit us at the System Club.