Gen Z’s Love Gift Cards, $4T Growth, Digital vs. Physical

📚 Data Dive

Digital vs. Physical: The $4 Trillion Gift Card Faceoff

The global gift card market is booming, with projections showing it will grow at a 16% CAGR to $4.34 trillion by 2033. But the industry finds itself caught in a tug-of-war: digital vs. physical. Currently, physical cards hold the slight edge with 51% market share, thriving on their tangibility, nostalgia, and significantly higher redemption rates (54.85% vs. 47% for digital cards). Meanwhile, digital cards are riding the wave of mobile wallets, instant delivery, and eco-friendly appeal, winning over younger demographics like Gen Z.

The stakes are high, with digital formats gaining 1% market share annually and poised to dominate as consumer preferences shift. But for now, the question remains: what’s in your hand is still what gets used? For businesses, the answer is clear—offering both options is essential to capturing the full spectrum of this rapidly growing market.

💡 Case Studies

Gift cards as a reward for social media branding

Gift cards have emerged as a powerful tool for fostering brand engagement through reward-based activities. By offering gift cards as prizes for contests, challenges, or loyalty programs, companies can incentivize participation while directly tying rewards to their brand. This strategy not only creates excitement and encourages customers to interact with the brand but also drives conversions as recipients often redeem gift cards for additional purchases. Gift cards are particularly effective in generating user-generated content (UGC) and word-of-mouth marketing, as participants are motivated to share their experiences with friends and on social media, amplifying brand visibility with minimal investment.

Jersey Mike’s successfully applies this strategy with its “Mike’s Mini Games” social media campaign, which challenges followers to solve puzzles, such as crosswords, for a chance to win gift cards. For instance, in one game, participants were tasked with completing a Jersey Mike’s-themed crossword and submitting their answers using a branded hashtag for a chance to win a $15 gift card. This not only engaged the audience with a fun and lighthearted activity but also promoted brand-specific elements, such as menu items, in an interactive format. By linking the rewards to their products, Jersey Mike’s ensures participants become active customers, while the campaign itself enhances brand awareness and community involvement.

🏛️ Legislation Corner

Expiration dates

Recent legislative developments across the United States highlight an evolving landscape concerning gift card expiration dates and associated fees. States are adopting a variety of approaches to regulate these policies, reflecting a growing emphasis on consumer protection. A significant trend is the outright prohibition of expiration dates, adopted by states such as California, Connecticut, Florida, and New Jersey, among others. This approach ensures that consumers can use their gift cards indefinitely, eliminating potential losses due to arbitrary deadlines. By contrast, other states permit expiration dates but impose strict conditions, such as requiring a minimum validity period—ranging from one year in Kentucky to seven years in Massachusetts—and clear disclosure of these terms.

In addition, some states focus on ensuring clarity by mandating conspicuous disclosure of expiration information on the card or pviding alternative access through phone numbers or websites. Examples include Nevada, Oregon, and Virginia, where consumer awareness is prioritized. A smaller subset of states, such as Hawaii, Nebraska, and Pennsylvania, ties the validity of gift cards to escheat laws, which ensure unspent funds are eventually returned to the state.

📈 Seasonal Insights

Redemption Trends

The redemption trends for restaurant gift cards highlight a consistent decline in both holiday and non-holiday periods over the years, with notable drops in the 180-day window. Holiday redemption rates fell from 60.35% in 2019 to 57.63% in 2022, although a slight rebound in 2022 suggests recovering consumer engagement. Non-holiday redemptions also declined steadily, from 66.00% in 2019 to 56.91% in 2022, reflecting reduced urgency in using gift cards outside of festive periods. This demonstrates how seasonal factors and broader trends in consumer behavior impact long-term redemption patterns.

These trends are shaped by changing consumer behavior and economic factors. Holiday gift cards are often used later, explaining the slower redemption pace, while the 2022 rebound hints at a return to pre-pandemic dining habits. Non-holiday declines could stem from inflation and shifts toward digital or at-home dining options. This data highlights an opportunity for restaurants to optimize gift card promotions to better align with evolving dining and spending behaviors.

📰 Interesting Articles

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