Gift card and voucher sales grow despite challenging trading conditions

The UK’s gift card and voucher market has grown by 7.2% year-on-year, according to the latest analysis carried out by the UK Gift Card & Voucher Association (UKCGVA) and KPMG UK.

The analysis – looking at sales performance in the first half of 2019 compared to the same period the year before – recorded a healthy 15.6% growth in business-to-business (B2B) sales, which includes gift cards issued via an employer’s reward programme.

While sales direct to consumers contracted by 9%, likely due to low retail sales growth in recent months, they remain the main driver of business-to-consumer (B2C) gift card sales, accounting for two-thirds of the market.

Retail remains the most important sector within the gift card industry, with retail sales making up 67% of the overall market, but there was also strong improvement in the leisure industry, with the sector having grown by 13% year-on-year.

Although a preference for physical gift cards continues – taking 72.5% of the market share – digital and e-vouchers are proving increasingly popular, now accounting for 26.9% of sales (up from 12% in the first half of 2018).

Promisingly, gift card malls (the selection of gift cards stocked by third party businesses) grew by 3.6% on a like-for-like basis, highlighting the growing importance consumers place on convenience and choice in the gift card market.

Gail Cohen, director general for the UK Gift Card & Voucher Association, said: “The continued growth of the market only underlines gift cards’ increasing importance as a revenue and loyalty generation tool. It’s particularly encouraging to record this growth in the first half of the year, which tends to be slower compared with the months leading up to Christmas.

“The growth of gift card malls is also noteworthy, pointing not only to the consumer’s calls for added convenience and choice, but also how consumer businesses are forming alliances and partnerships to generate additional revenue and loyalty.”

Paul Martin, UK head of retail at KPMG, added: “Placed against a backdrop of lacklustre sales in retail in recent months, it’s perhaps easy to have overlooked the significant role gift cards and vouchers play in obtaining additional revenue and encouraging customer loyalty. This is arguably even more important during tough times, like those currently being faced by retail and consumer business more broadly.

“As is evident in the latest analysis, businesses need to think carefully about the interplay between physical and online offerings, as well as their partnerships with other businesses. Relationships with other reward partners, or business-to-business sales, may well provide a welcome boost of consumer interest. It is certainly a channel many players must now consider, and just like their product sales more broadly, there is a vital need to offer flexibility where purchase and redemption is concerned.”