Sunday, September 16, 2012

How Gift Cards Increase Net Profit

Looking again at data from retail surveys conducted by the Nation Retail Federation and National Cash Register, it is probably not well known that simply selling gift cards through your retail point of sale system can actually increase your net profit.

How?  It boils down to three things that generally happen when someone purchases a gift card from your store:
  1. The gift card is set aside or given as a gift and forgotten about.
  2. The gift card is used for a purchase but the customer under-spends. The gift card has a value of $50.00 but the customer only spends $45.00 and never uses the remaining amount. I personally tallied up the various partially used gift cards in my laptop bag and they all had unused balances of $.87 to $2.84.  The unused portion of a gift card is pure profit for you.
  3. The gift card is used but the customer over-spends. The gift card has a face value of $50.00 but the customer spends $65.00.  That is a 30% increase in the transaction amount.
Factoring these three things, retailers reported net profit increases of 1% to 3% by simply offering gift cards. Considering that point of sale systems  have built in gift card functions, it should be an easy decision as to whether or not to offer gift cards.

When researching point of sale software, I always encourage the retail store owner to make sure that there are no hidden fees related to the selling or redemption of gift cards. The only cost should be for the card itself as the point of sale software should track the gift card sale and redemption (and remaining balance for the customer who wants to reload or fully utilize the cards value).

Even with just a 1% increase in net profit that could equate to $1250 or more annually - depending on your annual gross sales.  There is also some time savings involved since your no longer have to track paper gift certificates as your point of sale system will take care of it for you.  Not a bad deal for simply selling a piece of plastic!

Are you in the US and in need of no cost retail point of sale advice? I'm happy to help and can be reached on my cell at 208-340-5632 (mountain time) or via email at

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