When you sell a Gift Card, there are two possible outcomes. It can be used to purchase a product on your store, just the same as cash. Or it can remain unredeemed. Either way, there are big benefits.
1️⃣ Guaranteed bonus margin based on redemption rates
At any given time 10-19% of gift card balances remain unredeemed. When all is said and done, around 6% of gift cards are never redeemed.
This means that at the very least, you are increasing your margin on gift card revenue vs. regular revenue by 6%.
6% of $100,000 = $6,000
6% of $1,000,000 = $60,000
These aren’t trivial numbers.
When you sell a gift card, what you’re selling is convenience. When you sell a gift card through Gift Card Pro (available on the Shopify App Store here), you’re selling convenience to the purchaser and a great experience to the recipient.
2️⃣ Increased cash flow and sales
Even if a gift card is 100% redeemed, as it is being redeemed against a product that you were going to sell for cash anyway, what your are essentially doing is pre-selling an item.
With a gift card, the transaction is essentially reversed. A Checkout happens, and then a product is selected. Traditionally it is the other way around. As we all know, for sellers, the Checkout is the important part of that equation. Cash in hand to reinvest in the company, or offset inventory costs, is always welcome.
And let’s get nerdy for a second… because as we know, a dollar today is worth more than a dollar tomorrow.
So let’s say you sell $1,000,000 of gift cards, and that after 6 months, 50% of your gift cards are redeemed.
Now let’s say that you’ve held that cash in even a very conservative account growing at 2% interest per year. That is 1% per 6 months.
So $500,000 x 1% = $5,000.
Now let’s say that the rest of the gift cards are redeemed. No problem! In the time that it took for them to be redeemed, you’ve made an extra $5,000 just because you had the cash in hand, and it could appreciate in value.
Cash, as ever, is king 👑