UK gift card sector posts first-half growth of 25%

Demand for gift cards and vouchers continues to grow in the UK in the first half of 2021. Specifically, sales are boosted 25% year on year by corporate businesses saying thank you to loyal and new customers and employers seeking innovative ways to reward staff.

B2B sales continue to dominate the UK gift card sector, representing around 75% of the market. But B2C sales are up by a healthy 19.5% compared to first half of 2020, according to research from KPMG undertaken for the UK Gift Card & Voucher Association.

Overall, sales of gift cards and vouchers are up by 25% y-o-y in the first half of 2021.

Other key figures include:

• Benefits, employee savings & salary sacrifice, rewards, and incentives now account for 93% of the B2B market;
• As operators accelerate the number of new platforms available to buyers, digital sales of gift cards and vouchers are the primary drivers of growth, with digital and eVouchers achieving a 90.7% rolling year increase in sales, and
• Online consumer sales are up by more than 50% while online B2B sales are up by 30% compared to the same period in 2020.

A greater proliferation of new digital channels, accelerated by the pandemic, has opened up the world of gift cards and vouchers to ‘Generation Z’ consumers looking to make purchases and redeem vouchers via apps and online.

The research shows that there has been a shift in behaviour as 41% of gift cards are now being redeemed online, much greater than expected.

The retail sector continues to dominate the gift card and voucher market. This accounts for 97.3% of sales, whereas the leisure sector currently represents only 2.7%. With most leisure gift cards needing to be physically experienced to be enjoyed, the sector has continued to be hit harder than retail through the pandemic.

But with the gradual reopening of the UK through the second half of the period, leisure operators record a like-for-like increase of 8.3% in the first half of 2021 as consumers unleashed pent up demand for social and leisure activities.

Consumers are also increasingly embracing greater choice in where and how their gift cards were spent. For example, ‘open loop’ cards and vouchers are by 19.4% – breaking the 25% market share barrier. This suggests an increase in popularity as the option becomes more widely offered.

Store specific gift cards and eVouchers account for two thirds of the market (66.3%). These ‘closed loop’ sales are up by 28.2% on a like-for-like basis, outstripping the growth of other formats. Multi choice formats post a rise of 11.6% year on year, potentially as a result of them being much more difficult to redeem online.

While digital sales nearly doubled on a rolling year basis, sales of physical gift cards remain the most popular with 61.7% market share with the majority redeemed in store. As stores started to re-open in the later months of the period, transactions directly to consumers are starting to recover with like-for-like sales growing by 19.5% in the first half of the year.

With lockdown restrictions easing, the strong demand for physical gift cards is reflective both of greater ease in physical purchasing, and of physical gifting. Consumers heading out to purchase physical gift cards is also helping to drive footfall to high streets as Covid-19 restrictions ease.

Mobile wallets are also identified as a source of future growth. Around one-third of GCVA members are actively working on the provision of mobile wallets with a further third either considering it, or have ruled it out for strategic reasons.

“There is no doubt that gift cards and vouchers have grown in stature since the pandemic hit,” says Gail Cohen, director general of the Gift Card and Voucher Association.

“They have been increasingly used by the public and private sector to say thank you to customers and staff.

“We are seeing a growing number of corporate brands using gift cards as part of their strategy to attract new customers. And employers are increasingly using them as an innovative way to reward and retain staff forced to work remotely or being placed on furlough."

Cohen continues: “As with many other areas of life, the pandemic has accelerated the move towards online channels, and permanently cemented the greater influence of digital purchasing and redemption. E-vouchers and gift cards provided a solution to the problem of lockdown for many consumers looking to purchase that special something for loved ones when the high street remained closed.”

Paul Martin, UK head of retail at KPMG adds: “The performance of the gift card and voucher market is extremely encouraging, with the sector having thrived amidst challenging market conditions, and continuing to go from strength to strength.

“The areas of growth in this industry very much mirror the activity that we have seen on the high street over the last year, with digital sales recording particularly strong growth.”