Key Insights from NAPCO Research’s Second Annual Merchant Gift Card eCommerce Evaluation
December 17, 2018
NAPCO Research recently released the second annual Gift Card eCommerce Evaluation. The assessment, sponsored by CashStar, provides insights into progress across the gift card ecommerce offerings of 100 top merchants. Given the high consumer demand for gift cards, they have risen to a top business priority for many retailers—a trend that shows no signs of changing. According to Mercator Advisory Group, gift card sales are projected to reach $171.5 billion in 2019, up from $166.7 billion in 2018. This year NAPCO Research evaluated 100 merchants across 15 highly-giftable vertical markets, adding grocery as a new category this year.
Amazon.com, Inc. held onto its title of overall best score for the second consecutive year, receiving 79 percent of the total available points. The leader was followed by Sephora (75 percent), Williams-Sonoma (74 percent), Bed Bath & Beyond (69 percent), and Best Buy (67 percent). Sephora and Best Buy were also reigning leaders, appearing within the top five positions for the second year running.
Evaluation Findings: A Bird’s Eye View
Traditional retail categories fared best in this year’s assessment. Department stores led the way with the highest average score (55 percent), followed by health and beauty (52 percent), home goods (52 percent) and apparel (51 percent). Overall results were positive this year, with more companies experiencing score improvements than drops (44 vs. 35, respectively). Brands are making progress, though the rate of progress could be improved.
The primary online customer journey for purchasing gift cards has traditionally been desktop purchase of digital and physical gift cards, with digital cards accessed by recipients via desktop or mobile. The user experience for that journey must be finely tuned to achieve optimal results. Sephora led the top ten brands with the best primary online customer journey, scoring 82 percent. One interesting note is that all top 10 performers in this sub-set of criteria are using gift card ecommerce solutions powered by third-party vendors which specialize in optimizing online experiences for shoppers.
Another significant finding from this year’s research is that brands’ mobile web and mobile app purchase experiences have improved considerably. The average score in this category was 46 percent, up 11 percentage points from last year. That said, brands are still struggling to achieve parity between the desktop and mobile experiences. Mobile apps are a huge area of opportunity for merchants, most of which are not offering gift cards through the mobile app. In fact, 28 brands with a commerce-enabled app scored zero points in this category for this very reason.
B-to-B programs are another untapped revenue opportunity for merchants. While there was a slight increase in number of merchants who mention a B2B gift card program on their website (41 merchants had no mention of B2B programs on their site last year vs. 37 this year), only 38 of the merchants evaluated offered both physical and digital gift cards to B2B buyers.
Major Gift Card Trends in 2018
In evaluating 100 brands’ ecommerce gift card programs across a number of categories, several trends emerged. We’ve highlighted the top trends below, but you can access all trends by downloading the report [LINK].
Merchants are making progress with omnichannel but still have room to improve – Fifty-one of the brands evaluated offered both digital and physical cards in all available channels — desktop, mobile web and, for some, mobile app. This is a 42% improvement over 2017 results, though disparity in mobile purchase and recipient experience and desktop experience is still a sore spot for merchants.
Merchants need to explore broader payment options – Merchants are still slow in offering alternative payment methods to consumers when it comes to gift cards, which is especially important for mobile. With mobile ecommerce forecast to account for nearly 54 percent of all ecommerce sales in the United States by 2021, merchants must strongly consider easier mobile payment options like PayPal and Apple Pay.
Merchants are paying attention to accessibility – The report evaluated merchants’ desktop websites for ecommerce gift card programs compliance with the Americans with Disabilities Act (ADA) Standards for Accessible Design. Thirteen brands received a score of zero, nine brands received the max number of points, and the vast majority of the brands evaluated fell somewhere in the middle.
The results of the 2018 Merchant Gift Card eCommerce Evaluation point to several key areas of opportunity for merchants across all verticals. Several are summarized below.
Own up to omnichannel – A seamless gift card buying experience should be available across all channels, regardless of device.
Self-buyers: be aware – Customers are buying more gift cards for themselves, making it critical for merchants to offer a tailored experience for self-buyers. This includes easy purchase experiences that enable consumers to skip steps that are necessary only for gifting (e.g., adding recipient’s information, personalized messaging).
Bulk up B2B Programs – There is a lucrative market opportunity for merchants to sell bulk gift cards to other businesses. Merchants should consider offering B2B programs—and clearly promoting these programs via a tailored B2B gift card landing page.
Be CX-essible – Brands have an ethical and financial responsibility to adhere to the ADA Standards for Accessible Design when creating their sites and apps. Optimized CX should reach across all channels, devices, and customers.
Fraud protection is a balancing act – Fraud is a serious matter, but false declines are, too. Merchants should aim for a balanced fraud prevention strategy that minimizes friction while effectively deterring bad actors.
While this year’s evaluation shed a generally positive light on merchants’ gift card ecommerce programs, the opportunities for growth are tremendous. The overall average for the 100 brands evaluated totaled less than 50 percent, making it imperative for merchants to seek out areas for improvement. With some tinkering and tailoring in their weaker areas, it’s not outlandish for merchants to think they can truly compete with—and potentially unseat— Amazon.