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Emerging Gift Card Market Trends

gift card market trends

Gift Card Market Overview

The gift card market is a thriving industry that has experienced substantial growth in recent years due to its convenience and flexibility. With the rise of e-commerce and online shopping, the gift card market has expanded further, catering to the evolving needs of consumers.

Global Market Growth Projections

According to industry reports, the global gift card market is projected to grow at a compound annual growth rate (CAGR) of 17.9% from 2021 to 2028, reaching a value of $506.23 billion by 2028 (GiftAFeeling). The market size is predicted to reach $1,396.01 billion within the 2021-2028 timeframe, growing at a CAGR of 15.4% from $437.78 billion in 2020 (Research Dive). This substantial growth indicates the strong demand for gift cards across various sectors and regions.

Market Trends and Predictions

The gift card market is influenced by several key trends and predictions that shape its trajectory:

  1. Online Sales Channel Growth: The online sales channel sub-segment is expected to experience the fastest market growth, generating revenue of $706.05 billion by 2028, with a CAGR of 17.9% (Research Dive). This growth can be attributed to the convenience, accessibility, and wider acceptance of digital gift cards, which have gained popularity among consumers.

  2. Technological Advancements: The continuous advancements in technology have transformed the gift card landscape. The rise of digital gift cards and e-gift cards has provided consumers with instant and contactless gifting options. These digital formats have also allowed for personalized and customizable experiences, making them increasingly appealing to both gift card purchasers and recipients.

  3. Increased Consumer Demand: Gift cards offer numerous benefits to consumers, including the freedom to choose their preferred items, convenience, and flexibility. The ease of purchasing and redeeming gift cards has made them a popular choice for gifting occasions, contributing to the overall growth of the market. However, it is important to note that gift cards also come with certain drawbacks and limitations, such as expiration dates and potential loss of value if not used within a specified timeframe.

  4. Regional Market Dynamics: The gift card market exhibits regional variations in terms of market size and growth. For example, the United States has witnessed significant growth in the gift card market, with a 29.1% CAGR between 2015 and 2019. It is estimated to grow another 18.1% between 2020 and 2024, with the e-gift card market projected to reach $101,979.2 million by 2024 (Tidal Commerce). In the Asia-Pacific region, the gift card market outlook showcases promising growth opportunities driven by factors such as the rising adoption of e-commerce and increasing consumer disposable income.

As the gift card market continues to evolve, businesses should stay abreast of these market trends and predictions to effectively leverage gift cards as a revenue growth strategy. By understanding consumer behavior, adopting innovative marketing initiatives, and capitalizing on emerging technologies, businesses can position themselves for success in this dynamic market.

Market Segmentation Analysis

To gain a deeper understanding of the gift card market, it is essential to analyze its segmentation. This analysis helps identify the different aspects that contribute to the overall market dynamics. Two key segments that play a significant role in the gift card market are open loop versus closed loop and online versus retail sales channels.

Open Loop vs. Closed Loop

The gift card market can be divided into two main categories: open loop and closed loop. Open loop gift cards are typically issued by financial institutions or credit card companies and can be used at multiple merchants. These gift cards function similarly to debit or credit cards, providing recipients with the flexibility to use them at a variety of locations. Open loop gift cards are predicted to have a dominating market share, generating a revenue of $724.93 billion during the forecast period (Research Dive).

On the other hand, closed loop gift cards are specific to individual retailers or brands. These gift cards can only be redeemed at the issuing retailer or a select group of affiliated merchants. Closed loop gift cards are often used as a marketing tool to drive customer loyalty and encourage repeat purchases.

Both open loop and closed loop gift cards have their advantages and target different consumer preferences. Open loop gift cards offer versatility and convenience, allowing recipients to choose where they want to spend their gift. Closed loop gift cards, on the other hand, provide a more tailored gifting experience and can help increase brand visibility and customer engagement for retailers.

Online vs. Retail Sales Channels

The sales channels for gift cards can be categorized into online and retail. Online sales channels include e-commerce platforms, brand websites, and mobile applications. The convenience and accessibility of online shopping have led to significant growth in the online gift card market. This segment is anticipated to have the fastest market growth, generating a revenue of $706.05 billion by 2028, with a compound annual growth rate (CAGR) of 17.9% (Research Dive). The widespread adoption of digital gift cards and e-gift cards has contributed to the growth of the online sales channel in the gift card market. For more information on the digital gift card market, refer to our article on digital gift card market.

Retail sales channels encompass physical stores, supermarkets, and other brick-and-mortar establishments. Despite the rise of e-commerce, retail sales channels still hold a dominant position in the gift card market. The retail sub-segment is predicted to generate a revenue of $876.72 billion during the forecast period (Research Dive). The in-store experience and the ability to physically browse and purchase gift cards contribute to the continued popularity of this sales channel.

Understanding the segmentation of the gift card market provides valuable insights into consumer preferences and shopping behavior. Both open loop and closed loop gift cards offer unique advantages, catering to different gifting needs. Meanwhile, the online and retail sales channels each have their own strengths, serving diverse customer segments. By recognizing these distinctions, businesses can tailor their strategies to meet the demands of the market and leverage the opportunities within each segment.

Regional Market Insights

Understanding the regional dynamics of the gift card market is crucial to gain insights into the trends and opportunities within specific regions. In this section, we will explore the Asia-Pacific market outlook and the North America market dynamics.

Asia-Pacific Market Outlook

The Asia-Pacific gift card market has been experiencing significant growth and is projected to continue its upward trajectory. According to Research Dive, the Asia-Pacific market is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 16.0%, generating a revenue of $301.54 billion during the review period. This growth can be attributed to several factors, including the increasing adoption of gift cards as a popular gifting option and the expanding retail industry in the region.

As the Asia-Pacific region becomes a key player in the global market, it presents a vast potential for both traditional and digital gift cards. The rise of e-commerce and the growing popularity of digital transactions have contributed to the growth of the digital gift card market in this region. To tap into this market, businesses should consider leveraging digital platforms and partnerships to offer convenient and accessible gift card options.

North America Market Dynamics

The North America region has witnessed significant growth in the gift card market in recent years. According to Allied Market Research, the region attained the highest growth in the gift card market in 2021. Gift cards have become increasingly popular in North America, offering a convenient and flexible gift option for consumers.

In the United States specifically, the gift card market has demonstrated remarkable growth. According to Tidal Commerce, the US saw a Compound Annual Growth Rate (CAGR) of 29.1% between 2015-2019, and it is estimated to grow another 18.1% between 2020-2024. The e-gift card market is also expected to see substantial growth, with an estimated value of $101,979.2 million by 2024.

The retail industry plays a significant role in the North America gift card market. Retail gift cards have become increasingly popular, with consumers embracing the convenience and flexibility they offer. According to Retail Insight Network, the average proportion of monthly gift card buyers in the retail sector has been increasing, reflecting the growing appetite for in-store shopping experiences. This trend was especially evident during the holiday season, with a rise in foot traffic to shopping centers and high streets.

To make the most of the North America gift card market, businesses should focus on creating strategic marketing initiatives to promote gift cards as a preferred gifting option. By leveraging the popularity of retail gift cards and the growing demand for e-gift cards, businesses can maximize revenue growth and capture the attention of North American consumers.

Understanding the unique market dynamics in the Asia-Pacific and North America regions allows businesses to tailor their strategies and capitalize on the emerging gift card market trends. By staying abreast of regional trends and consumer preferences, businesses can position themselves for success in these key markets.

Factors Impacting Market Growth

The gift card market is influenced by various factors that shape its growth and development. Two key factors impacting the gift card market are the demand for digital gifting and security and acceptance challenges.

Demand for Digital Gifting

The rise in demand for digital gifting options has played a significant role in driving the growth of the gift card market (Allied Market Research). As consumers increasingly embrace technology and online shopping, the convenience and versatility of digital gift cards have become more appealing. Digital gift cards, also known as e-gift cards, offer instant delivery, flexibility in customization, and easy redemption options.

The convenience of digital gifting allows consumers to send gift cards through email or mobile apps, eliminating the need for physical cards and reducing the risk of loss or damage. Furthermore, digital gift cards can be personalized with messages, images, and even video greetings, enhancing the overall gifting experience.

The growth of the digital gift card market has been fueled by the increasing popularity of e-commerce and online shopping. Consumers are now more inclined to purchase gift cards online, either directly from retailers or through third-party platforms. This shift towards digital gifting has opened up new opportunities for retailers to expand their reach and attract a broader customer base.

Security and Acceptance Challenges

While the gift card market continues to grow, security and acceptance challenges pose significant obstacles to its further expansion. One of the major concerns relates to the limited acceptance of gift cards (Allied Market Research). Gift cards issued by specific retailers or brands are often only accepted at their own stores or online shops, restricting their usability at other businesses. This limited acceptance can lead to a lack of flexibility for gift card recipients and may deter potential buyers.

Security concerns also play a role in shaping the gift card market. Consumers may be hesitant to purchase gift cards if they perceive a risk of fraudulent activity or unauthorized use. Protecting the value of gift cards and ensuring their secure redemption is crucial to maintaining consumer trust and confidence in the market.

To address these challenges, industry players are implementing various measures to enhance security and improve acceptance. This includes the implementation of secure technologies such as unique codes, PIN numbers, and advanced encryption methods to protect the value and integrity of gift cards. Additionally, efforts are being made to establish partnerships and collaborations to expand the acceptance network, allowing gift cards to be used across a wider range of retailers and businesses.

By addressing the demand for digital gifting and overcoming security and acceptance challenges, the gift card market can continue to thrive and provide consumers with convenient and versatile gifting options. Retailers and industry stakeholders must stay vigilant in adapting to changing consumer preferences and advancing technology to ensure the sustained growth and success of the gift card market.

Consumer Behavior Trends

As the gift card market continues to evolve, it’s important to understand the consumer behavior trends surrounding gift cards. These trends shed light on the benefits and drawbacks that influence consumers’ preferences and decisions when it comes to purchasing and using gift cards.

Benefits of Gift Cards

Gift cards offer several benefits that make them an attractive choice for both gift givers and recipients. Some of the key benefits of gift cards include:

  1. Convenience: Gift cards provide a convenient gifting option, allowing recipients to choose their own desired items or experiences. This flexibility ensures that the recipient receives something they truly want or need.

  2. Easy to Use: Gift cards are simple to use, typically requiring only a swipe or scan at the point of sale. This ease of use makes them a hassle-free option for both online and in-store purchases.

  3. Greater Shopping Freedom: With a gift card in hand, recipients have the freedom to explore a wide range of products or services within the issuing brand or retailer. This freedom empowers individuals to select items that align with their personal preferences.

  4. Opportunity to Discover New Products or Businesses: Gift cards can introduce recipients to new products, services, or businesses they may not have considered before. This discovery aspect can lead to new customer acquisitions and help businesses expand their customer base (Tidal Commerce).

  5. Higher Sales Margins: Businesses that support gift cards often benefit from higher sales margins. People with gift cards tend to spend money on higher-margin items, resulting in increased profitability for businesses (Tidal Commerce).

Drawbacks and Limitations

While gift cards have numerous advantages, there are also some drawbacks and limitations that consumers should be aware of:

  1. Expiration and Fees: Some gift cards may have expiration dates or hidden fees that reduce their value over time. It’s important for consumers to read the terms and conditions associated with the gift card to understand any potential limitations.

  2. Non-Transferability: Once a gift card has been used, it is typically not transferable to another individual. This limitation prevents recipients from passing on the gift card to someone else once they have utilized it.

Despite these drawbacks, gift cards remain a popular choice for consumers due to their convenience and ease of use as a gift-giving option. By understanding the benefits and drawbacks of gift cards, consumers can make informed decisions when purchasing and utilizing gift cards for themselves or as gifts for others.

The consumer behavior trends surrounding gift cards highlight the importance of convenience, flexibility, and the ability to explore new products or businesses. As businesses implement marketing initiatives and leverage gift cards for revenue growth, they can tap into the potential of attracting new customers, increasing sales margins, and maintaining steady sales throughout the year.

Business Strategies and Opportunities

As the gift card market continues to evolve, businesses have the opportunity to leverage gift cards as a strategic tool to drive revenue growth and attract new customers. By implementing effective marketing initiatives and capitalizing on the benefits of gift cards, businesses can tap into the potential of this thriving market.

Marketing Initiatives for Gift Cards

To maximize the impact of gift cards, businesses can employ various marketing initiatives. One effective strategy is to offer kickback incentives to attract new customers using gift cards. By providing additional value or discounts upon gift card redemption, businesses can entice new customers to engage with their products or services. This not only drives immediate sales but also offers the opportunity to develop a larger and more loyal customer base.

Another marketing initiative is to promote gift cards during periods of low customer activity. By leveraging gift cards to combat post-holiday lull periods, businesses can attract new customers and maintain steady sales throughout the year. This is particularly beneficial in months like January when customer spending tends to decline. By encouraging gift card purchases and subsequent redemptions, businesses can stimulate sales during traditionally slower periods.

Leveraging Gift Cards for Revenue Growth

Supporting gift cards can be a powerful revenue driver for businesses. Studies have shown that people with gift cards often spend more than the value of the gift card itself, particularly on higher-margin items. This translates to increased sales margins and higher profitability for businesses that offer gift cards (Tidal Commerce). By promoting gift cards as a convenient and versatile gifting option, businesses can not only increase revenue but also benefit from additional spending by gift card recipients.

Retailers, in particular, stand to benefit from the additional spending associated with gift cards. According to Retail Insight Network, two-thirds of shoppers typically spend more than the value of the gift card they receive. This trend is especially prominent among younger shoppers, with some willing to spend triple the amount of the gift card being redeemed. By capitalizing on this behavior, retailers can tap into increased sales and strengthen customer loyalty.

In conclusion, businesses can capitalize on the vast opportunities presented by the gift card market. By implementing strategic marketing initiatives and leveraging the benefits of gift cards, businesses can attract new customers, increase revenue, and maintain steady sales throughout the year. Gift cards not only offer a convenient gifting option but also serve as a powerful tool for driving growth and profitability.

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