Consumers expected to spend 29% more on restaurant gift cards, study says

Dive Brief:

A new report from Blackhawk Network shows that consumers are projected to spend 29% more this year on restaurant e-commerce gift cards than they did in 2019. The growth of e-commerce gift card purchases across industries is expected to grow 21%, illustrating that dining gift cards are the best-selling among U.S. consumers during the holidays.
Nearly one-third of consumers are starting their holiday shopping earlier this year because of the pandemic, and 52% report they are more likely to buy more gift cards this holiday season than in previous years. Consumers expect to purchase 10 gift cards this year on average, or double what they purchased last year, and they expect to spend $313 in 2020 versus $262 on average in 2019.
This influx of gift card revenue for restaurants could create a bit of a tailwind heading into the cold weather months, providing an incentive for diners to order out during these typically slower months, especially as municipalities re-establish dining room restrictions.

Dive Insight:

These holiday projections reflect a trend that has been gaining traction throughout the year. Blackhawk’s data shows that the volume of digital cards sold on merchant sites is up 74% in 2020. Some brands are striking while the iron is hot, launching seasonal promotions that encourage gift card purchases. Applebee's, for example, is offering a $10 bonus card with the purchase of a $50 Applebee’s gift card now through Jan. 3.

Restaurants of all sizes have also received lifts from cities, states and organizations launching gift card-specific promotions to generate sales through the channel as dine-in remains up in the air. Duluth, Minnesota, shifted its twice-a-year "Eat Downtown" promotion to a "Gift Card Edition," for example, while unemployed Hawaii residents received $500 restaurant gift cards to stimulate the state’s economy. Washington, D.C.’s Adams Morgan neighborhood launched a gift card campaign in March as a way to provide an influx of cash to restaurants. And point-of-sale company Toast created Rally for Restaurants, encouraging gift card purchases to show their support, while Tripadvisor launched a feature in April directing consumers to restaurants' gift card purchase links.

Gift cards are a critical channel for restaurants to pursue as they continue to grapple with lower revenues coming from dine-in service. Eighty-percent of consumers who redeem their gift cards at fine dining and fast casual restaurants spend more than the value of that card when using one. QSRs specifically have a 6% increase in check size for online orders paid with a gift card, according to Patronix's 2019 Gift Card Sales report. Thirty-five percent of small businesses say they would have closed during the pandemic without e-commerce, according to a Chase Ink study. Indeed those gift cards are increasingly digital in nature.

The shift to digital and digital wallet adoption has pushed demand for digital gifting to an all-time high, and e-gifts are proving to be a preferred contactless option, Theresa McEndree, Blackhawk vice president of marketing, said in a statement. This bodes well for the number of chains that have prioritized digital payments. Key among them is Starbucks, which now enables customers to earn stars through its mobile app by using a number of payment options, including cards. During the company's fiscal Q4 2020 call, Chief Operating Officer Roz Brewer said Starbucks Rewards membership grew by about 10% year-over-year and has helped increase engagement with occasional customers.

In 2018, 55% of consumers said they would be interested in giving or receiving digital gift cards that can be added to a mobile app or digital wallet. That interest has likely accelerated throughout the past few months as consumers have been forced to adopt new digital habits.According to new research from The NPD Group, digital restaurant orders grew by 138% in the July, August and September quarter.