Dive Brief:
- Restaurant gift card sales were relatively flat in 2017, growing 0.76% compared to 2016, according to the Paytronix Gift Card Sales Report, which analyzed data from over 190 restaurant brands and 550 store value programs.
- In-store sales made up nearly 43% of gift card sales last year, while third-party retailers — such as discount warehouses, grocery stores and convenience stores — made up more than half of restaurant gift card sales in 2017.
- Around 70% of gift cards are redeemed within 180 days of purchase, with 76% of cards coming from quick-service restaurants and 52% coming from fine dining. Customers typically spend QSR gift cards almost immediately while they save fine dining gift cards for special occasions, according to Paytronix.
Dive Insight:
Gift cards, especially ones tied to loyalty programs, are quickly becoming a way for restaurants to encourage customers to keep coming back and reward them for doing so. Gift card sales are expected to rise this year to nearly $30 billion compared to $27.6 billion last year, and restaurants make up 36% of gift cards sales — more than any other retailer type, according to a National Retail Federation report. Nearly half of all restaurant gift cards are purchased during the holiday season, according to Paytronix.
During the non-holiday season, in-store gift card purchases only make up about a third of total gift card sales. But this number jumps to over half, presenting a unique opportunity for restaurateurs with gift card programs. Many restaurants are offering deals on gift cards. Gift card sales typically peak in the days leading up to Christmas and nearly reached 200,000 purchased on Dec. 24, 2017, according to Paytronix. For example, Applebee’s, Carraba’s, Olive Garden, Outback Steakhouse and Panera are offering a bonus $10 gift card to customers purchasing $50 in gift cards.
These bonus cards typically have time limits for redemption, encouraging guests to come back after the holidays. Grotto’s Pizza built up its gift card program by offering bonus cards for 20% of the value purchased during a holiday promotion, according to the Paytronix report. Bonus cards were redeemable from Jan. 1 to March 31, which encouraged customers to come back during winter, the chain’s slowest time of the year. The promotion led to 20% more gift card sales in the first year and 30% growth in the second year, according to Paytronix.
Another perk that comes with gift cards is increased consumer spending — diners typically spend $59 more than the value of the gift card, according to First Data. About 80% of consumers with a gift card from a fine dining or fast casual restaurant typically spend more than the gift card value.
Gift card and loyalty programs also can help restaurants avoid per transaction credit card fees. Starbucks has been so successful in getting customers to load and reload gift cards that it now has $1.2 billion in deposits, more than some of the top financial institutions, according to Paytronix. Instead of paying credit card fees for every transaction, the chain only pays a fee for each time a customer adds money to their gift cards or mobile payment app, according to Bloomberg. About 14% of the chain’s transactions are done through the payment app.
