Restaurant gift card sales jumped 15% during the holidays last year

Dive Brief:

According to Paytronix's annual Gift Card Sales Report 2019, holiday gift cards continue to increase in popularity. The average increase in card sales throughout the year was around 6.3%, but in the holiday months, gift card sales increased over 15% in 2018 compared to 2017, according to a press release.
Gift card sales especially pick up around mid-November during Black Friday, according to the report.
While Paytronix's report shows that third-party retailers are gaining ground for sales of these gift cards, in-restaurant sales are about six percentage points higher during the holiday season.

Dive Insight:

The increase in gift card purchases during the holiday season coupled with the fact that most purchases are done in-store during that time showcases a major opportunity for restaurant brands to prioritize this marketing channel. This is especially true if the restaurant industry performs similarly to how it performed during last year's holiday season, in which same-store sales were at their highest in the industry since August 2015.

Gift cards are an effective way to bring in guests who otherwise wouldn't come into an establishment and it offers the opportunity for restaurants to provide a solid first impression and prove why these customers should come back. For restaurants fighting against traffic declines amid intensifying competition, that's an especially big deal right now.

Indeed, a consumer study from First Data found that 52% of consumers are more likely to have visited a store more often over the past year because of a gift card, driving foot traffic. And there are other benefits, too. Sixty-nine percent, for example, said they spent more than the value of their gift cards.

To get an idea of just how effective gift cards can be for restaurant brands around the holiday season, consider Starbucks. In 2015, the company announced that $25 billion had been loaded onto its gift cards in the 15 years since it launched. That is immediate revenue for the brand. Its gift cards are also tied to its loyalty program, so another added benefit is an uptick in loyalty members.

The brand is hardly alone. Restaurants are the most popular places for consumers to purchase gift cards, and are likely to be the most popular this year, according to Blackhawk Network. With gift card spending expect to rise over 7% during this holiday season, there will be plenty of opportunities for restaurants to capitalize on additional revenue.

It's also worth noting that the rise in third-party retail sales for restaurant gift cards presents an additional opportunity during the holidays. In-store sales accounted for 50.3% of all gift card sales in 2018, down from the previous year as third-party retailers, like Costco and Sam's Club, continue to gain popularity and accounted for over 45% of gift card sales in 2018, up from about 43%. Costco and Sam's Club are gaining in popularity for a reason: convenience. As consumers hit the shopping circuit for the holidays restaurant brands are wise to leverage these types of retailers for their gift card sales. Retail sales are expected to jump to 5% from November into January, according to consultancy Deloitte, amounting to more than $1.1 trillion during peak season. For context, last year's holiday sales totaled $1.09 trillion. According to Paytronix, adding just one such third-party retail partner could contribute to increases of more than 25% for restaurants.