Electronic Gift Cards -- A Sound Economic Choice

As booksellers begin to consider the Book Sense Gift Card program, the question of costs and profits arise. Various retail studies have shown, however, that money invested in a gift card program is money well spent, and booksellers who already have gift card programs in place attest to their ease of use, an increase in sales, and high consumer satisfaction.

Two booksellers who already use gift cards in their stores are Brother Simba Sana of Karibu Books, which has locations in Maryland and Virginia, and Liz Murphy of Learned Owl Book Shop in Hudson, Ohio. Sana, who sells gift cards in his Bowie, Maryland, location, said there are "definite advantages" to using the gift card. The primary benefit is that when a customer uses a gift card, unlike with paper certificates, the remainder is not given back as cash, but, instead, is left on the card to be used at the bookstore in the future. Sana added that when the customer gets cash back, aside from the obvious disadvantage that the money may not be spent at the bookstore, it "always creates problems at closing [regarding balancing the cash register]."

A major selling point of the Book Sense Gift Cards, Sana noted, is that the program could be accessed online and would be available to all of his stores, regardless of the credit card system and terminal each store uses.

Liz Murphy of Learned Owl Book Shop in Hudson, Ohio, also discussed the pluses of gift cards. The Learned Owl currently offers and accepts two different cards. One can be used throughout the town of Hudson, in about 25 restaurants and other businesses. The other is the Learned Owl's own card.

Murphy is very pleased with both. She noted that the cards increased her sales, particularly among young adults. "They're glitzier than paper certificates," said Murphy. "People like them better, especially young people who might not have a credit card, since the gift cards are kind of like a credit card. I've had kids come in, who never bought paper gift certificates, buying the gift cards for their friends."

While most published gift card statistics are from chain stores and businesses outside of the book industry, much can be learned from their experiences. For example, Starbucks, which started its electronic card program in November 2001, has had great success with it. As was reported in The Seattle Post-Intelligencer, by January 2003, Starbucks had sold six million gift cards, with holiday sales increasing 50 percent over the previous year. Starbucks customers spent an average of $12 on the first activation and an average of $20 on reloads.

Market research confirms that durable plastic cards have mass appeal. In August 2002, TNS Intersearch's Express Omnibus conducted a survey of 1,278 consumers about gift cards. Of the consumers polled, 37 percent had purchased or received an electronic gift card in the previous 12 months. The group that had previous experience with gift cards rated their overall satisfaction as 9.3 on a scale of 1 - 10, with 1 being "not at all satisfied" and 10 being "extremely satisfied." Ninety-three percent said they were "likely to purchase additional gift cards in the future."

Givex, Book Sense's gift card partner, has also compiled findings from a variety of sources that show that the benefits of an electronic gift card more than offset increased the costs. To view the data gathered by Givex, click here.

The Book Sense Gift Card also offers other practical benefits. The gift cards will not expire or have inactivity fees, which is in compliance with the widespread trend in consumer protection laws being passed nationwide. Consumers will be able to purchase and redeem Book Sense Gift Cards online at stores participating in BookSense.com. Last holiday season, Book Sense paper gift certificates were the number one bestselling item on BookSense.com.

ABA has created a financial analysis spreadsheet for the Book Sense Gift Card program. A number of assumptions were made in order to produce useful information for booksellers. All assumptions are printed on the spreadsheet. To view the spreadsheet, click here.

Through the Book Sense Gift Card program, independent booksellers will have a tool to meet consumer demand using cutting-edge technology. And, because Book Sense Gift Cards can be bought in one store and redeemed in a different store, customers' needs will be met, and independent bookstores will be able to capture more of their sales dollars.