Report Faults Merchants for Sub-Par Virtual Gift Cards

With the holiday shopping season only weeks away, the nation’s biggest retailers are falling short in their offerings of virtual gift cards, according to research released on Thursday. Of the country’s 100 biggest online merchants—many of which also operate large brick-and-mortar chains—only half offer virtual cards, which are gift “cards” delivered electronically via e-mail or mobile application, according to the research, which was conducted by Miami-based Retail Systems Research and sponsored by CashStar Inc., a Portland, Maine-based provider of digital card programs..

Those that do offer virtual cards are delivering a sub-par experience overall in such critical areas as personalization, notification, and mobile delivery, the report says. “I certainly expected retailers to have more capabilities than they did,” Nikki Baird, managing partner at RSR, tells Digital Transactions News.

The findings come at a time when consumers are increasingly preferring virtual rather than conventional plastic gift cards. Some 74% of consumers opt for virtual cards when given a choice, according to Giftango Inc., a Portland, Ore.-based gift card and incentives provider. And the results also come when merchants are about to enter the most frenzied shopping season of the year, a time when they might be expected to use tools such as digital cards to win new customers and gain market share.

For the report, “The Digital Divide: Digital Gifting Among Top 100 Internet Retailers,” RSR researchers bought and sent virtual gift cards from all the merchants that offered them, and scored the merchants on range of criteria. The report relied on a ranking of the 500 largest online retailers published by Internet Retailer magazine. The top-scoring merchant in the study, with a total of 47 out of a possible 60 points, is Home Depot Inc. Close behind are CVS Caremark Corp. (43), Amazon.com Inc. (41), American Eagle Outfitters (41), and Sears Holding Corp. (40).

A common shortfall is merchants’ practice of including long strings of account numbers and PINs in their messages, the report says. To redeem their cards at the store, recipients must give printouts of these messages to cashiers, who must enter all the data, making for a slow and tedious checkout. The fault lies in a failure to integrate online and physical-store systems, says Baird, so the cashier’s point-of-sale system can readily capture data from the online card order. “The technology behind the scenes is getting in the way,” she says.

She recommends that merchants use bar codes that cashiers can scan. While this technology is beginning to emerge for e-mailed cards, Baird says none of the merchants surveyed offered mobile redemption by allowing recipients to display a bar code on a smart phone screen for scanning in the store. When it comes to ordering gift cards, only six retailers offered a process optimized for mobile phones, according to the report. “Mobile capabilities appear to still be nascent,” the report says.

The report also found fault with retailers’ offerings in personalization and notification of recipients. Only two merchants, Home Depot and CVS, allow senders to personalize messages with photos or other images, the report says. All but seven of the 50 that offer virtual cards allow only short text message. Meanwhile, senders are often left in the dark as to whether and when recipients received and viewed their cards. Just 17 of the 50 notified senders when the card was sent, and only three (Home Depot, CVS, and Target) let senders know when recipients viewed the card.

While the report found most virtual gift card offerings scored high in disclosures of fees and restrictions, as well as in the range of payment methods, it found enough shortcomings to reach a stark conclusion: “Gift card offerings were often hard to find, difficult to navigate, and lacked follow-through for both the sender and the recipient. This represents an enormous missed opportunity for retailers. In fact, we were shocked at how underserved retailers’ offerings are.”