Innovation – The Competitive Gift Card Offer

I received the following question from Guideline Senior Project Manager Howard Waxman regarding gift card usage and had the following response.

Q: Subject: Comment on a thesis

Dear Mr. Cohn,

I’m doing some research for a client on the impact of gift cards on home improvement and home decorating e-tailing. I’m reaching out to people who think about marketing matters to ask for their thoughts about a thesis we have.

Our thesis is that smaller etailers in this category lose business to large multichannel retailers because people get gift cards as, well, gifts and then use them in the brick and mortar stores of the multichannel retailers.

For example, I need a lamp and I’m looking at some on LampsPlus.com but I haven’t made a purchase yet. Maybe I’m waiting to see if there is a post-holiday sale.

Then I get as a holiday present, a gift card to Home Depot. I take it down to my nearest brick & mortar Home Depot, hunt for a lamp, find one I like, use my gift card and maybe a couple of bucks in cash, buy it and take it home, never thinking to comparison shop at LampsPlus.

In other words, the savings offered by small etailers in this category is overpowered by the immediacy of a gift card to a larger retailer, especially a multichannel.

With gift card usage going through the roof, we want our client to think about whether they need to have gift cards or need to work more closely with non-specific gift card providers like Amex.

Would you have any comment to share on this thesis?

Thanks!

Howard Waxman
Senior Project Manager
tel: 212.463.6209
hwaxman at guideline.com

Guideline | 625 Avenue of the Americas, New York, NY 10011 | http://www.guideline.com

A: Subject: Re: Comment on a thesis

Hi Howard,

Thanks for contacting me.

Your clients could use a tactic similar to the competitive upgrade offer in the technology business.

LampsPlus.com could accept competitors gift cards commensurate with set transaction sizes as an inducement provided the new customer’s lifetime value supports offering the discount.

All the best,

Tim Cohn

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