Gift Cards for Small Businesses: A Complete Guide

Gift cards are a win-win for both small businesses and customers. They provide a more thoughtful gift avenue than cash for consumers, and for businesses they help bring in new and repeat customers while fighting back against lull periods (I’m looking at you post-Christmas).

Think about it. Every customer that walks into your shop or goes online searching for a gift card and doesn’t find one takes that business elsewhere and doesn’t spread the word about your business. You lose both short-term and long-term cash potential. This can really add up over time.

Gift cards double as both a marketing and revenue tool simultaneously, so if you don’t currently support gift cards, you need to be — otherwise you’re just leaving money on the table.

So in short, gift cards:

  • Offer another product to your customers.
  • Often get other people inside the doors, presenting the opportunity to create new lifetime customers.
  • Make it easier for customers to share your business.
  • Help you compete with larger retailers and businesses.
  • Increase your sales and earning potential.

This article has everything you need to begin accepting and growing your business with gift cards. From choosing what type to various marketing ideas, you’ll walk away confident about how to best approach gift cards.

Why are gift cards so great for businesses?

Before digging into the how let’s talk a bit more about the why.

1. Gift card sales are through the roof

According to Research and Markets, the US saw a 29.1% Compound Annual Growth Rate (CAGR) in the gift card market between 2015-2019, and is estimated to growth another 18.1% between 2020-2024. Further, the e-gift card market is estimated to hit $101,979.2 million by 2024.

That is a MASSIVE market that you need to tap into. Gift cards are the perfect upsell to repeat customers. If someone loves your product, you should make it easy for them to share it.

And it’s worth noting that the cultural meaning of gift cards is changing. It’s not just an impersonal gift anymore — gift cards are evolving into a way of sharing a piece of culture with someone else. With the rise of “craft” businesses and small, powerful brands, gift cards are no longer a last-minute gift-giving medium dominated by large companies.

Instead of, “Hey, here’s a gift card because I forgot about you”, gift cards are now, “Hey, I discovered this amazing Thai restaurant on the east side that you have to check out”.

And boy, is there a lot of market potential in that shift!

2. Sales margins go up when you support gift cards

People with gift cards tend to spend money on higher-margin items. If they have “free” money already, they are more likely to get something new than buying off the discount rack.

This means higher margins for you and your business.

3. Not all gift cards are used

Around 10% of all gift cards go unused, and that statistic plays in your favor since you’ve already collected the funds.

4. Gift cards bring in new customers

Sure, you have people who give them to their addicted friends, but the addicted friends give gift cards of their favorite haunts and products to people who they want to share that experience with.

New people = new customers = new opportunities to develop a bigger and more loyal customer base.

You can use gift cards in cool marketing initiatives like kickback incentives (give a friend $50 on a gift card and get $10 back, etc.) as well.

5. Chance to compete with bigger dogs

When you sell gift cards, you have the chance to let someone give a more personalized gift to their family and friends and compete with retailers.

6. Fight back against the post-holiday lull

January sucks for a lot of B2C businesses — especially retail. The returns hurt, and there’s often a massive dip after the Holiday push. Supporting gift cards help you fight back by bringing in new faces during those down months.

How to order small business gift cards

So where do you get gift cards?

Well, most commonly through a merchant services provider. These are companies that sell a variety of services to “merchants” including merchant accounts, payment processing, online gateways, etc.

Make sure your MSP prioritizes transparency and longevity. It should feel like a partnership, and they should earn your business month after month. This industry is full of MSPs who try to sneak in shady contracts and high management fees for no reason. Don’t let them get the best of you!

We offer gift cards that easily integrate with your existing POS — unlocking a whole world of useful business possibilities. And if you’re an existing Tidal customer or switch to our merchant service suite, all of your data will be combined and easily accessible in your reporting dashboard.

It’s your data, centralized.

This means you can track gift card sales like any other product type and see how they ebb and flow over the year. You can also reload, pay, track, and redeem codes directly from your POS — this makes it super easy to see the impact supporting gift cards has on your bottom line.

We also offer low prices and design assistance with state-of-the-art templates you can choose and customize.

How to get the most out of gift cards

1. Don’t be afraid to show them off

Don’t hide your gift cards! Place them prominently either by your register or alongside other souvenirs you sell. This could be on a high shelf or any major store displays you have.

If you’re a restaurant, having them by your register and by the desserts is a must — that way when a customer is happy and going back for dessert, they can gift that experience that is still fresh on their minds to their friends.

2. Sell them with nice packaging

No one likes having to go somewhere else to make your gift card “gift” ready. Invest in some nice envelopes (preferably with your branding on the inside) and have a pen ready. This way someone can pick up a gift card, sign it, seal it, and deliver it all in a moment.

3. Customize them for the holidays

After you get your first couple of gift card shipments, make note of how long they took to arrive and ask your provider how long in advance you should order gift cards during the holiday season.

The last thing you want is to run out during the holiday season. Once you have these timelines in mind, make sure to order well in advance for all of the holidays relevant to your business — and whatever you do, don’t forget about Christmas!

4. Advertise them during the holidays

Go beyond having gift cards on display during major holiday or high sales periods.

For example, If you sell flowers, two weeks before Mother’s Day would be a great time to send out an email and post on social media about your gift cards.

You could also include them as an automatic upsell that occurs in your online cart (using systems like Stripe & Shopify).

5. Use social advertising and customer segmentation

Combine your POS with a CRM to really tap into gift card potential.

Imagine if you had an automatic email that advertised gift cards to anyone who spent >$100 with you in the past month, or what if you advertised gift cards on Facebook and Pinterest to customers who have repeatedly engaged with your posts.

There’s a lot you can do here.

6. Give some away

Don’t be afraid to give some gift cards to your top customers to encourage them to bring friends in. Or you could send some to local charities to give away during fundraisers.

You could also send gift cards to people who just moved in nearby to get them in the door. The opportunities are endless!

7. Give gift cards instead of refunds

A clever way to capitalize on the marketing potential of cards is to offer a full refund in card form instead of conducting a chargeback. This is easier for your business, saves you the headache of having to void a transaction, and encourages the customer to come back.

Business gift cards FAQ

How do you choose the right gift card program?

You want to make sure the software seamlessly integrates with your existing POS and fits into your larger business structure.

This is most commonly and easily achieved through going through a respectable merchant services provider.

Does gift card design usually come included?

That depends on the merchant services provider, but most have pre-designed templates or options or you to upload a custom design.

How do you get physical gift cards?

Whatever MSP you choose should have a partner they work with. If not, you’ll have to order the software and cards separately.

How do you sell and load physical gift cards?

POS integration makes this easy, and the process is very close to how you accept debit and credit cards. It’s just a combination of swiping and POS keystrokes for loading funds and accepting gift card transactions.

How do digital gift cards work?

They integrate directly with your payment gateway and are purchased just like any other digital product (making it easy to track your gift card sales data). Then the user is given a unique product code that they can apply to their balance.

Some services let the user send the gift card directly to the receiver’s email address with a “gift email” as well. Or you can set it up for customers to drop by the store and pick up their card or mail it to themselves after buying a physical card online.

How do you get the most out of selling gift cards?

For starters, making sure to advertise them during holiday seasons is a must. Other than that, making the checkout process as clear on your site as possible is smart, plus having them by your register or easily seen in your physical store (if you have one).

We cover more on that toward the end of this article!

What are closed-loop and open-loop gift cards?

When shopping around for gift cards, you may have come across the terms “closed loop” and “open loop”.

  • Closed-loop gift cards are particular to a store, easier to brand, and easier to customize to your own business. Customers can only use them at your store.
  • Open-loop gift cards are specific to the credit card processor and can be used at a variety of businesses. This is closer to a VISA pre-loaded card, for example.

Most people think of closed-loop gift cards when imagining a gift card program, and this is usually best for small businesses. Plus, closed-loop doesn’t exclude you from participating in an open-looped program later on.

Open-looped programs are great for franchisees and businesses that are quite big and diverse. This way you can offer gift cards that can be used across your brands instead of just one physical location.

Do gift cards have transaction fees?

Depends on the type of gift card you support. Open-loop cards can, but they typically have the lowest possible rates offered by the card association (Visa, Mastercard, etc.), and closed-loop cards only have the normal fees that occur when a customer purchases the card.

The bottom line? Not really. And the fees you do incur are vastly outweighed by the benefits of selling gift cards.

The bottom line

There’s really no good reason for not supporting gift cards. They’re convenient, cheap to acquire, bring in new customers, and help keep sales steady through low months.

As we mentioned, we offer fantastic gift cards that include design assistance at affordable, transparent prices. We’d love to chat if you’re ready to take the next step.

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