It’s no shock to hear that gift cards are hot. Forecast to reach $750B worldwide by 2026, an estimated 25-35% of gift cards are purchased by the “B2B segment” (corporate gifting/employee incentives) -- and this trend shows no sign of slowing thanks to their convenience, ubiquity and popularity.
But are gift cards the best corporate gifts?
Let’s break downsides and hidden costs of gift cards from a corporate gifting POV, and tips for using them more wisely.
Will gift cards get used?
Jennifer Segro, Director of Digital Content at SAP says her Sales and Marketing teams had experimented with online lunch-and-learns and other meetings, sending Uber Eats, Dunkin Donuts and other gift cards. “We used to order hundreds of gift cards, but only a handful were used, leaving us with a large number of paid for but unredeemed cards.”
According to Consumer Reports, upwards of 25% of gift cards are never used. 58% of those surveyed said they didn’t have time to go to the store or shop online. 35% said they couldn’t find anything to buy, and 32% lost a gift card or forgot they had it.
While sending a gift card ticks the show-your-appreciation box, it’s only one part of the gifting value exchange. As the gift giver, you may end up paying for hundreds of thousands of “gifts” void of an experience.
The balance act
For gift cards that are redeemed, recipients often end up paying out of pocket above the face value of the card -- 74% of gift card users spend an extra $54.
Alternatively, leaving an unused balance, however small, leaves the feeling of not realizing the gift’s full value.
Easy for you to send, but places a process on the receiver to take action to redeem, this sometimes can be a frustrating process and often leaves them paying out of pocket.
Explicit disclosure of value
Denominated gift cards leave no mystery about how much you spent (save any volume discounts you may receive from bulk-buys). There’s no room for perceived value or nuance around it. It’s akin to saying “we appreciate you this many dollars worth.”
For some gift-cases, a clear and discrete gift value makes sense. For example, employee recognition, or programs where staffers can exchange points (such as Bonusly or Qarrot) for gift cards. For clients and prospects, you may want to keep a gift’s “price” more ambiguous.
When near-cash gifts = taxable income
Another reason to disclose gift value is for tax purposes. In the US, physical corporate gifts under $100 are considered “de minimus” fringe benefits and are not taxable. However, gift cards of any dollar value issued by employers are considered near-cash, taxable benefits in the US and Canada, as well as many other countries.
Compound this with the fact many gift cards go forgotten or unredeemed, and that employees are typically unaware of the tax implications (buried as a line item in their W2) -- gift cards become less rewarding as employee incentives. While 52% of US employers offer gift cards as non-cash incentives to employees, informed employees may prefer tax-free de minimus options such as event tickets, gift baskets, tech, apparel or even alcohol (under $100).
Do gift cards provide “redeeming” value?
The intent behind corporate gifts is often a mix of expressing gratitude and fostering relationship. Because the process of redeeming a gift card is so much like an everyday, personal purchase, recipients are less likely to associate the items they ultimately pick as a gift from your company. In gift-cases where you want to leave a lasting impression, consider sending physical gifts such as a best-in-class branded merchandise, practical item or great quality branded swag.
Gift cards are here to stay - how to maximize their value
Despite the drawbacks, people still love to receive gift cards and they will always hold their place within corporate gifting programs.
A corporate gifting platform like CG Elite can help you mitigate gift cards’ challenges and maximize their value.
Gift cards are popular corporate gifts because they are easily distributed electronically and don’t require you to know your recipient’s physical address. But they’re not the only convenient option! E-Gifts (physical gifts sent by email invitation) are just as easy to send by email, but carry additional perks:
Choice: Let your recipients pick their favorite reward, whether a gift card, physical gift, experience or donation - it’s up to you (and to them)!
Options: CG E-Gifts allow recipients to accept or decline a gift, upgrade/exchange for something else (including anything from the CorporateGift.com Marketplace or even charitable donation), or re-gift the offer to someone else. As a gift giver, you decide what options apply to each E-Gift.
Cost control: Pay only for “accepted” gifts (unlike gift cards and traditional corporate gifts which is always pre-paid).
Compliance: Without a centralized gifting platform, it’s tough to communicate and enforce gifting policies across departments, employees and campaigns. Teams can often go rogue, and unwittingly gift outside your requirements. With CG Elite, you can configure rules such as acceptable gift types and vendors, maximum spend per gift, per gift giver, per team/group, per event, or any other specification you need.
Want to learn more about how CG Elite and E-Gifts can help you optimize your corporate gifting programs? Book a demo, we’d love to show you more.
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