October signals the wind-down after a busy Summer season and is the month you'll be refreshing the pro shop with new stock. As a retailer, your attention also turns to Christmas and planning your transition to a gift shop. Yes, the festive season is on its way and soon the shop will be selling more gift vouchers than any other time of year. But while vouchers are generally a good thing for retailers, complacency could mean big trouble further down the line.
Gift vouchers aren't a new concept: generally seen by retailers as a great way to boost revenue, and widely appreciated by consumers. The voucher industry is big business, having seen double digit growth over the past 5 years and now worth over £6bn each year in the UK alone. Here we look at what's great about gift vouchers, as well as what retailers need to do to avoid the pitfalls.
- While gift vouchers bring in extra cash when they're purchased, you'll often receive additional revenue when they're redeemed. Spending a voucher can feel like "free money" to the customer and over 70% go on to spend more of their own money on additional items in the shop.
- Vouchers are a great way to reach new customers. When a club member buys a voucher for a friend or family member, that could mean a first time customer for your shop - perhaps someone who hasn't walked through your door before.
- After a busy Summer and Autumn time, and subsequent spike in sales during December, January and February can feel slow. Encouraging voucher holders to come in and spend can help keep things ticking over.
Despite these positives, retail expert, Matt Peace, has a warning for retailers. "In the short-term, vouchers can be a good way to bring in extra cash but it's really important to keep track of how many vouchers you've sold, and how much is left outstanding. It's easy to forget about previous gift voucher sales, but it isn't hard to imagine someone coming into the shop, who's been saving up vouchers, and spending hundreds of pounds in one go. You had the cash 2 years ago, but have since spent the money. It's effectively product going out the door that you haven't made a profit on because the money was spent a long time ago."
Do you know the state of your vouchers?
In his role as Sales Manager for Crossover Technologies, Matt travels around the UK, talking to retail owner managers about their businesses. "I've seen many cases where hundreds, or even thousands, of pounds-worth of vouchers have been purchased in a shop. The retailer is happy - afterall, it's cash in the bank - but it's not always good for business", continues Matt. "When you sell a £50 voucher, what do you do with the cash? You don't know when that voucher will be spent, or even if the customer will ever come back to the shop. Everything's about risk ... But if you go and spend that money on new stock, you've just added to that uncertainty".
When it comes to gift vouchers, success is about footfall, stock rotation, and getting people back to the shop. "Having thousands of pounds out there on vouchers is never a good thing", says Matt, "But if it's rotating and people are coming into the shop to use them quickly, then that's great".
Make Gift Vouchers Work for You
- Open a separate bank account to keep money from voucher sales This will prevent the cash from being spent on stock and immediately reducing risk.
- Always include an Expiry Date on your vouchers, and stick to it - easier said than done, we know.
- More often than not, you won't know who the voucher recipient will be: making it impossible to prompt them to come back to the shop. Try to reach voucher holders with generic emails to your customer base, or posters around the club.
- Another good idea is to suggest cash gifts are put on customer accounts, instead of vouchers. That way, you'll have a recipient name AND more control over when the money is spent.
New XPOS V2 and Gift vouchers
Our sales and stock management solution, XPOS, enables retailers to introduce, and manage, voucher schemes into their business. What's more, the new Version 2, currently being rolled out to our customer base, gives you even better control and multiple options for voucher sales and reporting. Get in touch today if you'd like further advice on using gift vouchers, or upgrading to XPOS V2.