feature story

gift cards: A GROWING OPTION FOR FLORISTS

With the explosion in gift-card sales, don’t miss out because you don’t offer them. Here’s everything you need to know to get started with a gift-card program in your store.

by Morgan Chilson


Gift cards have blasted into popularity in the past few holiday seasons, delighting both consumers and business owners. These small plastic cards were estimated to account for almost $28 billion in sales during the past holiday season, according to the National Retail Federation (NRF), a retail trade association based in Washington, D.C.

In its November 2006 “Gift-Card Survey,” the NRF found that almost 80 percent of consumers were planning to buy at least one gift card over the holidays. More than half said they hoped to receive a gift card.

Gift cards offer marketing opportunities for florists because they can increase store traffic, says Michael Russo, chairman and president of the Gift Association of America, a gift industry trade association based in Johnstown, Pa. Statistics show 55 percent of recipients make more than one trip to the store to use up a card’s value.

What’s more, the NRF says 61 percent of gift-card recipients spend more than the value of their cards. Gift cards also can increase business traffic in January and February. Sales are not recorded when the cards are purchased but when they are used to buy merchandise.

Gift cards aren’t just about the holidays. Mr. Russo says research indicates the average person receives four gift cards a year, with an average value of $35 each. In addition, fraud with gift cards is significantly lower than with paper gift certificates, he says, 1 percent versus 8 percent.

Bruce Nelson, president of St. Croix Floral Co., in St. Croix, Wis., saw a 25 percent increase in gift-card sales when he got rid of his store’s paper certificates three years ago and started using gift cards. They sell well for Christmas and Mother’s Day, he says.

“Customers are just more comfortable with them,” Mr. Nelson explains. “All the big mass merchants are using gift cards. There’s no reason the floral industry shouldn’t be.”

These plastic marketing tools have been available at most major retail stores for a few years. One challenge for owners of small- to medium-sized businesses is determining if the cost of installing a gift-card system is outweighed by the benefits.

setting it up through pos
The first important question to answer when considering gift cards is whether your current point-of-sale (POS) system offers that function. If so, getting started can be easy.

Two of Teleflora’s four POS systems, the RTI Total Management System and Dove POS, offer gift-card capabilities, says Quinn Goldstein, director of marketing for the Los Angeles-based flowers-by-wire service. Teleflora also offers a gift-card solution for non-POS users through its credit-card terminal.

Mr. Goldstein says the two Teleflora systems include software that helps store owners track gift-card sales as well as outstanding balances and customer information. That information stays in-house at the business and is not accessed by Teleflora.

Floral Accounting Systems, Inc., a floral industry technology provider based in Ruston, La., added gift-card capabilities to its FAS 2007 POS system in October 2006, says Gary Reed, president. As with Teleflora’s systems, there is no cost for processing gift cards through the FAS system because it is included in the software.

“There was an immediate response from our customers,” Mr. Reed says. “The people who make the gift cards were very surprised at the level of response they got.”

Training employees to process gift cards through the current POS system is easy, he says, because they work a lot like credit cards. Each store can decide if there will be an expiration date on the cards or any fees charged for cards that aren’t used within a certain period of time.

If your store uses a POS system that has gift-card capabilities, there usually are no additional fees other than purchasing the gift cards. Costs for those can run from 10 cents to $1 per card depending on options such as custom artwork, barcoding, magnetic strips or whether the card is reloadable.

  Eunredeemed gift cards: causing some controversy

 
 
One challenge for retailers is what to do about unredeemed gift cards. While some business owners might consider this a bonus to their businesses, gift cards with expiration dates and/or service fees that go into effect after a certain period of time are causing controversy. As a result, many retailers are no longer following those practices, says Bill Horne, president of Valutec Card Solutions, a firm that offers gift-and loyalty-card programs to retailers.

A few state legislatures have tackled the issue. The focus so far has been on making it illegal to utilize expiration dates and service fees, steps that both Florida and California have taken.

There also has been some talk that dollars left on gift cards should fall under regulation by Abandoned Property Laws, and in some cases this is so. That would mean that unused gift-card money would have to be turned in to the state to be held for the gift-card holders. Each state has different laws on the books about how this should be handled, so consult your accountant or attorney.

For larger stores, the value of unredeemed gift cards can be tremendous. Some of the larger companies have coined the term “breakage” for unused gift cards and started showing them on their books as earnings after a certain period of time. (Remember, gift cards are not counted as sales until they are redeemed.) According to The New York Times, Best Buy’s earnings in 2006 were pumped up by breakage of $16 million.

 


 

separate systems
If your current POS system doesn’t support gift cards, you still can start a program although the costs may be higher. Mr. Nelson’s POS system through FTD Group, Inc., does not support the service, so he uses a separate vendor. A spokesperson for FTD confirms that their POS systems do not currently support gift cards.

Mr. Nelson elected to use a gift-card processing system from The Card Group, in Deer Park, N.Y., that runs like a credit-card system. He purchased one terminal for the floral shop and one for the garden shop. It would be better, he says, if it ran through his POS system because sometimes having only two processing machines can slow customer service.

There are several factors to consider when choosing a stand-alone gift-card system:
Type of system. Some vendors sell gift-card systems that work through many POS platforms. Others offer separate machines that scan the cards. (Mr. Nelson notes that his works this way and does tie up a telephone line.) Manual systems also are available, requiring the input of the customer’s name and information into a computer. Some systems utilize a scanner attached to a personal computer. Before buying, determine if you might want to use the system for loyalty cards or promotional cards, and make sure the software supports that.

Accounting. Determine what reports can be generated by the software. Those can include number of cards sold, amounts outstanding and amounts redeemed. Some companies collect the information and generate reports for business owners while other companies offer software packages for owners to run the reports themselves. Additional programs can track buying behavior and customer information.

Cost. Most companies offer several programs based on usage. For instance, Valutec Card Solutions, a gift- and loyalty-card program company based in Franklin, Tenn., has a flat-fee program that includes 100 standard cards (which would be printed with your business name but not your logo) and up to 4,000 transactions per year for just less than $500. It is considered one transaction each time a card is swiped. Some companies, however, charge either a fee each time a card is swiped or a monthly fee that covers all transactions.

marketing with gift cards
“I think a gift card, instead of being a payment tool, is really a merchandising tool,” says Bill Horne, president of Valutec, which is part of Metavante Corporation, the banking and payments technology subsidiary of Marshall and Ilsley Corporation (NYSE: MI). “You can use it as a gift card, a loyalty card or a promotional card. We’re having tremendous success in the floral industry using them as promotional cards. Instead of waiting for the traffic to come to their store, the florist will do a targeted mailing with, for example, a $10 card.”

Another idea is to run a “Hole in One” special with a local golf course. A furniture company client has a $10,000 card for that purpose, Mr. Horne says. They bought insurance in case they have to pay out, but it’s been a terrific way to bring attention to their business. A floral shop could offer flowers for life, he suggests.

Mr. Nelson tried a new promotion for Mother’s Day where customers who bought gift cards valued $25 or more received $5 off 10-inch hanging baskets. He also is using the cards with fund-raising groups. The local high-school drama club bought $20 gift cards, and he charged them only $16 each. That way, the group benefits from the sales, and he pulls in more customers.

In addition, customers typically keep gift cards with their credit cards, and they see the floral company logo every time they open their billfolds, so the cards themselves are ideal marketing tools. Gift cards also can be used for in-store credits, making sure that money comes back to your store.

Matthew Troy, owner of Troy’s Garden Nurseries in Bedford, N.Y., instituted a gift-card program in his business more than a year ago, and although he hasn’t tackled special marketing programs with it yet, the card program immediately began to pay off. Troy’s typically sold five or six paper gift certificates annually, but by the end of last year, the business had sold more than 200 gift cards.

“The cards make it more convenient for people,” Mr. Troy says. “They are sitting on the counter, where people can pick them up and handle them. Before, there was just a sign behind the counter saying that we had gift certificates.”

  gift-card/loyalty-card service providers

 
 
Floral Industry sources

Floral Accounting Systems (FAS)
(800) 830-6160
www.fasinc.org

FloristWare
(888) 531-3012
www.floristware.com

McShan Abner Systems (MAS)
(214) 324-2481
www.mschanabnersystems.com

Teleflora
(800) 321-2654
www.myteleflora.com

VIP Florist Network
(405) 359-9952
jfrancis@vipfloristnetwork.com


Non-Industry sources
This list of suppliers was compiled by the editors; it is by no means an exhaustive list, and inclusion on it does not constitute or imply endorsement by Florists’ Review.

Buyer Zone
www.buyerzone.com/marketing/gift_cards/

Capital Bankcard
(888) 605-6770
www.nurit2085.net/giftcardsmain.html

E-Card Systems
(866) 776-7409
www.ecardsystems.com

EffortlessE.com
(888) 362-9307, Option 1
www.effortlesse.com

Gift Association of America
(814) 288-1460
www.giftassn.com

Millennium Resources
(706) 228-4616
www.millresources.com/salon/gift.htm

Shift4
(702) 597-2480, Option 3
www.shift4.com/your_card.htm

Smart Transaction Systems, Inc.
(888) 494-9760, Ext. 111
www.smart-transactions.com/gift.html

Tx Systems
www.txsystems.com/valuecard.html

Valutec Card Solutions
(877) 654-6937
(615) 771-8700
www.valutec.net
 


 

loyalty cards
Mark Anderson, founder of FloristWare, an order-taking and point-of-sale system with headquarters in Ann Arbor, Mich., offers a loyalty program through his company’s POS system. The next upgrade also will incorporate gift cards but not the traditional plastic cards; his system aims for environmental friendliness by offering virtual gift and loyalty cards to customers.

The customers’ profiles are input into the system, and the florists then contact them by e-mail, telephone or mail about the virtual gift card. For loyalty cards, the profiles also are set up, and the florists can use them for marketing purposes. Customers receive points based on their purchase amounts as determined by the florists, Mr. Anderson says.

Loyalty cards enable florists to have different marketing options. For instance, some stores offer double points on Tuesdays and Wednesdays or if customers order Valentine’s Day gifts by the end of January, Mr. Anderson says.


Morgan Chilson is a freelance business writer residing in Topeka, Kansas. You can contact her by e-mail at morgan@exactlywrite.net.


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