Why the future of gift cards lies in B2C segment, essential services
In a conversation with Indian Retailer, O2O gifting solution provider GyFTR.com CEO Arvind Prabhakar talks about the opportunities in the industry, gaps and more:BY Shwetha Satyanarayan | October 29, 2018 | comments ( 0 ) |
As the popularity of digital vouchers and gift cards continues to grow, it’s that time of the year when most corporate houses will turn to digital gift cards for festival gifting. And this festive season, it’s the B2B category that’s making volumes, while B2C has higher growth rate.
Corporate or personal gifting these days mostly means gift cards. How has the market evolved from vouchers to gift cards? And why this sudden boom?
Though it seems gifting today is all about gift cards, it can be said an indirect form of gift cards has been here for a while. In fact, they have been here for as long as brands have existed. Earlier, companies would give vouchers in the form of letters for a certain brand with certain amount. Though they were not given as gift cards, such gifting methods certainly existed. However, the evolution started when there was transition from letters to vouchers to plastic cards. While less people used plastic cards and most often retrieving it at the right time was the biggest challenge as it would expire even before one could use, people were curious if these cards could be reloaded and continue shopping. However, with large corporates mostly giving out gift cards, the momentum has sustained.
Moving on, why the boom, I think it’s because corporate houses don’t want to make the choices for their employees anymore. In the sense, if people can spend the same money on a vacation or things they want to buy, why gift them things they don’t need? Also, gift cards are far most cost effective.
Tell us more about your reverse auctioning that GyFTR is working on. What gap in the industry does it intend to bridge?
So the idea behind reverse auctioning is to let the demand define the price of products and services. Over a period of time, it’s the fixed costs that form the majority of prices like the rentals, resources and so on. While many parameters influence the demand in the F&B industry, the footfall turnout may vary from day to day and not necessarily meet the daily target every day. What reverse auctioning intends to do is real time intervention in the business hours. For instance, if a cafe is unable to sell its target number of products that have less shelf life, let’s say a doughnut or a cupcake, through reverse auctioning such products can be sold at lesser price so that there is loss in operational costs at least. The same applies for groceries too. We are working on how to make this accurate in real time basis.
Which industries do you think will benefit the most from reverse auctioning?
F&B is one which will benefit the most because it functions on daily basis and will remain the largest category. Also, supermarkets and stores that sell groceries, if they can identify lean business hours they can benefit from reverse auctioning. Even service industries may find it useful.
Meanwhile, with gift cards what category has fared well this festive season- B2B, B2C? And what category looks more promising?
Well, it’s B2B which does more volumes and about 98 per cent of business comes from this category. Meanwhile, the growth rate has been higher with B2C category. A couple of years ago people never thought of giving gift cards at weddings or birthdays. But due to its convenience, more and more people are turning to gift cards and digital vouchers for presents. This category will continue to grow.
Tech players like Ola, Paytm have tied-up for gift cards. How are these collaborations impacting the gift card industry? (Ola, Paytm)
For any gift card, banks are the biggest drivers of growth. Now, with banks themselves aggressively promoting a brand or a certain product, it’s a win-win for both customers and brands. For example, let’s say Axis will give a voucher to its customer to shop from a certain brand, of which the person is not a customer. When there are offers or discounts, there is natural push to buy from a certain brand. Again loyalty points are given to the customer which adds up for customer loyalty. Hence, such collaborations are win-win for both.
What are the challenges in the industry?
The key challenge has to be that the super hyper local retail outlets are out of the ambit. Gift cards have not reached this segment which means about 50 per cent of the market has not been covered. The kirana and neighbourhood stores have huge potential and our aim is to work with these stores also.
What trends do you think will take forward the industry?
For now, it seems like products or services which are essential and importantly save money to people may soon become a trend. For instance, we are the first in the industry to introduce gift cards for petrol. Going on, maybe, as funny as it sounds, there can be gift cards for TATA power supply or Vodafone payments and so on. The industry is expected to grow by 150-200 per cent in the coming years and it looks like essential services will have their own gift cards.
What are your expansion plans?
In the B2C space, we are aggressively working towards distribution of gift cards and vouchers available at physical stores. The idea is people can walk into a store, buy a card, get it loaded with cash and gift it. We have identified nearly 2,000 retail stores for this. Also, in the B2B space, we want to make the complete process of gifting more convenient and time efficient. Meanwhile, we are also trying to penetrate the market at the brand level since many brands are not aggressively selling gift cards.