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The U.S. gift and incentive card market is projected to cross $221 billion by 2024, according to a new study by Research and Markets. While the growth of the gift card industry has seen some impact from the pandemic, eGift cards in particular have experienced a substantial boost alongside the rise of eCommerce. The report points to millennial and Gen Z consumers driving the gift card market growth in the U.S.
According to Square data, eGift card sales made up 8.1% of gift card sales in 2019. This share more than doubled to 21.7% in 2020 and has held steady so far in 2021.
The gift card giving season
With newly adopted safety protocols throughout the pandemic, social distancing and mask-wearing has created physical distance between consumers, products, and services. Square’s data showed a rise in digital, online, and phone transactions in the holiday season leading up to 2021. In fact, gift card sales were up 30% year over year in the 30 days leading up to Christmas 2020. Of those gift card sales, eGift cards more than doubled to make up 20% of all gift card sales.
Christmas isn’t the only holiday giving gift cards a lift. Square data reflected bumps around Valentine’s Day, Mother’s Day, and into graduation season from mid-May through June. Valentine’s Day has seen, on average, a 57.3% increase in gift card sales from the week prior for the last three years. Mother’s Day has seen an even bigger increase with 77.6% higher sales than the week prior in both 2019 and 2020 on average. This increase holds steady through May and into June, possibly due to graduation season and Father’s Day following shortly after.
eGift Cards take the lead
eGift cards saw a huge boost in the first two weeks of the pandemic but are still higher than they have historically been, pointing to an overall shift in ways of doing business. In fact, Square’s data shows that this rate has held pretty steady into 2021 so far, suggesting that it will continue to hold as people become vaccinated and stores open back up to more in-person retail. Small business owners have explored new ways of connecting to customers and growing their businesses during this time.
For Square business owners, there were a few prevailing trends. eGift cards for food and beverage businesses were the overwhelming majority of purchased cards. Following as a distant second were retail businesses, beauty and personal care, and finally, health and fitness eGift card purchases.
Durham, North Carolina, saw the biggest jump across the country from 2019–2020 in eGift card sales with a 458.6% increase. Though the city’s small businesses started from a lower baseline, this was still an impactful rise in sales. San Francisco, on the other hand, a city with substantial eGift card sales year-round, still saw an increase in both 2019 and 2020. San Francisco saw the biggest year-over-year jump from 2019 to 2020. Starting from a higher baseline of sales than Durham, eGift card sales yielded a smaller percentage increase but a high number of sales.
While both gift cards and eGift cards have grown in popularity, a few trends remain evergreen. During the holidays, Square’s data shows that eGift card sales have historically risen about a week after physical gift card sales. eGift cards make up the largest percentage of gift card purchases right after major holidays, potentially due to the convenience of purchasing these types of prepaid cards digitally. Both gift card and eGift card sales rose at the beginning of the pandemic as customers looked to support their local businesses. And while sales have gone down about 20%, both physical and digital gift card sales remain steadily higher across the board.