Economic challenges provide a growth impetus to the gift card market in the United Kingdom
Despite growing inflation and the rising cost of living, the gift card industry has continued to post a strong performance in the United Kingdom in H2 2022. Several factors have aided the growth of the gift card industry in the United Kingdom. An increasing number of brits, for instance, have turned to gift card solutions to help combat the cost of living. With consumers feeling the pinch of higher product prices, including daily essentials, grocery retailers launched discounted gift card schemes to attract shoppers and drive their sales and revenue growth through a period of economic uncertainty.
Alongside grocery gift cards, the leisure gift card segment also posted strong growth, as brits continued to pull away from the effects of the pandemic restrictions. According to a report from the Gift Card and Voucher Association (GCVA), leisure gift card sales increased by 28% in 2022, compared to the year before. This also indicates the growing appetite for experience-led gifting in the United Kingdom market.
- The report from GCVA also revealed that sales in the business-to-consumer (B2C) segment increased by 13% in 2022. The demand has remained robust across different sales channels over the 12 months of 2022. While in-store gift card sales accounted for over 58%, gift card malls experienced a 20.5% growth during the period. This indicates the strong role played by the high street in driving the growth of the gift card industry in the United Kingdom.
- Digital gift cards have also grown in widespread popularity among brits in 2022. The gift card segment reported a growth of 19.3% compared to the year before. As the shift away from physical gift cards and paper vouchers continues to grow in the United Kingdom, digital gift cards are projected to become even more popular over the next five years. Convenience and more sustainable methods to purchase are among the various factors driving the popularity of digital gift cards.
- In the business-to-business (B2B) segment, rewards and incentives spaced reported a growth of 44.6%. This shows that an increasing number of businesses are turning to gift card solutions to reward their employees. In 2022, the employee benefits space retained the largest market share at 55% but showed a small decline compared to the year before.
In 2023, the trend of self-gifting is also projected to aid the growth of the gift card industry in the United Kingdom. Amid the growing demand for both physical and digital gift cards, many more players are entering the market through strategic collaborations to capitalize on the high-growth segment.
- In January 2023, FreedomPay, the cloud commerce platform, announced that the firm had entered into a strategic alliance with Savvy, an Irish gift card analytics firm. The collaboration will enable FreedomPay merchants to integrate the Savvy gift card platform into their card terminals. This will enable FreedomPay merchants to sell gift cards to their customers. On the other hand, the collaboration will facilitate Savvy to provide its customers with the ability to redeem gift cards in-store through FreedomPay devices.
As the demand for gift cards, physical and digital, continues to grow among brits from the short to medium-term perspective, PayNXT360 expects more such strategic collaborations to emerge in the United Kingdom. This will further drive the competitive landscape and aid innovation in the fast-growing gift card industry.
To compete in the highly competitive market, existing players are also forging strategic alliances to extend their reach among consumers and businesses that are seeking innovative gift card solutions in the United Kingdom.
- In March 2023, Healthy Minds Club, the health and wellbeing platform, announced that the firm had entered into a strategic collaboration with Tillo, the gifting management platform. Under the collaboration, Healthy Minds Club’s membership and gift card platform will be accessible on the Tillo network. With the widespread reach among consumers as well as businesses, the partnership with Tillo is expected to assist Healthy Minds Club in boosting its gift card sales and revenue growth from the short to medium-term perspective.
Over the next 12 months, PayNXT360 expects the gift card industry in the United Kingdom to keep recording strong growth despite economic challenges that have resulted in a decline in discretionary spending. Furthermore, PayNXT360 also expects that investment in attracting and retaining consumers will be on the agenda for most consumer-facing businesses, thereby leading to many more gift card program launches in the United Kingdom in 2023.
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