March 19, 2020 Ideas en_US Find out how to setup your small business for gift card sales. A great revenue generating idea, gift cards can help attract more customers. Learn more. https://quickbooks.intuit.com/cas/dam/IMAGE/A9kwKDWK4/gift-card-small-business.jpg https://quickbooks.intuit.com/r/ideas/small-business-gift-cards/ How to sell gift cards for your small business
Ideas

How to sell gift cards for your small business

By Katie McBeth March 19, 2020

Communities are eager to find ways to help small businesses weather the COVID-19 outbreak. The White House and CDC are pushing efforts such as social distancing and self-quarantining. But some customers are worried about the impact these measures will have on their favorite local small businesses.

Some people have suggested ordering takeout, shopping online, and tipping extra to service workers. Another potential solution is purchasing gift cards from small businesses.

“I just bought gift cards to every one of the [local] restaurants that I love,” Luz Urrutia told CNN. “They get their cash today. And I’ll be able to use it later.”

But not all small businesses are ready for gift card sales yet. Luckily, it doesn’t take much effort to start. Here’s everything you should know about selling gift cards at your small business.

How small businesses benefit from selling gift cards

There are many reasons why you should consider setting up a gift card program. Here are the top three:

  • They increase your revenue now. When a customer buys a gift card today, you get that revenue today. You collect the payment upfront and remove purchases from your stock when customers redeem their cards. This can be especially helpful in generating revenue during the coronavirus outbreak.
  • They can attract new customers. Existing customers can give gift cards to a friend or family member who doesn’t know about your store. It’s a great way to promote word-of-mouth marketing.
  • They boost customer loyalty. Once a customer purchases a gift card, they have to return to your store to use it. Customers may even spend more than the gift card’s balance, meaning more revenue for your store.

Types of gift card programs

It may seem like all gift cards are all the same, but they aren’t. There are two primary types of gift card programs: open-loop and closed-loop.

Open-loop gift cards

An open-loop gift card can be purchased at one location but used at multiple locations. Common examples include Visa or Mastercard gift cards provided by select vendors. “Restrictive open-loop gift cards” may be specific to regions. Examples include gift cards accepted at businesses in a co-op or business network.

These types of gift cards provide flexibility to buyers. But they don’t always generate direct revenue to the small business issuing them. Typically, vendors print open-loop gift cards on-demand. Small business owners may have to pay a fee to use this option.

Closed-loop gift cards

Customers can only purchase and use closed-loop gift cards at your business. These gift cards provide less flexibility to the consumer but more profit to the small business issuing them. Typically, closed-loop gift cards are free to activate. Neither the small business owner nor the customer has to pay additional fees. But the small business issuing the card may need to purchase cards from a vendor, merchant bank, or point of sale (POS) provider.

Gift card laws to keep in mind

Before you start your gift card program, familiarize yourself with the applicable federal regulations.

The 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD) sets standards and consumer protections for gift cards. Most importantly, the law prohibits gift cards from expiring within five years from the date of activation. It also limits inactivity fees, except in some circumstances.

Additionally, gift card laws can vary by state. Check the National Conference of State Legislature’s website for any applicable gift card laws in your area. Or reach out to a legal professional for more comprehensive advice on gift card laws.

How to sell gift cards in 4 steps

Now that you understand more about gift cards, your small business is ready to set up a gift card program.

1. Choose your gift card system

Choose how you plan to process your gift card orders. For many small businesses, the easiest option might be to use whatever gift card option is in their POS system. You can also purchase them from vendors and create a new “item for sale” in your POS system. Another option is to buy them through a bank that offers the service. Once you choose how you’ll process cards, you’ll need to order them. You have a few options.

Online or e-gift cards

By partnering with your POS system provider, you may be able to offer gift card purchases online. Just like any e-commerce transaction, items are processed online. When customers are ready to purchase in-store or online, they can print e-gift cards or show them to you on their smartphones. Your business may only have to pay a small processing fee but won’t have to worry about purchasing physical gift cards. Most commonly, these cards will appear as a barcode, an identification number, or both.

Gift certificates 

While a bit of an old-school option, you can use gift certificates if you don’t have a POS system that can track gift cards. Instead, you can print your certificates and track purchases in a digital ledger or create a new line item in your POS system. Some businesses also use a mix of gift cards and gift certificates. For example, a spa might offer a gift card for any purchase and a certificate for a “free massage.” However, gift certificates can be easy to counterfeit and aren’t the safest or most reliable option.

Electronic strip or barcode gift cards

The last option is a physical gift card, ordered from your POS provider, a merchant bank, or a third-party vendor. These cards often look like credit cards, with magnetic strips or barcodes and identification numbers. Many vendors will provide you with customizable options so that you can include your brand information on the card. Although they can be a pricer option, customers may prefer the physical card over a paper certificate or e-card.

2. Input gift cards into your system

Each POS system will have a different method for inputting your cards, but they’re all similar. Scan or swipe a blank card. You’ll be prompted to choose the amount of money for that card. Your customer will pay the amount on the card to complete the transaction. When customers come in to use a gift card, the gift card should appear as an option for tender in your POS system.

3. Establish gift card policies for your team

Once you have your POS system set up for gift cards, tell your team how it works. Share how to process gift card transactions and how customers can make purchases with gift cards. You’ll also want to inform them of any limitations you have on gift cards. Policies might include limiting the number of gift cards customers can purchase or not allowing customers to buy gift cards with gift cards. Other things to consider are how to track purchased cards and set expiration dates that follow federal guidelines.

4. Start selling and tracking gift cards

Now that your staff is on the same page, you can start selling gift cards online or in your store. If your POS system allows, you might track gift cards by attaching them to customer profiles in your system.

As your small business sells gift cards, you’ll be able to accept those profits upfront. Your customers will be happy to support you and look forward to shopping with you in the future. Gift cards can be a great way to generate revenue in challenging times.

This content is for information purposes only, and information provided should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

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Katie McBeth

Katie McBeth

Prior to joining the QuickBooks marketing team, Katie McBeth spent her time writing for various blogs across the web, including Quiet Revolution, Fortune Magazine, and many more. Her writing focus is on small business management, marketing, and recruitment. When she’s not writing, she’s hanging out with her small private zoo of three cats, two dogs, and dozens of plants. Read more