Blackhawk Helping Supermarkets Grab a Chunk of Everyone's Gift Card Business

Last Updated Nov 18, 2009 8:50 PM EST

As the holidays approach, gift cards become a critical part of the retail equation both for shoppers trying to figure out what to give and retailers who have seen them become a force that has changed the shape of the season, shifting activity into January and providing them with additional options for approaching consumers.

When The Nielsen Co., as part of its annual holiday forecast, asked consumers what products they would spend more on this holiday season, gift cards led all other categories. In the United States, eight percent of households plan to spend more on gift cards this season, more than the seven percent who plan additional indulgence on the Number Two category, toys. Those numbers might not seem large, but consider that, on average, consumers are planning to spend less on the holidays this year and the number becomes more significant.

Teri Llach, vice president of the Blackhawk Network, has a particular angle on an important element of gift card development. A division of Safeway (SWY), Blackhawk operates Gift Card Malls, supermarket kiosks that house gift cards from multiple restaurants and retailers. The supermarkets aren't just those operated by Safeway. Blackhawk, as a third-party provider, works with a wide range of supermarket operators who want to gain from getting more deeply involved in gift giving occasions. And these days, supermarkets sell gift cards with names ranging from Bed, Bath & Beyond (BBBY) to Olive Garden.

Llach says that the kiosks are evolving into more than a convenience for consumers but also a substitute for other financial arrangements that consumers used to make for the holidays. And to ensure trial, supermarkets will be providing premiums such as discounts on gas and other merchandise with purchase, so called bundled offerings that provide incentives as a reward for certain purchases.

In this post, Llach discusses gift card prospects in the holidays. In a following post, the topic will be gift card evolution.

Bnet: Some research indicates that food and drink are going to be big holiday gift items this year, what opportunity does that afford supermarkets and how can gift cards play a role?

Llach: This year, we will see more consumers than ever looking to save money, seek convenient shopping and practical gifts for the holidays. Grocery stores offer all that and more. This holiday, grocery store chains will offer many incentives on perishable and non-perishable items. For example, supermarket chains across the country will be offering holiday deals on their Gift Card Malls. Consumers will receive incentives when purchasing gift cards. It's a win-win situation. Consumers can purchase gift cards for gifting or personal use -- to use anytime during the holidays -- and save money on their grocery bill whether those items are for their use or for gifting.

Bnet: How much does the company expect gift card spending to increase, if it does, this holiday season?

Llach: We are cautiously optimistic that sales of overall gift cards will increase, especially in third-party because of the variety of cards to select from. People want gift cards because it allows them to get what they want, when they want. For example, according to Deloitte's 24th Annual Holiday Survey, gift cards will be the No. 1 present for the sixth consecutive year, with 64 percent of consumers saying they'll give or receive them. Deloitte's survey also found the average spending will increase to $35, up from $28 a year ago.

Bnet: How do you expect grocers carrying gift cards to market and merchandise them in maximizing potential sales?

Llach: We are encouraging and working with our retailers to advertise and promote gift cards to their shoppers. Signage, posters, and decorations at the retailer all help sell gift cards. The same goes for any special offer, incentive and promotion around the holidays. We see the consumer greatly benefiting from gift cards in the fourth quarter.

Bnet: Blackhawk now is offering multi-card packs to make holiday shopping more convenient but how else will supermarket customers be enticed into purchasing gift cards at the grocery store?

Llach: This year we will see more grocery stores offer multi-packs and promotions on gift cards. Grocery stores will also offer special deals for the first time. Consumers will receive incentives when purchasing gift cards. Consumers can visit their local grocer first, buy gift cards for shopping at the mall and receive incentives such as a coupon off their next grocery bill and discounts on gas.

Bnet: Blackhawk also provides fancy covers for gift cards to render them more attractive as gifts. How else is the company making gift card giving more fun?

Llach: GiftCardMall.com allows consumers to personalize and customize their gift cards with skins. Skins are the decorative/design aspect of the card and consumers can choose from a variety of unique skins depending on the occasion: Happy Birthday, Thank you. In addition, consumers can personalize their skins by uploading their own photo or message.