From Blockbuster to Borders, Staples to Sephora: Which retailer will be next to develop a gift card?

Just ask Rich Killian, incoming president of the Incentive Marketing Association's Incentive Gift Certificate Council. “We started with 65 members in 2001, and today we have 110,” reports Killian, who, as president of RK Incentives in Orlando, also consults for major retailers that want to sell more gift cards. “Some people thought gift cards would peak, but those who have exhibited in the gift card section of the Motivation Show continue to come back each year — like Marriott, a company that was at the forefront; Blockbuster; Darden; and The Sharper Image. We expect the growth to stay on pace for the next five to eight years.”

These companies have had such success, he says, because today's rewards programs are mostly focused on the family. “Reward programs used to focus on the salesperson or whoever was in the workplace, but now many are geared to the whole family. Gift cards are a great way to let everyone choose: Imagine the whole family going to Foot Locker and everyone getting a new pair of shoes.”

According to the Incentive Federation, corporate use of gift cards and gift certificate cards has become the fastest-growing segment of the noncash incentive industry. In fact, two out of three corporate incentive programs include at least one gift card or gift certificate offer.

The Sharper Image, which has offered gift cards for about eight years, reports that its gift card business is “the fastest-growing segment on a percent basis of our business,” says Doug Atkinson, vice president, corporate sales for the San Francisco — based company.

New players, such as Quiznos, are looking for the same kind of growth. Mark Bromberg, CEO of Apex Restaurant Group, which is rolling out the Quiznos cards just in time for the holidays, says Quiznos has a high perceived value: “Just think, a $5 card can buy someone lunch.”

Most will agree that gift cards are best used for large numbers of participants, where the cost to deliver an incentive can be an issue. “What we're finding is that gift cards don't have the trophy value of merchandise and travel,” says David Peer, senior director, merchandise and fulfillment for Carlson Marketing Group in Plymouth, Minn. “Gift cards are flexible, have a wider range of applications, and are cost-effective. But they don't work where you want to drive behavior. They're not going to motivate [people] like a trip to Hawaii or a flat-screen TV.”

Mike Horn, director of merchandising for Chicago-based Hinda Incentives, agrees. “The card business will not knock out the product industry. The excitement of getting merchandise will never go away. But cards are convenient, and there's less to mess around with.” He reports clients asking for cards from “high-profile suppliers” such as Macy's, Target, Best Buy, Restoration Hardware, L.L. Bean, and The Home Depot. “We know that the industry will continue to be enormous,” he says.

You don't have to tell that to the folks at Barnes & Noble, New York. “We've seen phenomenal growth,” reports Len Gilbert, vice president of gift cards and partnerships. “Gift cards are well-suited to the product we sell. How hard would it be to pick out one book out of a million for a person? No one knows the right choice.”

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