Gift cards can seem like something only big retailers do, but they’re actually one of the most practical, low-risk ways for small businesses to boost sales and bring in new customers. Whether you’re trying to smooth out seasonal slowdowns, increase average order size, or reach people who haven’t discovered your store yet, a gift card program for your small retail store can quietly deliver big results.
Yes, there are some upfront and ongoing costs, but compared to other marketing or sales strategies, the investment is small and often pays for itself many times over. In this post, we’ll break down what it takes for small retailers to run a gift card program, what it costs, and most importantly, why the long-term benefits usually outweigh those costs.
What Does It Cost to Offer Gift Cards?
Gift cards come with both upfront and ongoing costs, but they’re generally small and predictable. Managing these effectively will help ensure your program delivers the expected return.
Setup Costs
Physical gift cards do have upfront costs. They need to be designed, printed, and shipped. Ordering in larger batches usually brings the per-card cost down, so starting small and scaling up as demand grows is a smart, practical approach.
Custom designs featuring your logo, branding, or seasonal themes, can increase appeal, but they come with an additional price. A practical approach for small retailers is to start with a simple, professional design and scale up customization as your program grows. While this is an upfront expense, it’s a one-time investment that continues to pay off through each sale.
Transaction and Processing Fees
Gift card programs often come with small transaction fees when a card is loaded, redeemed, or a balance is checked. These fees are usually minor, but it’s worth understanding them upfront so you can factor them into your pricing strategy.
POS Integration
Manually tracking gift cards can eat up time and create errors. A POS system that supports a gift card program for small retailers makes it easy: issue cards, apply them to purchases, and check balances in seconds. The small monthly and setup costs can save you hours and reduce mistakes down the line.
Breakage and Liability Management
Gift cards are technically a liability until redeemed. This means proper accounting is essential to avoid financial surprises. Breakage (the portion of gift card value that is never redeemed) must also be considered carefully in your bookkeeping.
Additionally, Canadian regulations around gift cards vary by province. Some rules govern expiry dates, fees, and how liabilities are recorded. Familiarizing yourself with these rules will protect your business and ensure compliance. More details can be found here on the Government of Canada website.
Marketing and Promotional Costs
Even a great gift card program needs a little spotlight. Customers won’t buy what they don’t know about, so simple in-store displays, signage, and a bit of social media or local promotion can make a big difference and drive extra sales.
Although these marketing efforts add cost, they often pay off by increasing sales and raising awareness of your store in the community.
Why It’s Worth It: The Benefits of Gift Cards
Despite the costs, the potential benefits of gift cards for small retailers are significant. Let’s explore the ways a well-managed gift card program for small retailers can positively impact your business.
Immediate Cash Flow
One of the biggest benefits of gift cards is immediate cash in your pocket. When a customer buys a card, your business gets paid upfront, before any products or services are delivered. This can help smooth out slower months or cover seasonal expenses like rent and payroll.
For example, gift cards sold during the busy holiday season are often redeemed in January or February, a period when many small retailers experience slower sales. This upfront revenue can help cover rent, payroll, and inventory costs during slower months.
Incremental Revenue
Gift cards can drive additional revenue in several ways.
- Breakage: Not all gift cards are redeemed. On average, 10 – 20% of gift card value goes unspent, becoming pure profit for your store.
- Upselling: Customers often spend more than the card value when redeeming it. In fact, 61% of consumers spend more than the value of the gift card, with an average overspend of $31.75. This increase in average transaction size is a direct boost to your sales.
Gift cards don’t just generate sales. A gift card program for small retailers can increase your revenue with very little extra work. With breakage and upselling, each card can bring in more than its face value.
Customer Acquisition
Gift cards are a powerful tool for attracting new customers. Many people receive gift cards to stores they haven’t visited before. This can introduce your store to a fresh audience who may not have otherwise discovered you.
Research shows that 51% of gift card recipients say they started shopping at a store more frequently after receiving and redeeming a gift card. That’s a significant opportunity for a small retailer to build long-term relationships and expand their customer base.
Brand Awareness
Gift cards also double as marketing. Every time someone gives a card, your store gets exposure, often to people who haven’t shopped with you yet. It’s a simple way to grow awareness without spending extra on advertising.
Gift cards also carry an element of thoughtfulness. Even if the gift giver couldn’t choose the perfect product, a card from your store shows that they thought of the recipient and your business, positioning your store as a local favorite. This marketing benefit is particularly valuable for smaller retailers competing with larger chains.
Customer Retention and Loyalty
A gift card program for small retailers can also encourage repeat visits and build customer loyalty. For instance:
- When a customer wants to return an item without a receipt, offering a gift card instead of a refund keeps the money in your store.
- If a customer wants to return an item after your normal grace period, providing a gift card can turn a potentially negative experience into a positive one.
This keeps money in your store while turning a tricky situation into a positive experience, helping customers leave happy and come back again.
Holiday and Seasonal Sales Boost
Gift cards are a low-risk way to drive seasonal sales. Unlike stocking up on inventory, gift cards generate revenue without additional product costs. They’re especially popular as flexible gifts: 42% of shoppers choose gift cards during holidays because they’re convenient and guarantee the recipient can pick what they truly want.
A Smart, Low-Risk Strategy That Pays Off
At the end of the day, a gift card program for small retailers is one of the simplest, most cost-effective ways to grow your business. You get paid upfront, you bring in new customers, and you often make more than the value of the card thanks to upselling and unredeemed balances. It’s a small investment with a strong track record of return.
Most importantly, it’s low risk. You don’t need a big rollout or a fancy design to get started. With just a bit of planning (and a POS system that makes managing gift cards easy) you can launch a program that increases revenue, builds loyalty, and keeps your store top-of-mind in your community.
Gift cards may seem small, but they’re a powerful way to move your business forward with less effort and more reward.
