According to industry benchmarks, gift card programs should generate 1-4% of a small business’s total revenue. New gift card programs typically need 1-3 years to mature and reach optimal performance levels (6). This represents a modest but meaningful portion of overall sales that can significantly impact a small business’s bottom line through direct and indirect benefits.

Current Gift Card Market Overview

The gift card industry has experienced substantial growth, underscoring its rising importance in retail and consumer spending. In 2024, gift card sales in the United States reached approximately $308 billion, marking a nearly 45% increase over the past four years (7). The market is projected to grow at a compound annual growth rate (CAGR) of 5.7% through 2028, potentially adding over $17 billion annually (8). Globally, the gift card market surpassed $1.1 trillion in 2024 (8) and is projected to grow significantly in the coming years, with some estimates forecasting a market size exceeding $3.8 trillion by 2034 (8). This strong growth trajectory highlights how gift cards are becoming an increasingly vital tool for businesses of all sizes to engage customers and drive revenue, offering merchants like you a promising avenue for growth.

Digital vs. Physical Gift Cards

The digital segment of the gift card market is experiencing robust growth. Digital gift cards offer enhanced convenience for purchasers and recipients, who can buy and receive instantly via email or text (3).

Digital gift card solutions complement physical gift cards by expanding customer reach beyond local markets. This approach allows businesses to attract a wider audience while maintaining the tangible benefits of traditional gift cards.

Financial Impact Beyond Direct Sales

While gift cards may account for 1-4% of revenue, their actual financial impact extends significantly beyond this direct percentage through multiple mechanisms:

Increased Average Purchase Amount

One of the most significant benefits of gift cards is that they tend to drive higher transaction values. Research shows that:

• • Customers using gift cards spend 72% more on average, particularly at full-service restaurants (5)
  • 61% of consumers spend more than the value of the gift card, exceeding the card amount by $31.75 on average (4)
  • 42% of consumers report spending more when using gift cards than they usually would (4)

These statistics demonstrate that while gift card sales may represent a relatively small percentage of overall revenue, they create a multiplier effect through increased transaction values.

Customer Acquisition and Revenue Timing

Gift cards provide small businesses with two distinct financial advantages:

1. 1. Upfront Revenue: Gift card sales generate immediate cash flow for the business, creating a time gap between payment and redemption that benefits cash management (2)
   2. New Customer Acquisition: Gift cards effectively turn existing customers into brand ambassadors who introduce new customers to the business, with 52% of gift cards being purchased for others (4)

Optimizing Gift Card Program Performance

To maximize the contribution of gift cards to your overall sales, businesses like yours should consider several best practices:

Year-Round Promotion

While the holiday season remains crucial for gift card sales, nearly half (48%) of all gift card sales occur in months other than December (5), promoting gift cards consistently throughout the year rather than focusing exclusively on seasonal pushes.

Strategic Timing

Interestingly, research indicates that Wednesday and Thursday are the most effective days for promoting gift card sales, contrary to the assumption that weekends would yield better results (5). Knowing your customers’ patterns, you will benefit from scheduling promotional activities accordingly.

Redemption Tracking

Understanding redemption patterns helps optimize gift card programs. Data shows that 56% of gift cards are used within six months after purchase 1. Follow-up marketing encourages the usage of gift cards while staying front and center in customers’ minds.

Conclusion

While gift card sales typically represent a modest 1-4% of total revenue for small businesses, their overall financial impact is substantially greater. Through increased spending per transaction, customer acquisition benefits, and upfront cash flow advantages, gift card programs deliver value beyond their direct sales percentage.

For businesses looking to launch or optimize gift card programs, setting realistic expectations for direct revenue contribution (1-4%) while leveraging the associated benefits can impact overall business performance. As the gift card market continues to grow robustly, small businesses have increasing opportunities to capture their share of this expanding market segment. eCard Systems is here to help you reach your goals.

Sources:

1. Hubifi: Average Gift Card Redemption Rate: 2024 Benchmarks
2. ARF Financial: The Power of Gift Cards for Small Business Growth
3. Global Payments: 6 ways to grow small business gift card sales
4. Shopify: Retail Gift Cards: Guide to Gift Cards for Small Businesses
5. NMRA: How Restaurant Gift Cards Increase Sales
6. Fiserv: Best practices for small business (pdf)
7. Marketwatch: Americans spend $300 billion a year on gift cards.
8. Precedence Research – Gift Cards Market