Soaring inflation is driving community gift card program launches
First, the global pandemic outbreak and now the rising inflation and subsequent surge in cost-of-living have dampened the growth prospects for small and medium-sized businesses, especially for local retailers. In H2 2022, consumers had reduced their discretionary spending significantly, to cope with the rising cost of living. These trends are projected to further continue in H1 2023, as the fear of a potential recession is eating into discretionary spending around the world.
Consequently, to support residents to cope with soaring inflation, city officials and authorities globally are launching community gift card programs. These programs are also aimed at boosting sales and revenue for local businesses.
- Lemon Grove, a city in California, approved using federal relief money to distribute gift cards aimed at supporting local businesses. The city launched the program amid concerns that inflation and the effects of the pandemic could result in dull year-end shopping activities.
- In November 2022, the City Council approved the US$150,000 Shop Local Digital Gift Card program. This program is funded by the US$1.9 trillion American Rescue Plan Act. As part of the Rescue Plan Act, Lemon Grove received over US$6 million from the federal government.
With deadlines approaching fast to allocate and spend the money, Lemon Grove is expected to launch more such community gift card programs in the city over the next 12 months in 2023. La Habra, Upland, and Portland are among the other cities in the United States that have launched similar community gift card programs to support residents and local businesses in the respective region.
While La Habra approved a US$200,000 gift card program, City Council in Upland approved a US$250,000 worth of gift card program for its residents and local businesses. For both of these gift card programs, City Councils used the funding received from the federal government as part of the American Rescue Plan Act. Consequently, these cities and many others are also projected to launch more such community-driven gift card programs over the next 12 months.
In 2023, PayNXT360 expects City Councils in the United States to launch closed-loop gift card programs, as consumers seek relief from their local government for everyday purchases such as grocery shopping. For instance,
- In October 2022, Denver City Council members approved a US$1 million grocery gift card and food boxes program. As part of the initiative, the City Council provided 4,000 residents with a US$200 grocery store gift card. Alongside the gift cards, the city also delivered 8,000 food boxes to needy residents during the month.
More such closed-loop gift card programs are projected to be launched in the United States in 2023, as City Councils seek to ensure that consumers spend the money on everyday essentials and not on discretionary purchases.
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Along with the United States, the trend of such community-driven gift card programs has also grown significantly in the United Kingdom, where city councils are putting millions of dollars to support residents and local businesses. For instance,
- During the cost-of-living crisis, Aberdeen City Council approved a £1.9 million gift card program to help residents. As part of the program, more than 14,000 gift cards were offered to residents in need from December 7, 2022. In the first month of the gift card program, 70% of the total cards were activated and more than £840,000 were also redeemed at local businesses. Nearly 300 local businesses, including supermarkets, shops, restaurants, cafes, and art venues, participated in the gift card program.
- Sunderland, another city in the United Kingdom, launched a gift card program to support local businesses in the region. The gift card program resulted in record sales for local retailers, as consumers spent more than £50,000 over Christmas. The city is also projecting record sales for local businesses on Valentine’s through the widespread usage of gift cards.
Lincolnshire, one of the biggest counties in the United Kingdom, also launched a gift card program. However, unlike Aberdeen’s gift card program, the Lincolnshire gift card program is aimed at driving growth for tourism-focused businesses in the country. This includes leisure, retail, and hospitality.
As more and more consumers seek assistance from their City Councils, the number of gift card program launches is projected to grow significantly from the short to medium-term perspective. The trend of community gift card program launches also represents a growth opportunity for gift card providers, as partnering with City Councils around the world, can assist players in the segment to drive their gross merchandise value and volume from the short to medium-term perspective.
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While the La Habra gift card program is implemented by Giverrang, Upland chose HdL and Yiftee to run and implement the program. Over the next 12 months in 2023, PayNXT360 expects these community-driven gift card programs to keep assisting the overall gift card market growth in the global market.
