What is a gift card reseller and what are the benefits for a brand?
A brand that wants to develop its gift card program has several options. The first is to provide a gift card service to its B2C customers. The second is to offer its gift card to B2B customers (works councils or companies as part of an incentive program or an employee grant). To enlarge the B2B segment, it can decide to open its gift card to third-party resellers: the distributors.
Definition: a gift card reseller
A gift card distributor or reseller resells single-brand gift cards to its end customers, including:
- employee incentive and reward platforms such as ProwebCE,
- customer loyalty program platforms or marketing agencies like Jackpot,
- cashbacks like Poulpeo
- marketplaces like macartecadeau.com
- …
They buy gift cards to enhance their product or reward catalogs and thereby make their platforms or solutions more attractive.
They are interested in brands with high brand awareness, as end-customer demand is strong. They are also interested in covering all industries, for a more comprehensive offer.
A distributor’s business model
The gift card reseller will take a commission on the sales of the gift cards through its platform. The commission ranges from 5 to 25% depending on the industry.
They also offer temporary advertising on their platforms and communications to their end customers. A fixed amount is offered, or the commission for the distributor increases over a given period.
For marketing efforts within the platforms, brands can negotiate in two different ways:
- An annual negotiation includes the commission and the communication plan within the platform — a global package.
- Several negotiations during the year with fixed payment or a temporary commission increase given to the reseller.
What are the benefits for the brand to work with resellers?
Working with resellers allows the brand to:
- Grow its revenues
- Increase awareness among a large audience, both B2C and B2B
- Open a new customer acquisition channel
A few key elements to bear in mind for a successful gift card distribution
A sound strategy with objectives
Before getting started on the multi-distribution of your gift card, you should have a clear idea of your objectives. Why open your gift card to resellers?
If the objective is to generate as much revenue as possible through this new channel, or to increase exposure, the brand should have an open strategy where it will develop partnerships with different types of retailers.
If it aims at a B2B target, then it will only go for distributors whose final customers will be companies, HRs or works councils.
If it wants to keep its brand image under control, then it will have to target selected networks where end customers have to log in to access the product catalogs. For example, to access an employee rewards platform, a company’s works council must subscribe to an offer from the distributor.
Contract management and commission strategy
A network of gift card distributors means working on business and legal contracts. With each new distributor, you need to agree on the business terms, negotiate commissions, and other aspects.
Brands can choose between three strategies:
- Some do it on a case-by-case basis. The commission is calculated on the potential sales volume, profitability, ease of management, marketing strength, and reseller growth.
- Others set a fixed commission policy, the same for everyone to save time and simplify contracts
- Others apply a more flexible fixed commission policy. A commission rate is set for large distributors (mature and with high sales volume) and a commission for medium/small distributors (lower sales volume and new).
Margin management
You have to think about profitability to set your commission. Otherwise, the brand risks selling at a loss.
Let’s imagine the following situation: a consumer arrives with a 50€ gift card, bought from a distributor. He/she goes to buy a product on sale on the brand’s website that costs 50€ (50% off).
On a product usually sold at 100€ outside of the sale period, the brand only earns 44€ (since it gives a 12% commission to the distributor on the gift card sold).
Out of these 44€, it is essential that the brand makes a profit.
That’s why it’s important to anticipate profitability.
Flow automation and security
There are many flows between a distributor and a brand. From signing contracts, to setup, to selling gift cards, to paying the brands (sales volume minus commissions), to dealing with any problems with gift cards or other issues.
Add to that several distributors and it becomes complicated if no automation and some security are implemented. It will be difficult to expand your network of distributors, and therefore your revenues, without having significant internal resources.
Brand image management
One very important aspect when a brand opens up to multi-distribution is to make sure that the gift cards are used for their intended purpose.
Unfortunately, it can happen that some distributors resell the gift cards to other players. The brand can then end up on unreliable websites. As a result, the brand’s image can be harmed.
As soon as the contracts with the distributors are set up, it is important to include provisions to prohibit this kind of practice and to control the brand throughout.
Marketing on platforms
To increase the impact, it is very important to develop exposure and communication campaigns within the gift card distributors. Ideally, campaigns should be launched at peak times (Christmas, Easter, Mother’s Day, etc.).
Monitoring and KPIs
As with any project launched, the brand must monitor the overall performance of each distributor to make the right decisions: should we develop a specific type of distributor, should we stop with another? Is my return on investment satisfactory?
A few KPIs to monitor:
- Overall sales volume
- Sales minus commission
- Commission share
- Sales volume and commission share per reseller
- Number of used and expired gift cards
- Additional payments on gift cards
- Share of new customers
Time between purchase and gift card use
Use an aggregator to go faster
Prospecting, negotiating, and then technically implementing each distributor to create your own network is long, complex, and time consuming. Then you also have to maintain your relationship with each distributor and so on, the work never stops.
However, there is a way to quickly access a network of gift card distributors, to quickly implement them, to automate, secure and delegate the billing/contracting part. For that, you need to use an aggregator.
