Why using a gift card plugin is not always a good idea?
When a brand wants to launch its gift card service on its e-commerce website, it can choose from several options: plugins, SaaS products, in-house solutions, customized external development.
Depending on the budget and time available, some brands choose a plugin. It’s quick and easy to set up, and above all, it’s pretty affordable.
However, several months later, these brands often discover that a plugin may not have been such a great idea. But why?
A gift card plugin: easy, quick and affordable
Let’s give credit where credit is due; plugins are convenient. A plugin is an efficient alternative for small brand websites using a CMS. You pay for it once and can quickly launch your gift card program. While a specific solution requires a larger budget, with a monthly or even yearly subscription, and requires more time to implement.
Although plugins include fewer features, the essentials are provided and are enough to create your gift card program. Then, one click and a few settings later, the service is up and running.
However, remember that a plugin will require more effort to manage in the long run. The brand has no support in understanding the market characteristics and managing its accounting, financial, marketing, and communication services.
But a plugin is limited and requires extra work
What is a gift card plugin? It is an additional tool for creating gift cards. The gift card becomes a new product referenced in the brand’s catalogue. In other words, a new logo is displayed next to the other products. It is up to the brand to create its own gift card presentation page and banner on the website to promote it.
Can gift cards be used for discounts? The plugin may have a feature for this.
Can you use a gift card as a support tool for customer service? Unfortunately, no. It is impossible to create a gift card with a given amount and send it for free to a customer.
Can the gift card also be used in the brand’s stores? Unfortunately, this is still not possible. Plugin gift cards are rarely cross-channel.
Do they have custom and practical features? Yes, but they will be limited. For example, visual elements may be customizable, but video or photo customization might not be supported. Adding your gift card to your mobile wallet will also be complicated to provide to users, as well as creating a shared money pot or choosing a free amount (55 €, 62 €).
The back office management will also be limited, which will not allow for a very accurate ROI* assessment.
*To determine the ROI of a gift card, several elements are required: gift card sales, but also additional payments (beyond the gift card), cards that expire after the end date, and the lifetime value of new customers using the gift card.
The plugin limits the conversion rate of the gift card
With a plugin, when a person buys a gift card, they will go through the same checkout process as an average customer. They will add the gift card to their shopping cart, create an account, and buy it.
But the person who buys a gift card is not necessarily a brand’s customer. Let’s take a grandfather who wants to offer his granddaughter some cosmetics. Not knowing what to get, he decides to buy a gift card. Does he want to create an account to buy it?
So the shopping cart and account creation steps increase the chances of shopping cart abandonment (about 70%).
Especially since the main reason to buy a gift card is speed and convenience.
Ideally, you should offer a one-page order process without creating an account. Then, a few clicks are enough to place an order and send it.
“The plugin forces you to create a customer account and go through the shopping cart, which can lead to about 70% cart abandonment.”
The plugin is not compliant with the accounting requirements of the gift card
The main drawback of a gift card plugin is bookkeeping.
Keep in mind that a gift card is considered a payment method. Therefore, it differs from other products and is treated differently in accounting.
As soon as a gift card is sold, the card amount must be recorded on the “advance and deposit” line until its expiration date. It is not yet sales. It will become revenue for the brand when the gift card holder purchases a product with it.
What’s wrong with a plugin? It treats the gift card as a product. So when someone buys a 50€ gift card, the brand will consider the 50€ as sales. Then when the person redeems the gift card on the website, the product purchased will still be accounted for as sales. So that’s 100€ in sales. But in reality, the brand has only made 50€.
What are the other concerns? The VAT. As the gift card is a payment method, it is not subject to VAT. However, in the example above, two VATs are calculated, while there is just one.
And what happens when a gift card is not used before its expiration date? So no product has been purchased? The amount of the expired card will have to be entered as “special income” into the brand’s accounts, as it is not subject to VAT. So it is not truly a turnover, but it remains an income for the brand.
As you can see, with a plugin, the brand will have to make an effort to adjust its accounting later on, to comply with regulations and not distort figures.
“A gift card is a payment method when it comes to bookkeeping. However, the plugin considers gift cards as a product that needs to be adjusted later.”
A customized solution for a long-term strategy and support
Even if the price may surprise you initially, a customized solution is a long-term investment and provides you with peace of mind.
A customized solution is flexible and can be used with all CMS. It will just take longer to set up.
There are many benefits:
- Accurate and automated accounting
- Comprehensive back office for accurate and real-time ROI calculation
- Gift cards can be spent both on the website and in the store
- UX journey optimized for conversion
- Extensive customization features
- Possibility to save it on a mobile wallet
- Email directly sent to the recipient with the gift card
- Money pot feature (group payment)
- Customer service, marketing and loyalty features
Above all, you will be guided by experts to understand better the market, the different players, and the many specifics.
If your website is international, legal, currency and other issues will be taken care of.
If you want to enter the B2B market with a gift card service (which represents 50% of the turnover of gift card programs today), you will be able to do so with a customized solution.
