As inflation continues to impact economies worldwide, it's essential to understand its effects on various industries, including digital gift cards. In this post, we'll explore the relationship between inflation and digital gift cards, with a focus on key statistics that highlight current trends and potential opportunities for businesses. So, let's dive in.
Inflation has undoubtedly made its presence felt in the world of consumer spending, particularly when it comes to non-essential items. As prices rise and the cost of living increases, many consumers are forced to reevaluate their spending habits and cut back on discretionary purchases. This shift in behavior can result in reduced demand for various products and services, with businesses feeling the pinch as their sales and revenues are impacted.
Surprisingly, retail gift card purchasing has shown resilience in the face of these challenges, reaching its highest level since tracking began. This trend suggests that, despite the economic pressures brought on by inflation, shoppers continue to prioritize key occasions such as birthdays, holidays, and anniversaries.
But why is gift card spending rising when non-essential spending is falling? Here are a few reasons why:
Gift cards often carry a perception of higher value than their actual cost, making them an attractive option for consumers looking to maximize the impact of their spending during times of inflation.
As consumers become more cautious about their spending, gift cards can serve as an effective budgeting tool. By allocating a specific amount to a gift card, shoppers can ensure they stay within their budget.
Gift cards allow recipients to choose their preferred items or experiences, which can be particularly appealing when disposable income is limited. This flexibility can make gift cards an attractive option for both the gift giver and the recipient.
In times of economic uncertainty, consumers may be more inclined to support local businesses by purchasing gift cards. This not only helps businesses maintain cash flow but also strengthens communities by keeping spending within the local economy.
Did you know that Tillo has collaborated with Brilliant Brighton to sponsor a brand new gift card for the local Brighton area that can be spent like a debit card with shops, restaurants, and leisure venues?
Inflation's impact on disposable income has also led employers to search for creative ways to support their employees and maintain morale. One such approach that has gained traction is the use of gift cards as part of employee benefit programs.
In 2022, Ireland increased the limit for non-cash rewards and incentives purchased under the Small Business Exemption scheme to €1000. Businesses were, therefore, able to save €1313.54 per employee when gifting them a non-cash reward worth €1000 net, and their employees benefited by receiving the full value of their bonus without needing to pay income tax on the additional income.
Besides taxable benefits, the flexibility of digital gift cards also enables employers to send highly personalized rewards and incentives, enabling the recipient to select products or experiences that align with their preferences. This tailored approach not only makes employees feel more valued and appreciated, ultimately boosting morale and engagement, but also allows employees to direct the additional spending power towards specific financial areas.
As inflation squeezes disposable income, gift cards provide essential financial support, helping employees manage their budgets more effectively and potentially alleviating some financial stress associated with the rising cost of living.
As living costs rise, an increasing number of individuals are also turning to gift cards to help them manage their finances.
Although gift cards are commonly associated with indulgent activities like shopping, travel, and dining out, consumers also use them for everyday necessities such as weekly groceries.
By purchasing a gift card for a set value and using that gift card to make purchases throughout the month, consumers are effectively turning gift cards into prepaid debit cards, which can help them to more easily keep track of where their money goes and remove the temptation to exceed their budget.
Despite the impact of inflation on consumer spending and the reduction in non-essential purchases, the demand for gift cards remains strong. The steadfastness of gift cards in today’s climate showcases their resilience and versatility, proving their efficacy as rewards, incentives, and alternative non-cash payment methods.
While the retail landscape continues to shift and evolve, the power of digital gift cards remains a constant, opening up new exciting use cases for consumers and revenue opportunities for businesses.
If you’re interested in unlocking new use cases for digital gift cards, then get in touch with Tillo today. Our award-winning API and network of 2000+ global brands make it easy for brands and businesses to capitalize on the power of digital gift cards.