More than three weeks ago, it was Christmas. You probably went shopping and when you could not decide what to get your loved ones, you bought gift cards instead, contributing to the ever-growing multi-billion dollar industry. But did you stop to think about the origin of gift cards? In this article, we will go back in history and trace when the first gift card was introduced.
Hint: The story is one of innovative thinking, and could get you to think differently about opportunities in your life!
The First Gift Card, by Neiman Marcus
Neiman Marcus introduced the first gift card in 1994 while Blockbuster Entertainment was the first company to introduce them on a wide scale to replace gift certificates. While the 90s might seem like a lifetime ago to those born in the 2000s, the gift card industry is merely twenty-five years old yet it has recorded tremendous growth. From 1995 to 2012, the gift card industry grew faster than the US GDP, China’s GDP, and Apple’s Stock. More recent statistics according to this article on Market Watch indicate that the industry will grow by six percent annually to $506 billion in 2025 from $318 billion in 2017.
Before Neiman’s and Blockbuster’s introduction of gift cards in the 90s, American Express had introduced gift cheques in 1988. These gift cheques were the first offering in the gift card industry.
As with any new and exciting product, gift cards started to gain popularity after this and large retailers like Macy’s, Bloomingdales, and the Gap adopted the concept in 1998 as reported on Gift Rocket.
In 1999, Visa introduced the first open-loop gift cards in the form of credit cards. That same year, Forrester Analysts predicted that the gift card market would grow to $17 billion in 2004. They were wrong. The industry grew three-fold the estimate. This really is an astonishing change, at the time very few expected.
The Tech Boom, Regulation, and Crime
At the beginning of the new millennium, a lot was happening in the gift card industry. Regulators were cracking down on offending companies, the technology boom was producing online gift card companies, and gift card fraud started blooming.
In 2001, the first online gift card companies started to emerge while gift wrap sales declined as gift cards became more popular.
One of the companies that found itself in trouble with the law was Home Depot for charging excessive fees for store credit cards. In 2002, the company consented to stop treating gift cards as cash if lost or stolen in a settlement with the New York Attorney General. This meant that the company would start accepting proof of purchase in place of lost or stolen gift cards. That same year, drug traffickers and fraudsters started using stolen credit cards to purchase gift cards to get cashback or to later buy products to sell.
As the usage of gift cards increased, many issues arose as well. One such issue was hidden fees which the Fair Gift Card Act addressed. This Act was introduced in 2004. The other regulatory milestone took place in 2009 with the introduction of the CARD Act. This Act prevented closed-loop gift cards from expiring in under five years.
Halfway through the decade, companies were coming up with all sorts of innovative gift cards to attract buyers. For instance, Starbucks came up with the idea of customization in 2006 enabling consumers to customize gift cards online. Another interesting idea was Best Buy’s gift card which could be plugged into an MP3 player to work as a speaker. This gift card was introduced in 2008.
With all the innovation that was taking place in the gift card industry, it was unsurprising that startups such as GiftRocket began creating online gift cards in 2010. Currently, you can carry a gift card on your mobile phone or you can send it via email. According to a CardCash survey, digital gift cards are growing at an annual rate of 200 percent making this the fastest-growing segment in this space.
The Future of Gift Cards
It is probably obvious by now that the retail industry will completely phase out physical gift cards in the future. As consumers look for faster and more convenient ways to buy, send, and redeem gift cards, e-gift cards could eventually win over the physical ones.
The existence of blockchain technology and cryptocurrencies also presents exciting possibilities for the gift card industry. The blockchain could solve fraud and enable users to easily redeem digital gift cards in physical stores. Cryptocurrencies are also changing the gift card industry because users can now trade the two on sites like Redeeem.
The expiration date of the gift card industry is a long way from now. Perhaps it will never come (we hope so!). However, it is a fact that gift cards have impacted a lot of lives across the globe and will continue doing so in the years to come. It will, therefore, be interesting to see how this industry evolves in tandem with the changing technology.