In the ever-evolving landscape of retail, where economic fluctuations can sway consumer behaviour, a heartening trend has emerged that speaks volumes about the generosity of Australians.
Despite a recent 0.5 percent dip in Australian retail turnover which followed a 0.8 percent drop in the March 2023 quarter and a 0.4 percent fall in the December 2022 quarter as revealed by the Australian Bureau of Statistics (ABS), there’s an undeniable resilience in our society when it comes to expressing care and appreciation through the act of gifting.
Times may change, economies may ebb and flow, but the need to connect, celebrate, and show gratitude remains steadfast. Amidst Australians’ concerted efforts to tighten purse strings due to the mounting cost of living pressures, there’s a remarkable constant: the commitment to gifting. Best Gift Group data shows consumers are increasingly spending on others.
Gift cards are playing an important role in facilitating that spending with Best Gift Group generating over $26 million in revenue during the FY22-23 period, a 65% increase from the previous fiscal year and $7.5 million already generated in gift card revenue for FY24. This data provides a snapshot into the buying habits of Autralians and their priorities, who on average are spending $190 on gift card purchases – we’re seeing a conscious decision to allocate resources to gestures.
Research shows that Australia’s gift card industry is expected to increase by 11.3% on an annual basis, from US$5446.5 million in 2021 to US$8504 million by 2026. The surge in Australia’s gift card industry has been driven by a wide range of factors including growth of ecommerce, increased adoption to incentivise employees working remotely, digital gifting, and initiatives undertaken by government, hospitality, and travel industries to revive growth.
Industries that had to find new and creative ways to navigate consumer spending habits following the pandemic, inflation, and other economic challenges have used gift cards to give merchants a boost in their revenue. This has been key to helping our 400+ restaurant partners survive and thrive despite rising costs due to inflation. Not only are our gift cards attracting new customers, but they are providing an additional stream of income with customers spending more than the gift card amount.
High-profile restaurants Meat & Wine Co, Solotel Group (e.g. ARIA) and China Doll’s customer spending shows gift card diners are spending an additional 107%, 94.3% and 421% respectively above the gift card value with the average spending between $300 to $500 at each restaurant.
As the holiday season approaches, we anticipate this trend to gain even more momentum. Australians are increasingly favouring gift cards (47%, up from 44% in 2019), money (40%), and clothing (32%) as their top preferences for Christmas presents.
With evolving consumer gifting behaviours, businesses looking to attract Australian shoppers should consider integrating gift cards into their marketing strategies. With 25% of shoppers having already purchased their gifts before November, it’s time for businesses to start planning promotional activity for Christmas.
Retailers that incorporate a strong omnichannel and optimised mobile experience into their marketing strategies are driving increased gift card sales. However, the physical customer experience is also important to help convert sales. Australian shoppers get the most gift inspiration from friends and family and being in-store or at a shopping centre (49%) followed by social media (42%), catalogues and gift guides (34%), shopping apps (22%) and email newsletters (15%).
Even in a retail turndown not everything is how it seems. There are still pockets of the market you can do well in as the Australian gift card market is forecast to grow at an annual rate of 9.1% over the next four years. Businesses should consider putting greater focus on gift cards to increase revenue and attract new customers as part of their marketing strategies.
Rajneen Arora is CEO of Best Gift Group.