DECEMBER 28, 2016  Remember those gift cards you sold during the December buying frenzy? January is the key redemption month for gift cards, and your sales this month could be heavily impacted.

“The holiday buying season is not over,” says Brett Glass, CEO of Gift Card Impressions. Glass points out that “gift card sales in the U.S. are $130 billion, with about half of that figure occurring during the holidays. That means consumers received an estimated $65 billion in gift cards over the last few weeks, representing 14 percent of all gifts. Now is likely the time these gift cards will be redeemed.” The 2015 Gift Cards report from CEB  supports these numbers, with their projections for gift card transactions in 2015 coming close to $130 billion, and increasing to $160 billion by 2018.

If you’re like a lot of small-business owners, you may spend considerable effort on selling gift cards but not a lot of time thinking about gift card redemption. Yet Glass believes influencing and directing gift card use is just as important.

Benefits of Targeting Gift Card Holders

“January sales results are heavily impacted by gift card redemption,” Glass says. “The majority of these gift cards received during the holidays will be redeemed in the first 30 days of receipt. Since sales of gift cards don’t get officially reported until they’re redeemed, it’s important to your January sales figures to encourage consumers to spend those gift cards as soon as possible in order to record revenue in a timely manner.”

Gift cards can get customers back shopping during January, which can be a notoriously slow month for business. “Often, the consumers who still have money after the holiday season are those with gift cards,” Glass says. “They will come to shop, not because of advertisements, but because they have the equivalent of cash to spend. This can stimulate early spring merchandise sales that aren’t yet discounted, leading to more profitable sales. The gift cards also bring in new customers, and since consumers look at the gift cards as ‘free,’ they don’t mind spending a little more.”

Gift Card Redemption Drawbacks and Solutions

In some instances, January gift card redemption can deteriorate your profit margin, Glass notes. “If you carry items that will result in a desirable profit margin, the hope is that customers will redeem their gift cards on those items, but they may instead decide to purchase ‘happy hour’ products that bring you a low profit margin, such as those that are heavily discounted or even close-outs now that the holidays are over. This can negatively affect your bottom line.”

It is possible, however, to encourage customers to spend their gift cards on items that can bring in more profit.

“Consumers with gift cards want to be provided suggestions on the best ways to use them. These ideas serve as welcome reminders to use the cards and not misplace them,” Glass says. You can target gift card holders now to get them spending with posts on social media, emails and text campaigns with messages such as “time to use your gift cards” and “it’s gift card Tuesday.”

It’s also helpful to add extras to the incentives. “Offer free items for using gift cards on certain types of merchandise,” Glass says. “If you carry branded merchandise, be aware that ‘extra’ items added to gifts received over the holiday are great ways to get high-profit sales in January. Fashion accessories and cosmetics are a great added purchase for those who got clothing for the holidays. Working closely with vendor partners to create new ways to promote their brand as a great gift card item can deliver winning results for all.”

Gift Card Use Likely to Increase

Gift cards may become even more popular, believes Jason Dorsey, an expert in millennials’ buying habits and a researcher with The Center for Generational Kinetics, which found that gift card sales  in general continue to grow at an estimated 6 percent, while digital gift cards are growing at 50 percent.

“From a generational standpoint, gift cards have never been more important,” Dorsey says. “Millennials love to shop online and provide gifts that are deliverable online. Gift cards give millennials tremendous flexibility. They can use them while shopping on their phone, while riding the subway or waiting for mom to make that awesome holiday meal. The easier merchants make it to purchase gift cards, the more millennials will buy them and talk about how great the experience was to their 5,000 Instagram followers.”

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A version of this article was originally published on December 25, 2015. 

Photo: iStock