ORLANDO, Fla. — Nearly a billion consumers worldwide participate on social network platforms such as Facebook, Twitter and Foursquare. But prepaid industry executives and merchants are split about how the medium could improve closed-loop gift card sales.
"I don't know if Facebook is such a great place for gifting," Walter Paulsen, senior vice president of business development and retail at the prepaid card provider Giiv Inc., said during a panel discussion March 9 at the Prepaid Card Expo here. "I certainly don't think the code has been cracked yet."
But companies are trying different ways to introduce users of social networks to virtual gift cards.
InComm Inc. last year acquired GroupCard, which has developed a Facebook application that enables consumers to purchase gift cards from a retailer's Facebook fan page or website. The application enables multiple consumers to add to a gift card's value and participate in a group gift.
"We're working on opening up new channels for merchants," said Dustin Young, InComm's vice president of products. "And while Facebook is important, it isn't the end-all, be-all."
Starbucks Corp. is demonstrating that to be the case, at least in a contest setting.
In conjunction with its 40th anniversary, Starbucks is awarding $40 gift cards to random customers who follow the brand on Foursquare and checked into a location March 10. Starbucks did not respond to a request for comment.
Outback Steakhouse, which is owned by Osi Restaurant Partners LLC, has yet to experiment with virtual cards and has hesitated to sign partnerships with third-party providers, Laura Parker, the restaurant chain's manager of national sales, said during the panel discussion.
In a recent promotion, Outback customers who purchased three of the restaurant's $25 gift cards at Sam's Club stores received an additional $10 card.
"As far as changing the way cards are sold, there are things consumers want for us, and [most] want value-add opportunities" and not the ability to purchase cards through social networking, Parker said.
Outback would find it difficult to invest in virtual gifting through social networking if only a small percentage of consumers were actually using the medium, Parker said.
"We're up for trying it, but we're just not as aggressive there," she said.
Young said the virtual gift card market will account for as much of 55% of total gift card sales in the next five years as merchants learn to leverage the technology for their own gains.
Paulsen pegged the growth at a more conservative 30-40%.
"I think sales are going to be significant, but I think plastic will be the dominant form for a long time to come," he said. "Credit card companies have spent decades teaching consumers to associate that plastic card with value."
The merchant ultimately will have a say in whether using social media to sell gift cards can be successful, Bruce Bower, chief executive of Plastic Jungle Inc., said at the conference. Plastic Jungle runs a website where consumers can buy, sell and exchange gift cards.
"We spend time speculating how a certain program will perform for [industry players], but you really have to think about how gift card performance works for the merchant," Bower said. "I think any of these new approaches don't work unless you bring the merchant along."
