The holidays are upon us and with that comes an onslaught of shoppers looking for that perfect gift. More gift cards and gift certificates are sold during the month of December than at any other time of the year. These are generally viewed as a quick and easy way to gift someone with something desired with little encumbrance, other than money, upon the gift giver.
As a Massage Therapist, you may wonder if having gift certificates available for sale is really worth it. Is keeping a supply of gift certificates on hand really worth the cost and effort, and how much return on your investment do you get? Also, how do you track gift certificates once they’re sold? What about expiration dates? These are things that you need to know and consider when determining whether you should sell gift certificates as part of your practice.
Let’s first look at the types of gift cards and certificates available:
1. Physical gift cards have become the most familiar to people. They are typically credit-card-sized plastic. The card usually has a magnetic stripe on the reverse side that encodes the value of the card.
2. Virtual or “e-gift” cards are usually purchased online and sent electronically to the recipient. These are redeemed via a unique code provided to the merchant or by the recipient.
3. Mobile gift cards are purchased and sent via SMS or mobile phone app and are redeemed similarly to virtual gift cards.
4. Gift certificates are similar to gift cards but are typically printed on either paper or card stock. These can be easily customized to a business, including logo, business name, and contact information. These usually include a TO and FROM line for the buyer or merchant to fill in along with a number assigned by the merchant for tracking purposes.
Deciding which of these options, if any, works best for your practice takes some time and effort. Cost, convenience, and accounting are all things you must consider as a business owner. Also, knowing which options work best for your clientele is important. For example, if you have a large portion of your clients that book their own appointments with you online, virtual or “e-gift” cards may be the way to go since they can be readily available to those who prefer the convenience of online transactions. Also remember that, should you decide to undertake selling gift cards/certificates, you aren’t limited to just one of these options.
Let’s look at the pros and cons associated with each option.
HOW MUCH DO GIFT CARDS/CERTIFICATES COST?
Physical gift cards can cost anywhere from $0.75 to $2.00 per card, depending on how customized they are and how many cards are ordered. Generally speaking, the more cards you order from a vendor, the less cost per card there is. The cost goes up with customization like adding your business logo and other information to the front of the card.
Physical gift cards are often sold in a required minimum per package, starting on the low end around 20 for a “starter pack” and going up to a minimum of 75 cards per order. If the cost ranges from $0.75 – $2.00 per card, we can calculate that a pack of gift cards can cost you anywhere from $15.00 for a starter pack of fairly generic cards, to $150 for a 75-pack of more customized cards. These are still the most common option for business owners.
As far as virtual or “e-gift” cards, the cost to produce them is lower because there isn’t a physical card to produce, and there is essentially no initial outlay of cash by you as a practitioner to get started. Third-party sellers (Square and Stripe for example) usually make their money off these transactions by charging a processing fee that can typically run from under 2% up to 3% of the value of the virtual gift. This cost is only incurred when the gift purchase is made. Mobile gift cards operate similarly.
The cost of gift certificates is fairly inexpensive compared to other options. However, the cost can vary greatly from pennies per certificate to $1.00 per certificate or more, depending on whether you design and print them yourself, or have them professionally done. This also depends on the type of paper or card stock you choose, how many colors you decide to print, and the size of the certificates you want. If you decide to design and print them yourself, you must factor in your time spent in these tasks as part of the cost.
Knowing these costs, you can better estimate which of these options works best for you and your business. The return on your investment is significant. The cost of producing physical gift cards, e-gift cards, or gift certificates is relatively low when you consider the return you stand to make as a business owner, which is typically the cost of a one-hour massage or more.
THE ENVIRONMENTAL IMPACT OF PLASTIC CARDS
We’re all being told to reduce how much single-use plastic we use if we want to save the planet, so plastic gift cards are not a sustainable choice. Many gift cards are made of PVC plastic, which is hard to recycle and isn’t accepted by most recycling systems. You can send used cards in the mail to a specialist recycler to dispose of in a more environmentally friendly way, but most individuals do not make this extra effort.
It is estimated that each card contains about five grams of PVC and generates 21 grams of CO2. That means in total, gift cards created 10,000 tons of PVC waste and 42,000 tons of CO2 in the U.S. alone in 2014. Some retailers, like Starbucks and Whole Foods, offer recyclable cardboard gift cards but are not commonly used by small businesses. Specialized items such as these tend to be a costly investment.
WHICH GIFT CARDS/CERTIFICATES ARE EASIEST TO TRACK AND MANAGE?
When deciding whether to sell gift cards/certificates, you must also look at the time you will need to spend in tracking and managing them.
Physical gift cards have a magnetic stripe that is encoded with a unique number that identifies that specific gift card along with the value. This is typically very easy to track. When the gift card is redeemed, you simply need to swipe it or enter the gift card number to see the available balance and to redeem it.
The procedure is very similar for e-gift cards. Again, a unique number is assigned to the e-gift card and, when it is redeemed, this number is entered to see the balance available and to redeem it. Having these unique numbers allows easy tracking and redemption procedures for your business.
What’s more is that, if you use business software (i.e., Square, Stripe, MassageBook, Mindbody, etc.) these often contain integrated features for managing and tracking both physical gift cards and e-gift cards. Simply swiping or entering the card number will link directly to the card being used and be seamlessly integrated into your business management system.
Gift certificates can be a little more cumbersome, although not impossible, as these are usually unique and customized to your business. They are not typically as seamlessly integrated with the types of software noted previously. You may have to devise your own tracking system for these, as well as assign your own unique numbers for each. This can be as simple as using a spreadsheet for tracking or customizing your own software for the same purpose. If you’re a little more tech-savvy, you can create QR codes to use on your gift certificates that can link to your business software.
In regard to accounting procedures and managing your cash flow appropriately, it is recommended that income recorded from gift card/certificate sales be handled differently than typical product and service sales. When the gift is purchased, you receive the money for a service that has not yet been provided. Therefore, you as the business owner are in the position of “owing” the customer a service for which you’ve already been paid, potentially putting you in a negative cash flow situation for that purchase. The potential for being in this situation increases as your gift sales increase.
In order to help offset potential cash flow problems, it is recommended that you set aside at least ½ of your gift sales until they are redeemed. For example, if you sell a $100 gift, you should put at least $50 into your savings that can be moved into your active cash flow account (typically your business checking) upon redemption.
Marketing your gift cards and certificates for sale is also important. You will want to be sure your customers know that you have gift cards and certificates available for sale. Be sure to include mention of this in your marketing, not just at the holidays but all year round. However, you will likely want to promote these more during the year-end holidays! Gift certificate sales increase significantly during these holidays, and for massage, also on Mother’s Day.
WHAT ABOUT EXPIRATION DATES?
There is some debate about the validity of expiration dates placed on gift cards and certificates. Michigan law is very specific about what merchants can and cannot do in this regard. A summary, from the State of Michigan Attorney General’s website, is included here:
Although the following list is not exhaustive, Michigan law prohibits merchants from doing any of the following:
· refusing to accept a gift card for personal, family, or household use UNLESS it has an expiration date that is more than five years from the date of purchase, and the gift card is presented after the expiration date;
· changing the terms and conditions of a gift card after the time of purchase;
· failing to disclose terms and conditions of a gift card; and
· refusing to apply the value of a gift card or gift certificate to the purchase price of goods or services if the value of the gift card or gift certificate is less than the purchase price of the goods or services;
· charge an inactivity or other service fee and deduct it from the value of the gift certificate. Merchants can charge a fee in connection with purchasing the card but can’t deduct it from the value of the card.
Laws vary from state to state, so if you’re in a state other than Michigan, consult the consumer laws for your state for specific information about expiration dates. Further information about laws in Michigan regulating the use of gift cards and certificates can be found at this link: https://www.michigan.gov/ag/0,4534,7-359-81903_20942-202806–,00.html
SO, WHAT’S THE VERDICT?
Overall, the majority of business owners would agree that selling gifts cards and certificates is worth it. This is why there are so many businesses that engage in gift card and certificate sales. There is some work that you’ll need to do as a business owner, but the benefits outweigh any disadvantages.
Gift card and certificate sales can provide an infusion of cash to your business. As a personal testimony, it was a loyal customer base that purchased gift cards and certificates during the initial phase of the COVID-19 pandemic that helped my business to stay afloat. As a business owner, I was very glad I had a gift-buying program already in place.
Would I recommend selling gift cards and certificates? Absolutely! Properly managed, they can be a boon to your business, increasing your cash flow and overall sales, which in turn helps your business to grow, be prosperous, and successful.
Paul Mattson, BS, LMT
Paul has been a Licensed Massage Therapist in Michigan since 2019. Running his own successful massage practice, Vita Nova Massage has provided valuable insight into the profession. He shares his knowledge with students while teaching Professional Development and Foot Reflexology classes at Irene’s Myomassology Institute in Southfield, MI. You can reach Paul at (248) 270-2686 or Paul@irenes.edu