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What is mobile’s role as Starbucks expects record gift card sales?

While physical gift cards are still preferred over digital cards, there is growing comfort levels with redeeming cards via mobile, according to a recent report from Stored Value Solutions. Merchants such as Starbucks could see a stronger role for mobile in gift card sales and redemptions due to an existing strong mobile strategy.

“Mobile plays a bigger role for companies like Starbucks that have a well-developed and widely used app,” said Ben Jackson, director of the prepaid advisory service?at Mercator Advisory Group. “Places that have numbers of visitors making small dollar transactions like Starbucks, Dunkin’ Donuts, and Subway seem to do best with apps.

“The mobile app gives the customer the ability to use coupons, redeem offers, and spend gift cards all at once,” he said.

Millennials lead charge
Overall, 64 percent of consumers surveyed have not yet bought or received a digital or mobile gift card, according to Stored Value Solutions’ report.

However, there are pockets of growing acceptance. Millennials, not surprisingly, are leading the charge for digital gift cards, with 29 percent having purchased or received a digital gift card.

In addition to millennials, the study also found that male consumers are more likely to have bought a digital gift card, with one in three preferring to buy digital cards.

Nearly 40 percent of consumers aged 18 to 35 expressed a preference for digital cards. Overall, the study found a slow but steady increase in digital use.

“It’s hard to say how big mobile is, because the numbers get counted in with other virtual cards,” Mr. Jackson said. “People shopping from mobile devices will use both apps and the Web.

“In previous years it has been about 1 percent of the market, but I expect that it will be bigger this year,” he said. “Companies like CashStar, First Data’s Gyft, and InComm Digital have all been working to make mobile an active channel for shoppers.

Last-minute shopping
Last year, nearly 2.5 million Starbucks Cards were purchased in the U.S. and Canada on Christmas Eve and the company expects to surpass this number as consumers search for last-minute holiday gifts. Digital gift cards can be given through the company’s Web site and mobile apps in the U.S.

Between October 2014 and September 2015, Starbucks saw $5.1 billion onto Starbucks Cards, with more than one-third of all transactions in the U.S. and Canada paid for with a Starbucks Card.

Mobile is a small but growing part of the gift card space thanks to the added convenience of always have a card available since it is stored on a device that consumers typically have with them when they leave the house.

With the growing adoption of mobile wallets such as Apple Pay and Android Pay, there is likely to be an increase in the number of consumers who load cards into these wallets, something retailers need to be prepared for.

“As shoppers receive gift cards in all forms, they may load them into these new mobile payments platforms,” Mr. Jackson said. “What this means is that the real growth in mobile gift cards probably will happen in the New Year when gift card recipients convert their cards into Mobile cards.

“Retailers would be smart to prepare their staff to redeem cards from the new mobile wallets and how to trouble shoot any problems,” he said.

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York