More Retailers Offer Virtual Gift Cards, But Could Do a Better Job with Them, Report Finds

With the holiday season weeks away, more major retailers are now offering so-called virtual gift cards. But few make the experience of buying, sending, and redeeming the digital payment products easy or pleasant, according to a report issued this week.

Some 59 of the 100 largest online merchants, ranked by Internet Retailer magazine according to annual sales, allow customers to buy virtual cards from online or mobile sites, says “Digital Gift Cards: A Retail Work in Progress,” released this week by RSR Research, a Miami-based firm, and sponsored by Cash Star Inc., a provider of digital-card technology. That’s up from 40 in last year’s list, the report says, a nearly 50% improvement. Virtual gift cards are prepaid “cards” that can be sent to recipients via e-mail, sometimes with a personal note or photo.

Similarly, recent research by Mercator Advisory Group, a Maynard, Mass.-based payments-research and consulting firm, found 36 out of 100 top retailers ranked by Stores magazine offered virtual cards. That’s a slight improvement over the 33 found to be issuing the products a year ago.

Gift cards are popular consumer products, especially around holidays and special occasions such as anniversaries and birthdays. But the merchants examined by RSR all too often fall down in the way they make their digital cards available, the report says. Indeed, the firm found little improvement in the customer experience from a similar study it conducted last year. “Unfortunately, even in 2011, your chances of having an easy or pleasant experience purchasing a digital gift card are relatively slim,” the report laments.

Among the major merchants offering no virtual cards, or at any rate none the authors could find, are such big names as Apple, Sony, and Kohl’s. Some that offer the products bury them on their sites, making them hard to find. Others take customers through a logical ordering and checkout process, only to confuse them by asking for shipping information, as if the product were a physical card. Still others make the cards hard to redeem in their stores because of a lack of integration between their Web sites and the point of sale.

RSR also faults many of the merchants for lapses ranging from a failure to notify senders when a card is received and viewed to a void when it comes to offering digital gifting through social networks.

But one of RSR’s biggest complaints is a widespread absence of personalization capability. Consumers who want to include a personal note, photo, or video are often frustrated, according to the report. “By its nature, a gift card is relatively impersonal–perhaps implying only slightly more consideration than a check or cash on the part of the gift buyer,” the report says. “With digital gifting, retailers have a unique opportunity to help their gift buyers show that they really have invested thought into their purchase, by enabling personalization of the gift card. Unfortunately, personalization opportunities are rare.” RSR found only a small handful of merchants offering personalization, while only one, Home Depot, offers video capability.

The firm ranked the merchants offering virtual gift cards, assigning points according to how well their programs performed against a set of 22 criteria. Ranking first, with 52.5 out of a possible 66 points, is Home Depot. Rounding out the top five are Best Buy (51 points), Williams-Sonoma (50), Amazon.com (47), and Gap and L.L. Bean (44 each).