Eddie Bauer, Others, Learn Their Gift-Card Weaknesses

In late July, a well-regarded retail research house called Retail Systems Research (RSR) began a study of retail digital card procedures by anonymously reaching out to 100 of the nation's largest retailers and trying to buy a gift card, preferably digital, but a gift card nonetheless. What surprised RSR was how poorly many of those retailers fared.

Eddie Bauer, for example, completed the transaction, took the money and never sent the card. Two other retailers also never sent the card, but at least they had the decency to not charge for it. RSR Managing Partner Nikki Baird said Eddie Bauer's people admitted they never shipped the card.

"In the case of Eddie Bauer, it was never sent. They sent me a letter that said so and gave me a number to call as the sender to release the card, but by the time I got the letter, the order had already been cancelled," Baird said. The potentially bigger problem is how easily these incidents could have gone unnoticed.

"In the case of the other two, the credit card was never charged, so I'm pretty sure it was never sent. But it definitely was never received," she said. (Editor's Note: If the credit card had not been charged but the gift cards had been sent, that would have been an even juicier story. No need to go there, though.)

"We never heard anything from the other two [retailers] as to why the order was not processed. From an end-user perspective, it looked like we bought the card, and it would not have been until the monthly credit-card statement or some kind of exchange with the recipient ("Did you like the card?" "What card?") that the consumer would've found out about it," Baird said. "That's not a good business practice."

Indeed it's not. Although those three retailers were the worst, many others showed some almost-as-bad processes. "Retailers fared very poorly on notification options. Only three retailers—Home Depot, CVS and Target—notified us when the gift card was viewed. Seventeen retailers offered a notification when the card was sent. Because the gift is digital, notification becomes extremely important. In our evaluation, seven gift cards ended up in junk mail," she said. "E-mail deliverability is not guaranteed, so it is worthwhile to help the sender make sure that the recipient actually got the gift."

I think we can go one material step further. It's not merely that "E-mail deliverability is not guaranteed." As a practical matter, it is guaranteed. It's guaranteed that for every 1,000 pieces of E-mail, dozens—if not more than a hundred—will not get through to the recipient.

Some retailers—like Eddie Bauer—may never send it, while far more messages will get diverted or blocked somewhere along the way. Will the Internet mail system complete its task? Will an ISP guarding the recipient's base block it? What about the recipient's mail server?Or how about corporate SPAM, junk mail or other filters? If the message gets through, it then has to deal with that user's machine's various filters, including mailbox rules to place messages in various folders. There's also accidental deletion and having a message intercepted by the consumer's PDA that wasn't set perfectly.

In short, assuming that a sent digital gift card necessarily materializes into a gift knowingly received is foolish.

RSR noted many other problems, too:

  • "CRM or Retention, however, did not fare well. Only one retailer—The Home Depot—offered to remember anything about the event that spawned the need for a gift card. At best, most retailers offered you a chance to sign up for their E-mail as part of the account registration process when purchasing the card."
  • "No retailers offered a seamless mobile experience when it came to buying a gift card, let alone redeeming one. Only six retailers offered a mobile-optimized experience, but 36 did have a Web site that worked on mobile well enough to complete a purchase. However, eight (YOOX, Coldwater Creek, Nike, Sears, Musician's Friend, Cabela's, American Eagle and Home Shopping Network) had sites that were so mobile unfriendly that we could not complete a purchase. Nike and American Eagle, given their younger target audience, were surprising in this regard."
  • "It's very difficult to explain to consumers that you can only use the gift card online, particularly if the retailer has a lot of stores. But many gift cards came with almost credit-card length card numbers, with PINs, so if you are going to enable cross-channel redemption, make sure it's easy for store associates to redeem."
  • The report—quite appropriately—chastised Best Buy, Sony, Apple and Urban Outfitters for an unusually strong amount of digital gift card cluelessness.

Best Buy, for instance, "offers only an E-mail message, but no digital gift card." Not only does Sony Style not offer a digital gift card, but "the gift card purchase option on their site doesn't make this clear until you're almost completely through with the transaction."

At Apple, "if you're not already into digital music, digital gift cards are impossible to find. Apple's storefront offers fixed denomination, plastic gift cards only, which is a surprising miss for a company that sells a lot of digital products."

Urban Outfitters, the report pointed out, "trends younger in its customer base and prominently features all sorts of opt-in and social networking opportunities on its impressive and youth-focused Web site. This demonstrates that the retailer understands its client base's needs and interests. Why then does it completely miss out on the digital gift card opportunity?"

Victoria's Secret actually did fine with sending out its gift cards, RSR said, but it then screwed the digital pooch with its post-purchase behavior. "The E-mail offers we received after completing the gift purchase were out of control: Sometimes two a day and continuing day after day until we relegated all their E-mails to our SPAM folder."

Technically, a SPAM-filter move wouldn't have stopped the onslaught, but it would have stopped it being a problem for RSR. For Victoria's Secret, however, it's a horrible outcome.