Magazine Article | November 1, 2002

Re-Purposed Gifts

Source: Innovative Retail Technologies

After $2.4 billion Charming Shoppes replaced its gift certificates with gift cards, it realized it found a solution that keeps on giving.

Integrated Solutions For Retailers, November 2002

Retailers that use gift certificates can appreciate the labor and administrative work involved with maintaining such programs. First, the paper must be filled out, either handwritten or via an electronic cash register, the certificate amount must be calculated as a sale at the cash register, and the certificate must be marked in some way to help the store track it. When customers redeem gift certificates, retailers often have to give cash back, especially for amounts under $10, or they can reissue a new certificate for the lesser amount. The bottom line is that gift certificates are difficult for retailers to track, they are expensive to administer and maintain, and they are susceptible to fraudulent use.

Prior to June 2001, Charming Shoppes (Bensalem, PA), a $2.4 billion clothing retailer with divisions such as Fashion Bug, Lane Bryant, and Catherine's, used a paper-based gift certificate program. Charming wanted to find a way to avoid gift certificate drawbacks by upgrading to an automated gift card program.

Paper Vs. Plastic
Traditionally, there have been a few snags with gift card programs that have kept some retailers away from them - especially larger retailers. "A few years ago, large chain store retailers had to outsource their gift card programs to third party vendors," says Ray Amoroso, Charming Shoppes' director of store systems. "The third party vendors would act as a gift card payment processing center, as well as a help desk for the retailers' customers. The problem with this system is that retailers would have to sign contracts with the vendors, leasing their solutions and services for several years, and at the end of the lease the third party vendors would own the retailers' data." Additionally, if retailers wanted to do any data analysis, they had to go through the third party vendors and pay additional fees, and then they could receive only whatever reports the vendors had available.

Own Your Data And Your Gift Card Program
One of Charming Shoppes' vendors, DataMax System Solutions, resolved its dilemma. DataMax had previously installed Charming Shoppes' RTS (retail transaction switch) for its central payment authorization and file transfer system. The vendor recommended SmartClixx (Raleigh, NC), a new gift card program vendor with customers such as Chico's FAS and Groupe Dynamite. "SmartClixx' gift card program had all the functionality of a hosted solution, but it also offered the opportunity to own our data and to own the solution after three years," says Amoroso.

Because Charming Shoppes already had many of the necessary constituents in place for a gift card program, including a WAN (wide area network), central payment authorization solution, and RTS, the gift card rollout took only a few weeks to deploy. The gift card program went live on November 5, 2001 at 1,250 of Charming Shoppes' Fashion Bug stores. By the end of the following month, without even marketing its gift card program, the retailer had sold 400,000 gift cards. "Our gift card program was an instant hit with our customers," recalls Amoroso. "The solution we chose costs us significantly less than what we would have spent with an outsourced solution from a third party vendor."

Charming Shoppes' customers can call a 1-800 help desk number to find out their gift card balances, to inquire about purchasing additional gift cards, or to report stolen cards. Unlike hosted third party solutions that charge from 25 cents to $1 per minute per call, Charming Shoppes pays only for the cost of the 1-800 number and its help desk CSRs (customer service representatives). Additionally, Charming Shoppes pays for its gift card solution on a per card basis, and not a per transaction basis like many hosted providers charge.

"Any retailer that already has a transaction system and help desk in place is foolish to outsource its gift card solution," says Amoroso. "Besides the savings provided by an in-house solution, there is also greater flexibility with such things as data analysis and reporting." With its in-house gift card solution, Charming Shoppes is able to do such analysis and reporting as gift card balances, promotional card responses, cards issued from the store, and cards issued with value equal to or greater than $100. Overall, Charming has more than 20 reports it uses to track the success of its marketing and customer service efforts.

Even though the gift card solution paid for itself in less than six months, the true savings didn't stop there. After Charming Shoppes has used the gift card program for three years, it will own the software outright, meaning that it will be able to purchase as many gift cards as it wants without having to buy more licenses. Even its other divisions such as Lane Bryant, Catherine's, Monsoon, and Accessorize will be able to take advantage of the three-year time frame following the Fashion Bug rollout. With a full payback already behind it, Charming Shoppes' gift card program is proving to be a gift that keeps on giving.