2009 Gift Sales Trending Up in Many Spas
Remember the media-whipped gift card buying scare of 2008? Last year, holiday shoppers were exhorted to buy merchandise, not gift cards, in case stores went out of business before the cards could be redeemed. The bad press took a toll on service businesses, and spas suffered badly.
Though the retail sector is not rebounding, and prominent companies are still vanishing from the landscape, the gift card story is last year’s news, and the media needs fresh new scares to stoke the engines of holiday panic. Thus gift card retailers, your services as enemies of the state are no longer required!
Long before the holiday season, we began noticing a distinct thaw in gift card sales. Most spas I’ve talked with say theirs began in October. In our own Preston Wynne Spa, we finished November with gift sales up 22% above last year.
Certainly, spas love and need the cash flow from gift cards. But 2009 was the first year that most spas redeemed more gift cards than they sold, which somewhat soured the love affair. Accustomed to (and adoring) the notion that “20% of them are never redeemed,” spas were rudely shocked.
But more important, we think, is that gift sales are a leading indicator. Gift redemptions closely track sales in general. In other words, when few gift cards are being redeemed, business in general is slow. When gift cards are being redeemed at a brisk pace, business is booming.
Numbers are funny things–they can tell vivid stories, but not always the ones you expect them to. Gift redemptions as a percentage of sales is a key number that I’ve observed for years. I like it to hover around 17-20% of total sales volume. If it drops below that, and especially below 15%, we’ve got a demand problem. If it rages above 25%, we’re churning a lot of new guests and not retaining enough of them. (Sure, in January you can expect to see these overheated numbers. But the holiday lump passes through the snake pretty swiftly.)
We just concluded our holiday client appreciation party and gift card preview. We threw a truly shameless “gift with purchase” at our clients this year–a gift certificate (expirable in 90 days, as promotional gifts are) for a $75 “Small Indulgence” treatment for every $150 in gift cards purchased. These are 45 minute treatments, and include a massage, body scrub, facial and a deluxe 75 minute pedicure.
Perhaps not surprisingly, as this was our richest offer ever, we sold 70% more gift cards than last year. Like most of you, I look forward to a time (a long way off, no doubt) when our clients no longer need spectacular promotions to get them to take action. But like most of you, I am delighted that they are taking action at all.
So, if our generally higher gift card sales are saying what we hope they are, 2010 may finally show growth. (Join us for our first webinar of the New Year, “Back in the Black,” and we’ll talk about what to do in the meantime.)
Have a very prosperous gift selling season, and please share your favorite promotions!
