With packed high streets, stressed-out shoppers and stores running out of stock, an increasing number of consumers are switching to online shopping every Christmas. This year, the Interactive Media in Retail Group (IMRG) estimates that £13.8 billion will have been spent online during the festive season. This is a 42 per cent increase on 2006.
Another area of retail that is going from strength to strength is the voucher sector. Industry body The VA estimates that the voucher and gift cards market is worth £3.2 billion a year. But while consumers are spending ever more online, they are largely unable to do so with the vouchers in their wallets and purses.
Customers at Marks & Spencer, the UK's biggest voucher supplier, cannot spend the retailer's vouchers online. It's the same story at Tesco, Boots, Next or Kingfisher, and the same is true for the gift cards of these companies. Although plastic gift cards are viewed as a high-tech option for companies looking to reward their clients, suppliers or staff, the fact is that none of these companies can redeem gift cards online. In fact, none of them even target gift cards at the corporate market, fulfilling the market with the tried and tested paper voucher.
Robert Barker, chief operating officer of online loyalty company iPoints thinks voucher companies could be missing a trick. "Consumers pay for the voucher product, so why should they not be able to choose the channel they spend it in?" he says. "It never ceases to amaze me how slow the big retailers are, and they are the ones with the big voucher propositions."
Steve Simmonds, business development director at digital agency Design UK, which works with Hackett, Selfridges and Hobbs believes there are three main reasons for this online time lag: cost, logistics and technology.
"Some e-commerce platforms will allow you to do it and others don't," he says. "There are big issues in terms of integration of on and offline technology. Basically, the retailer doesn't want you to spend your voucher online and then ten minutes later spend it in store."
Tweaking the technology to do this is simply not a priority for many retailers, he says. "There is a huge cost involved in meeting these needs and it might simply be beyond the reach of most mid-tier retailers. It's a cost-benefit analysis and they may not see the value in changing their systems when online only amounts to ten per cent of their sales."
John Lewis and Debenhams are the only two major voucher players which offer online redemption. Both use a scratch-off panel to uncover a unique reference number that the consumer must type in to fulfil an online order. Once the panel is scratched, the voucher is void, rendering dual use impossible.
Tesco says system limitations make online redemption impossible, but that it is working on changing this and will announce any changes on its website.
Kingfisher does not allow online redemption, but is planning to e-enable its Woolworths gift card. Tracy Aslam, head of incentive business at Kingfisher, says the problem is due to system issues with handling mixed tenders. "If somebody wants to part pay with a giftcard and the rest with a credit card, then it's a problem. However, we are looking at it for Woolworths for next year."
She adds: "It sounds simple, but there are security changes that need to be introduced in order to allow you to close the card once it has been spent."
Aslam admits there is not a huge demand for online products from the B2B market, but she says that ultimately consumer demand will drive it. Kingfisher is to undertake research to discover what end-customers want, which she expects will drive demand for an online solution from corporate customers.
Ironically, although B2B customers are ambivalent about online payment methods, they are increasingly buying their own vouchers in that channel, she says. "You can only buy Kingfisher Vouchers online now. It allows corporate customers to claim discounts on orders worth more than £1,000.You can get them quickly as and when you need them, and you have a benefits programme."
John Sylvester, director of P&MM, which has just launched a range of gift cards into the consumer market, says businesses that are predominantly online, such as Amazon and Laithwaites, are better geared up to accept voucher payment, but it depends on the systems that individual retailers have in place. "Although the cards themselves are relatively straightforward, constructing a system can be complex. All retailers have different levels of security," he says.
P&MM's consumer cards allow recipients to spend their gift allocation in a number of pre-determined stores, including Boots, River Island, Waterstone's, Halfords, Debenhams, JJB, HMV and Goldsmiths. Some accept online redemption and others don't, he says.
Sainsbury's has three main voucher mechanics: paper, gift card and electronic e-vouchers. Yvonne West, manager at Sainsbury's Business Direct says: "As a voucher issuer we realise the importance of e-commerce and we are looking to embrace online redemption. That's why we are looking to introduce gift cards in store. We don't want to restrict our customers from ordering online, but in the same way we don't want to force our customers to just have e-vouchers, as many will want to come in store and browse and buy."
Andrew Johnson, director-general of The VA, believes gift cards are the future for online purchases. However, he says that for many retailers, e-commerce remains a new area.
"It is only recently that there has been a connection between online and offline shopping," he says. "Online sales have grown with no connection to what has been happening on the high street, and it's only in the past five or six years that the high street has moved online."
And there are still unresolved issues for redeeming online vouchers. "Should customers be allowed to print e-vouchers and use them offline?" he asks. "The worry is obviously security and fraud."
HMV introduced its own online offering last year and corporate sales manager Katy Barton says it has found favour with corporates. "We send a 16-digit redemption authorisation that creates an electronic wallet and your own account. You can then spend it or top it up."
Clients include Castrol, which featured HMV vouchers on pack for a promotion on oil purchases, and Motorola, which ran an SMS promotion. "Security has to be tight on e-vouchers because they are live cash," adds Barton.
As of January, the product will be integrated within HMV.com, the business's relaunched entertainment portal, which will allow shoppers to buy physical products as well as download music. Paper vouchers are still available for use in store as well as in sister company Waterstone's, however gift cards can only be used in HMV.
Other voucher players looking at the thorny issue of how to satisfy the demand for online shopping, are coming up with their own hybrid solutions. Argos, for example, does not allow online redemption of vouchers or cards, but the retailer does allow online reservation, and customers can then pay with vouchers when they pick up the goods in store.
This is a partial solution to a problem that won't go away, because one thing on which everyone agrees is that online shopping is here to stay and it will only become more important. Voucher players who finally crack the online conundrum could find themselves with a serious competitive advantage as consumers continue to migrate online.
JOHN LEWIS: THE GIFT OF ONLINE OR IN-STORE REDEMPTION
One of the broadest online voucher offerings is available from John Lewis, which relaunched its vouchers in 2004 so they could be redeemed through the group's growing portfolio of websites.
Although paper-based, the voucher was developed to be used in-store and online by John Lewis's long-standing security printer Bemrose Booth. The vouchers feature a scratch-off latex panel on the front that covers a seven-digit security code and ten-digit serial number. Both are inputted into John Lewis websites - Johnlewis.com, waitrose.com, Waitrose wine and Ocado.com - creating an account for the named user, who can then pay in full or part with the vouchers. Any unredeemed credit is kept in the online account and can be used at a later date.
Andrew Sellers, development manager at John Lewis and chairman of The VA, says: "The voucher industry is embracing e-commerce as a sales channel and, with John Lewis exceeding one million gift voucher redemptions online, the popularity of internet shopping using vouchers is expected to grow."
Indeed, John Lewis has invested heavily, not just in the secure voucher system, but in website functionality, with video and podcasts providing the sort of in-depth data that a consumer would expect in-store.
"The real benefit with our gift vouchers is that they do not restrict shoppers to a single redemption method and, instead, allow recipients the flexibility to shop either online or in store - a choice that is highly valued," says Sellers.
MANCHESTER UNITED HOPES TO SCORE WITH THE CLUB'S FIRST INTERACTIVE GIFT CARD
Premier League champions Manchester United launched its first ever interactive DVD gift card last November.
Produced by Serious, and sold in 300 Sainsbury's stores, the card promotes the One United membership scheme. The cards include a hybrid DVD-DVD Rom packed with video and multi-media content. The cards also contain the prepaid One United membership, for which the club's fans go online to register.
Steven Hall, general manager for ticketing and membership at Manchester United, says: "The cards give fans instant credit to join the club's membership scheme, which then means that they have access to home game tickets, can get their names on the season ticket waiting list, as well as other exclusive benefits like discounts, entry into competitions to win autographed merchandise and the special welcome member packs."
Simon Osgood, vice president stored value, Serious Europe says prepaid interactive gift cards allow brands to stand out by providing added value for customers over paper gift vouchers and static plastic cards. They also provide a direct relationship and valuable consumer data.
"There's a definite gap in the market, and it's not because of the lack of technology. Historically, retailers have bolted on technology so that now systems don't talk to each other. Our card can provide the technical fix that directs customers online."
One option is a card that can only be redeemed online. "We are talking to a retailer which hopes to do this soon," says Osgood. "It's a new market for them and will give them a share of a market they don't currently have."