In 2006, the National Retail Federation estimated that consumers would purchase $25 billion in gift cards. Companies like Best Buy and Victoria’s Secret have seen upwards of $40 million each in profits in unused gift cards alone. So why the trend toward gift cards, and how can your store cash in on the potential profits?

Gift cards have recently become an extremely popular item around the holidays, for birthdays and wedding or baby showers. Some couples even now register for very few items hoping to get gift cards so they can pick out their own gifts. Gift cards are seen as a thoughtful purchase because they let your loved one know that you were thinking of them, but it gives them the freedom to choose their own items. Gift certificates to specialty stores, boutiques, spas or other niche stores can speak volumes about how you were truly thinking of that individual when selecting a store.

To get in on the gift card action, you should make it very easy to purchase a gift card/certificate. Place a sign advertising that gift certificates are available. We recommend not only putting one at the counter, but also placing one at the entrance to the store, so that weary buyers know right away that they have an alternative gift idea. Plus, if your store has a website, advertise that gift certificates are available.

We like gift certificates that can be customized to any amount. That way, people aren’t pigeonholed into a certain price. If you have only increments of $25, someone planning to spend $30 will go down to $25 rather than up to $50. That is $5 lost.

Now, plastic gift cards are great, but they are pretty impractical for independent retailers. The costs to start up a plastic gift card program would far outweigh the profits. And paper gift certificates and plastic cards spend exactly the same way, so people tend to not even notice the difference. So for now, stick with paper gift certificates and then if they take off, then consider investing in a card system.

We suggest having 2-part gift certificates. These packages allow you to give one certificate to the customer while you have an exact replica for your records. This way, when a certificate is redeemed, you know how long ago it was purchased, the selling associate, etc. These types of gift certificates help you add checks and balances to your gift certificate program.

The final thing to think about when starting a gift certificate program is an expiration date. It is pretty standard for gift certificates to be valid for either one to two years from the purchase date. Most organizations do not count a gift certificate as revenue until it is redeemed, so after two years, that certificate is automatically figured into profits. That way, you don’t have to keep your records open. Plus, as we mentioned before, many gift certificates go unclaimed, so you need an official date to stop acknowledging that sale.

Gift certificates can be an extremely good way to generate additional revenue. So don’t be scared, start a gift certificate program.

How have gift certificates sales impacted your stores bottom line?