Gift Cards Sold on a Small Site

Why they suit December

Every constraint that makes the last fortnight difficult disappears with a gift card.

No stock to run out of, no courier deadline, no risk of arriving late, and no shipping cost to justify.

Which means you can keep selling right up to the day, at the point when your physical products have stopped being orderable and your competitors have stopped too.

For a small business that is a genuinely useful position, and a great many sites do not offer them at all.

The commercial case

Beyond the timing, three things make them worth having.

They bring a new customer, since the recipient is frequently somebody who has never bought from you.

They are paid for now and redeemed later, which helps cash flow in a month where it usually helps.

And redemptions frequently exceed the card value, because somebody spending a fixed amount tends to add to it rather than stopping exactly at the figure.

Against that, they are not free money, which is the part small sellers underestimate.

It is a liability, not revenue

The accounting point that matters and is routinely misunderstood.

Money taken for a gift card is not earned until the card is redeemed. Until then you are holding funds against a promise to supply something.

Treating it as December revenue overstates the month and understates whichever month the redemption falls in, and it can produce an unpleasant surprise when a batch of cards is redeemed in a quiet period.

Your accountant will have a clear view on how to record it, and it is worth asking before you start selling rather than at year end.

Keep a running total of unredeemed value, which most systems will produce, so you know what you owe.

Expiry rules restrict you

• Most Canadian provinces restrict or prohibit expiry on general gift cards.
• Fees for inactivity are commonly restricted too.
• Promotional cards given away are often treated differently.
• Cards for a specific service may have different rules again.
• The rules vary by province, which matters if you sell nationally.

This is a general description rather than legal advice. Consumer protection rules on gift cards are provincial and the detail differs, so confirm the position for where you sell.

What that means practically

Assume the card is good indefinitely and plan on that basis.

Which means the liability does not expire off your books, and a card sold this December may be redeemed in four years.

Keep the record accordingly rather than assuming unredeemed cards eventually become yours.

It also means the terms you write should not promise an expiry you cannot enforce, since publishing one that is not permitted is worse than publishing none.

Keep the terms short and accurate: what it can be spent on, whether it can be used across visits, whether change is given, and how to check the balance.

A worked example

A shop added digital gift cards in mid-November, having never offered them.

They sold steadily through December and disproportionately in the final four days, when their physical delivery had closed and they would otherwise have taken nothing.

Roughly two thirds were bought by existing customers for people who had not shopped there before.

Redemptions came through over the following six months, and the average spend was above the card value.

The one thing they got wrong was accounting: December looked stronger than it was, and the redemptions landed in months they had already budgeted.

Their accountant corrected the treatment the following year, and the owner described the cards as the best thing they added that season with the worst bookkeeping.

Make the delivery immediate

The mechanical requirement that determines whether they work in the final week.

A digital card should be emailed instantly, to either the buyer or the recipient, with a printable version for somebody who wants something to hand over.

Let the buyer choose a send date, which matters because plenty of people buy on the twentieth for a card that should arrive on the twenty-fourth.

Say plainly on the product page that it is sent immediately and requires no shipping, since that is the entire reason somebody is looking at it on the twenty-third.

Test the whole flow yourself before December, including receiving one and redeeming it, because a gift card that fails at redemption is a considerably worse experience than a late parcel.

Redemption has to be easy

The step where small implementations fail.

The recipient is a new customer with no context, so the process needs to work without explanation: a code entered at checkout, applied clearly, with the remaining balance shown.

Partial redemption should leave a usable balance rather than voiding the rest, which is both fairer and frequently required.

Make the balance checkable without contacting you, since otherwise every card generates an enquiry.

And make sure staff know how to handle one in person if you also trade physically, because a card sold online and presented at a counter is where the confusion happens.

The counter-case

Gift cards are not right for everybody.

A business with a narrow product range or a high average order value may find the card amount rarely matches anything, which produces a frustrated recipient rather than a sale.

Service businesses have a harder version of the same problem, since a fixed amount against a quoted job is awkward, although a card for a specific named service works well.

There is also the liability question, which for a very small business is a genuine consideration: taking money now for work delivered later is a commitment, and if the business closes, the holder is an unsecured creditor.

Sell them where the range is broad enough that a fixed amount is genuinely useful, and account for them properly from the first one.

Setting them up

1. Confirm the expiry rules for where you sell.
2. Ask your accountant how to record them.
3. Deliver instantly, with a printable version.
4. Let the buyer choose a send date.
5. Allow partial redemption with a usable balance.
6. Make the balance checkable without contacting you.
7. Test buying and redeeming before December.

Step seven finds the problems, and a card that fails at redemption is worse than not offering one.

Cross-province obligations are covered in taxes on an order going to another province.

Frequently asked questions

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