A Guide to Enabling Gift Cards on Your Shopify Store

Why Shopify Gift Cards Are Essential for Growing Your Online Store

Summary

• Shopify gift cards are a product type that can be sold as digital cards (sent via email) or physical cards (requiring Shopify POS).
• Customers spend, on average, $31.75 more than the card's value, which increases average order value.
• Gift cards sold as products have a maximum daily denomination of $9,999 USD, while manually issued cards for store credit are capped at $2,000 USD.
• The gift card feature is included in all Shopify plans at no extra cost.

Shopify gift cards are prepaid products that customers can purchase and redeem for merchandise in your store, either online or in person. They work as a special product type with a monetary value and unique code, delivered digitally via email or physically through Shopify POS. You can create gift card products with multiple denominations, issue them manually for rewards or refunds, and track their sales and redemptions through your Shopify admin.

The financial impact is significant. The digital gift card market is projected to reach $2,076.51 billion by 2027, and 61% of consumers spend more than the gift card value when redeeming. Gift card sales grew 114% during the 2021 holiday season, and 56% of American consumers purchased a gift card during the 2024 holiday season. Beyond immediate revenue, gift cards introduce new customers to your brand, improve cash flow, and create opportunities for post-holiday sales when recipients redeem their cards.

I'm Steve Pogson, and over the past two decades I've helped businesses implement Shopify gift cards as part of comprehensive e-commerce growth strategies that drive conversion and retention. Here at First Pier, we've seen how properly configured gift cards become a year-round revenue stream, not just a seasonal tactic.

Shopify gift cards terms to remember:

• shopify email marketing
• shopify reporting
• upselling shopify

Understanding Shopify Gift Cards and Their Benefits

I often explain to clients that Shopify gift cards are a product for growing their business, not just a payment method. They offer several benefits for an e-commerce business.

What Are Shopify Gift Cards?

A Shopify gift card is a special type of product you can sell in your store. Its value is prepaid, meaning you receive the funds upfront, and the recipient can use that value towards future orders. Each gift card comes with a unique code. For digital gift cards, this code is delivered to the recipient via email. This makes them a good last-minute gift option, as they arrive instantly.

For businesses that also sell in person, physical gift cards are an option. If you use Shopify POS, you can issue both digital and physical gift cards to your in-person customers. This flexibility means your customers can choose how they want to give and receive their gifts, whether it's a quick email or a designed physical card. You can find more details on how to set up and sell these cards in your admin by checking out more info on selling gift cards.

Key Business Benefits of Offering Gift Cards

The benefits of gift cards include increasing average order value and building brand loyalty.

Gift cards increase the average order value (AOV). Research shows that 42% of consumers report spending more when they use gift cards than they normally would. In fact, 61% of consumers spend more than the value of the gift card, overspending by an average of $31.75. This means that when a customer redeems a $50 gift card, they are likely to spend $81.75 or more, bringing in additional revenue for your store. During the holiday season, this effect is even more pronounced, with customers spending an extra $81 on average when they redeem a holiday gift card. This shows the additional profit gift cards can bring.

Gift cards also help with brand awareness and new customer acquisition. When a customer buys a gift card for a friend or family member, they are essentially becoming a brand ambassador. This introduces your business to new potential customers who might not have found you otherwise. Research shows that 52% of people bought a gift card to give someone else in the past 12 months. This organic reach helps grow your customer base without additional marketing spend.

Another benefit is improved cash flow. When a customer purchases a gift card, you receive the money immediately, even if the card isn't redeemed for weeks or months. This upfront payment improves your business's financial health.

Gift cards can also help reduce returns. If a customer is unsure what to buy, a gift card is a safe option that allows the recipient to choose exactly what they want, minimizing the chance of an unwanted item being returned. Furthermore, they can be used to manage returns, especially for items without receipts or outside the return period, keeping customer dollars within your business as store credit.

Finally, gift cards are effective for increasing post-holiday sales. After the peak shopping season, many customers will have gift cards waiting to be redeemed. This drives traffic and sales during what might otherwise be a slower period. Gift card sales grew 114% during the 2021 holiday season for retailers, and 56% of American consumers purchased a gift card during the 2024 holiday season. This trend clearly shows that gift cards are a reliable source of revenue, especially during key shopping periods.

Differences Between Closed-Loop, Open-Loop, and Digital Gift Cards

When we talk about gift cards, it's helpful to understand the different types available. This helps clarify what Shopify gift cards are and how they fit into the broader market.

Closed-loop gift cards are the most common type for individual businesses. These cards can only be redeemed at the specific merchant that issued them. For example, a gift card to your Shopify store is a closed-loop card. It's tied directly to your brand.

Open-loop gift cards, on the other hand, are issued by banks or credit card networks (like Visa, Mastercard, or American Express). These cards can be used anywhere that accepts the associated payment network. They offer more flexibility to the recipient but don't directly drive customers back to a specific store.

Digital gift cards (also known as eGift cards) refer to the delivery method rather than where they can be spent. They are electronic versions of physical cards, sent via email or SMS, and can be redeemed online or often in-store by scanning a barcode from a phone. Digital gift cards are increasingly popular, with nearly 40% of consumers preferring them scanned from their phone over physical cards. They also have the advantage of not being lost, unlike physical cards, which 41% of people end up losing.

Here at First Pier, we focus on helping our clients implement closed-loop digital and physical gift cards through Shopify, as they are specifically designed to bring customers back to your store.

How to Create and Manage Your Shopify Gift Cards

Setting up and managing Shopify gift cards is a straightforward process within your admin. I guide many businesses through these steps, and once activated, they become an integrated part of your product offering.

Creating and Managing Digital Shopify Gift Cards

To start offering digital gift cards, you first need to activate the gift card feature in your Shopify admin. This is available on all Shopify plans. Once activated, you can create gift card products just like any other product in your store.

Here’s how I walk clients through it:

1. Go to your Shopify admin and steer to Products > Gift cards.
2. Click on Add a gift card product. This is where you set up the gift card that customers will purchase from your storefront.
3. Give your gift card a clear Title (e.g., "Digital Gift Card," "Store Credit").
4. Write a clear Description that explains how the gift card works.
5. Add relevant Media, like a branded image for your gift card. This image will represent the card on your product page.
6. You'll set the denominations for your gift card. These are the different values your customers can choose from (e.g., $25, $50, $100). Each denomination acts as a variant of the gift card product. Custom amounts are not directly available for customers to input on the storefront, so define your options clearly.
7. Configure Sales channels and organization settings to ensure the gift card is available where you want it to be.
8. Finally, click Save gift card product. You can then publish it to your online store and other sales channels.

For help extending Shopify's capabilities, our team at First Pier offers specialized Shopify Development services.

Creating and Managing Physical Gift Cards

If you have a physical retail presence and use Shopify POS, you can offer physical gift cards. This helps cater to different customer preferences, as 42% of consumers purchased a physical gift card at least every three months.

Here’s the process:

1. First, ensure you have the Shopify POS channel installed and configured.
2. You'll need to order physical gift cards. Shopify offers options for ordering these directly, often with customization for your brand.
3. Once you receive your physical cards, you activate them within the Shopify POS app. You'll need to enable the 'issuing digital or physical gift cards' setting in your POS app, in addition to activating the general gift card feature in your Shopify admin.
4. With the cards activated, you can sell and redeem them directly in your brick-and-mortar store using your POS system. The system links the physical card to its digital counterpart in your Shopify admin, allowing for unified tracking and redemption across all channels.

For a complete picture of how gift cards integrate with your in-person sales, refer to the overview of gift cards on Shopify POS.

Issuing Gift Cards Manually for Store Credit or Rewards

Sometimes, you might want to create a gift card without a customer purchasing it directly. This is called issuing a gift card manually, and it's a valuable tool for customer service, promotions, and loyalty programs.

You can create a gift card directly from your Shopify admin by going to Products > Gift cards and clicking Create gift card. Here, you can specify a custom value (up to $2,000 USD), assign it to a customer, and even set an expiration date if your local laws permit.

Common use cases for manually issued gift cards include:

• Customer Rewards: Thanking loyal customers with a surprise gift card.
• Refunds or Store Credit: Offering a gift card instead of a cash refund for a returned item, keeping the funds within your store.
• Promotional Giveaways: Using gift cards as prizes in contests or as incentives for surveys.
• Customer Service Recovery: Apologizing for a poor experience with a gift card to regain trust.

After creating the gift card, you can easily send it to the customer via email or SMS directly from the admin. Manually issued gift cards represent a liability for your business, as you've committed to providing goods or services without an upfront payment for that specific card. For a detailed guide, see creating gift cards directly in the admin.

Legal, Technical, and Financial Considerations

Navigating the rules and regulations around gift cards is crucial. I always advise my clients to understand the legal, technical, and financial implications to avoid any unwelcome surprises.

Legal Compliance and Terms

The legal requirements for gift cards can vary, but there are federal guidelines and state-specific laws you need to be aware of. The CARD Act of 2009 is a federal law in the U.S. that states gift cards cannot expire in less than five years from the date of purchase. It also limits inactivity fees. However, some states, like Maine, may have their own regulations that are even stricter. For example, some states prohibit expiration dates entirely or have specific rules about unclaimed property (escheatment).

As a merchant, you are responsible for ensuring your Shopify gift cards comply with all applicable laws. Shopify provides the platform, but the legal responsibility for issuance and management rests with you. It's wise to review Shopify's Gift Card & Store Credit Service Terms thoroughly. Additionally, the National Conference of State Legislatures provides detailed information on state-by-state gift card legislation, which I recommend checking for your specific location in Portland, ME.

Denomination and Redemption Parameters

Shopify gift cards come with certain parameters regarding their value and how they can be used.

When you sell gift card products on your storefront, the maximum denomination you can offer is $10,000 USD (or the equivalent in your local currency) to a single person per day. If you need to offer a custom amount not listed as a denomination, you can create a draft order for the customer, process their payment, and then manually issue a gift card for that specific amount.

For gift cards that you create manually in your admin (e.g., for store credit or rewards), the maximum value is $2,000 USD.

Customers can easily redeem their gift cards by entering the unique code at checkout. This code is applied to the total order value, including products, shipping, and taxes. A useful feature is that the balance on a gift card can be spent on multiple orders. If the gift card's value is less than the total order, the customer will simply be prompted to choose a second payment method for the remaining balance. You can learn more about this process in how customers redeem gift cards.

Tracking and Analyzing Gift Card Performance

Understanding the impact of your gift card program is vital. Shopify provides built-in tools to track and analyze gift card sales and their outstanding balances.

In your Shopify admin, you can access various reports that shed light on your gift card performance. I usually direct clients to the Analytics > Finance Summary section. Here, you can find a dedicated gift card sales report that shows you how many gift cards have been sold, their total value, and when they were purchased. This helps you understand sales trends and the overall success of your program.

Monitoring outstanding balances is also important, as these represent a liability for your business. Shopify’s reports help you keep tabs on the total value of unredeemed gift cards, which is crucial for financial planning. For more detailed reporting, check out viewing the gift card sales report. For businesses that need more detailed data analysis, our e-commerce analytics services can help you get more specific information from your reports.

Promotional and Loyalty Strategies for Gift Cards

Beyond the basic setup, there are many ways to use Shopify gift cards for your business. I've helped many brands use these methods to increase revenue and customer loyalty.

Best Practices for Designing Your Shopify Gift Cards

The visual appeal and clarity of your gift cards are important. A well-designed gift card reinforces your brand and presents it professionally.

1. Create On-Brand Imagery: Your digital gift card should look like it belongs to your brand. Use your brand's colors, fonts, and logo. For example, athleticwear brand Vuori uses product imagery that mimics the design of a physical gift card on its product page, creating a cohesive brand experience. Take inspiration from Vuori's strong gift card branding.
2. Customize the Gift Card Email Template: The email that delivers the digital gift card is often the recipient's first direct interaction with your brand. Customize this template to match your brand's aesthetic. Include essential information like sender name, recipient name, dollar amount, and clear instructions on how to redeem it. Brands like DÔEN communicate their brand identity well through their gift card emails.
3. Provide Clear Instructions: Make it obvious how and where the gift card can be redeemed. State whether it's for online use, in-store, or both.
4. Consider Physical Card Design: If offering physical cards, invest in a design that reflects your brand's quality.

For help with creating a consistent brand design across all your touchpoints, including gift cards, consider our branding and identity services.

Promotional Tactics to Increase Sales

Once your gift cards are designed and ready, it's time to get them in front of your customers.

1. Seasonal Campaigns: Gift cards are very popular during holidays. During the 2021 holiday season, gift card sales grew 114%. Promote your gift cards heavily around Christmas, Valentine's Day, Mother's Day, and other gift-giving occasions. Create limited-time designs to add a festive touch.
2. Offer Discounts on Gift Cards: While it might seem counterintuitive, discounting gift cards can increase sales and attract customers. You can offer a small percentage off a gift card purchase or even add extra value (e.g., "Buy a $100 gift card, get a $10 bonus"). Shopify has a feature for using discounts on gift cards.
3. Social Media Contests and Giveaways: Run contests on platforms like Instagram or Facebook where gift cards are the prize. This can increase engagement and expand your reach.
4. Email Marketing to Loyal Customers: Segment your email list and send special offers on gift cards to your most loyal customers. They are more likely to purchase gift cards for others or for themselves. Our email and SMS marketing services can help you create effective campaigns.

Integrating Gift Cards into Your Loyalty Strategy

Shopify gift cards are a good tool for building and maintaining customer loyalty.

1. Rewarding Repeat Customers: Surprise your best customers with a gift card on their birthday or anniversary of their first purchase. This small gesture can increase their loyalty.
2. Customer Service Solution: If a customer has a negative experience (e.g., a shipping delay), offering a gift card as an apology can turn a potentially lost customer into a loyal one.
3. Referral Programs: Encourage existing customers to refer new ones by offering both the referrer and the new customer a gift card.
4. Loyalty Program Integration: Many Shopify apps allow you to integrate gift cards directly into your loyalty program. Customers can earn points and redeem them for gift cards, or receive gift cards as part of VIP tiers. Popular Shopify loyalty apps include Rise.ai, Growave, and Govalo. These tools help build community and retention by allowing customers to earn and spend rewards.

Frequently Asked Questions about Shopify Gift Cards

How do customers redeem a gift card?

Customers receive a unique code via email (for digital gift cards) or on the physical card itself. At checkout on your online store, they enter this code into the gift card or discount code field. The value of the gift card is then applied to their order total, which includes products, shipping, and taxes. If the gift card balance doesn't cover the full order, the customer will be prompted to choose a second payment method for the remaining amount.

Can I sell physical gift cards without Shopify POS?

No, selling and activating physical gift cards with unique codes that integrate with your online store requires the Shopify POS system. The POS system is essential for linking the physical card to your Shopify store's inventory and tracking system, ensuring the codes are valid and balances are correctly managed. Without Shopify POS, you could theoretically sell generic, non-integrated physical cards, but they would function as manual store credit and could not be redeemed online or tracked consistently through your Shopify admin.

Do Shopify gift cards expire?

You can set an expiration date for your Shopify gift cards, but you must follow the laws in your region. For example, federal law in the U.S. (CARD Act of 2009) states that gift cards cannot expire for at least five years from the date of purchase. Some states have even stricter rules, such as prohibiting expiration dates entirely or having specific regulations regarding inactivity fees or unclaimed property. It's crucial to consult local laws applicable to your business in Portland, ME, to ensure compliance. Generally, a gift card created directly in the Shopify admin has a maximum value of $2000 USD and can have an optional expiration date set, assuming it complies with these laws.

To Sum Up

Using Shopify gift cards is a useful tool for any e-commerce business looking to expand its reach and increase its bottom line. As I've outlined, they do more than just allow for purchases; they increase sales, introduce new customers to your brand, and build loyalty. From the initial setup of digital and physical cards to promotional tactics and legal considerations, understanding and using gift cards effectively can impact your business's growth.

Here at First Pier, we regularly help businesses in Portland, ME, and beyond, integrate features like gift cards to build effective Shopify stores. Our experience ensures that these features are not just functional but also matched with your overall business goals. If you need help with your Shopify store, I invite you to learn more about our award-winning Shopify agency and how we can help your business.