March 18, 2014, 1:36 AM

Growing into the ‘Amazon’ of B2B gift cards

Growing demand for gift cards that companies buy for their customers and employees is causing National Gift Card Corp. to triple its facility space this month. Among its fastest growth: sales of electronic gift codes e-mailed to mobile phones.

Lead Photo

Eric Thiegs

As companies buy more gift cards for customer loyalty programs and employee incentive programs, National Gift Card Corp. is expanding both its operating space and number of employees as it strives to make it as easy as possible for companies to buy gift cards in bulk.

Now in its 10th year and moving into a new facility this month that will triple its space, the company is taking a page from the playbook in the consumer gift card market, (Digital gift cards attract holiday shoppers http://www.internetretailer.com/2013/12/05/digital-gift-cards-attract-holiday-shoppers ) says senior vice president of business development Eric Thiegs.  

“The whole mantra of making it as easy as possible for consumers to walk into a store and buy a gift card from many merchants—we took that idea to build the same concept for corporate buyers,” Thiegs says. But instead of promoting gift cards to consumers via racks in supermarkets and other retail stores, National Gift Card sells all of its gift cards—both plastic cards and the electronic code versions—through its e-commerce site at NGC-Group.com, where buyers can purchase a single card or several thousand at a time.

Because National Gift Card does not sell directly to consumers who would actually redeem cards, its account managers interview first-time customers to verify their business status. “We’re the grocery store of gift cards for the corporate marketplace—an e-commerce ordering portal like the Amazon.com for gift cards,” Thiegs says.

National Gift Card, or NGC, which is a privately held company and doesn’t report sales figures, is experiencing strong growth among companies that use gift cards in employee incentive programs, customer loyalty programs and as gifts to corporate clients, Thiegs says. Its strongest growth is in electronic gift card codes e-mailed to mobile devices, he adds.

To manage its growth, NGC is moving this month from 17,000 to 52,000 square feet of headquarters and fulfillment center space in the Chicago suburb of Crystal Lake, IL, where this spring it will employ 50 people, up from four several years ago.

NGC, maintains accounts with about 3,000 corporate clients and sells plastic and electronic gift cards from some 200 merchants and other companies, including Amazon.com Inc., ice cream company Ben and Jerry’s, the Baja Fresh restaurant chain and credit card companies American Express Co. and Visa Inc. For a few merchants and credit card companies, including American Express, Visa, and the Starbucks and Subway restaurant chains, NGC can sell cards co-branded with the logos of the gift card merchant and the corporate client. Starbucks is No. 454 in the 2013 Internet Retailer Top 500, which ranks companies by their annual web sales.

NGC earns its revenue in two ways: on the spread between the discounted rate it pays merchants for gift cards and the face value of cards that its clients pay , and on fulfillment services provided to clients who don’t want to deal with the paper cuts of stuffing their own envelopes or with e-mailing electronic cards. NGC declines to describe the typical discount. The company typically keeps large volumes of inactive cards in its warehouse, and, with computer network connections to payment processors like First Data Corp. and Chase Paymentech used by merchants, uses wireless connections in its warehouse to activate computerized tags in cards with value as its corporate clients purchase them.

When NGC’s customers purchase plastic or electronic gift cards on NGC’s web site, they can have them delivered in bulk to their own facilities for distributing to the final recipients. Under NGC’s full-service option, clients can load the list of names and addresses of the final card recipients on NGC’s web site. As NGC receives orders for plastic gift cards, it uses its own software and machinery to print “carriers,” or paper sheets to which it can attach up to four cards (each card usually from a different merchant), and stuff them into envelopes addressed to each recipient—or each employee, customer or business partner for whom the NGC client company purchased the cards.

NGC distributes electronic gift cards for its clients via e-mailed codes that recipients can either print out for use in a physical store or enter on a merchant’s e-commerce site. Through its own e-commerce site, its clients can sign up for NGC’s Gift Card API program, which enables clients to set up a direct software connection with merchants for instant delivery of e-gift cards through loyalty and marketing programs. Although companies can usually set up API connections directly with merchants, NGC serves as a central marketplace where companies can go through a single source to connect with multiple merchants, Thiegs says. API stands for application programming interface, which is a set of software instructions for transferring information among software applications.

NGC executives note that the gift card industry keeps evolving. Some merchants, including Starbucks and The Home Depot Inc., have in-store point-of-sale counters where store employees can scan an electronic gift card code off of a customer’s smartphone screen.

“Over the past 10 years we have seen this industry go from paper certificates, to plastic cards, to e-codes and now to mobile delivery,” says NGC CEO Adam Van Witzenburg.

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