How Have Vouchers Affected E-commerce?

by Alex Smith

Vouchers used to be something that you spent in your local bookshop or high street clothes store. Mostly reserved for Christmases and birthdays, they certainly felt more of the exception than the norm. So how is it that vouchers have so quickly become an essential part of the online shopping experience for so many consumers?

Firstly, the meaning of ‘voucher’ has been transformed from essentially a store-specific money system to also include a discount coupon or code. Many people use the term interchangeably now, provoking slight confusion for the SEOs out there — when someone searches for John Lewis voucher, do they want a money off code for the online store or to buy a gift voucher for someone else?

Statistics for UK online shopping from January 2011 show that almost 40% of consumers regularly use vouchers when purchasing over the net. These vouchers are most commonly used to get discounts on food shopping and eating out at restaurants, followed by fashion purchases and then holiday bookings.

The voucher code phenomenon really took off online in the UK when Threshers released a special voucher for staff and suppliers in 2006. The email went viral and, although Threshers denied that this was the intended effect, it became a classic in the development of the internet. No doubt other retailers had run voucher code promotions before this time but the Threshers moment really highlighted the effectiveness of vouchers (and email marketing) to those working in e-commerce.

Of course, voucher codes had been around online for many years before this but this one development was the beginning of a significant increase in the amount of people associating vouchers with the internet. This growth has continued in recent years, buoyed by the recession that has affected many countries around the world. When consumers’ wallets and purses are no longer bulging, as they were during the boom years, discount vouchers become an attractive prospect.

So how has the e-commerce world reacted to this natural interest in discount vouchers? It is not necessarily healthy for profits to have consumers associate your brand too closely with vouchers, unless discounting is part of the central offering of your business. However, on the whole a purchase is better than no purchase so many brands have felt that it is better to offer codes in order to keep their customers loyal and driving revenue throughout the recession.

But what affect will this trend have in the long term? The research mentioned earlier found that 83% of its respondents would make fewer purchases online if voucher codes were not available. But given the source of the research is a voucher code site, it is possible that this figure is artificially high because of the interests of the participants.

It would be interesting to run a test to see whether conversion rates increase with a code for, say, free delivery, compared with giving this automatically with every order. I suspect that discount codes would win as this would fuel promotions by affiliates and also consumers would not tend to go looking for a second discount code (whereas they may try to seek a code out if the free delivery was automatically applied).

Have you tested this with your customer base? How have discount codes affected your business? Please leave comments below!

Alex Smith, the author of this article, writes about gift vouchers and spa deals as well as all things internet marketing.