The Giving Economy: How Consumers Are Paying It Forward to Retailers

The Giving Economy: How Consumers Are Paying It Forward to Retailers

Retailers have been giving back to their customers and communities by sending products to frontline workers or ensuring their communities remain safe at home. Now, customers can return the support to support their favorite businesses. 

In response to some brands at risk of closing permanently, customers are choosing to directly support them, starting what we’re calling “the giving economy”. The giving economy is a movement of consumer generosity, and it appears in a couple of forms: direct tips to retailers or gift cards, ensuring cash is still going into the business, and using those cards for later. 

Here, we unpack what the giving economy is, the shift in buying behavior, and the tools available for brands to use. 

Why the giving economy matters

Many retailers, small or big, face an unprecedented battle by having to close during the pandemic. On average, retailers only have about 19 days of buffer money to keep them afloat. 

This remarkable essay by Gabrielle Hamilton in The New York Times, detailing the closure of her decades-open restaurant Prune, provides insight into her emotional decision to shutter the business. Former customers calling up Prune on its last night open in March to place orders they’ll never get signals both how important physical spaces are to communities, and how support does not and will not occur in isolation.

The story of struggle is becoming more common. For many businesses around the world, closures of physical stores or hiatuses on certain practices have extended to months, further depleting their capacity to run their businesses as normal. The strain the pandemic puts on them further risks permanent closure. 

How customers are supporting brands

In the earliest days of the pandemic, many businesses shifted online or made their online stores their primary means of business. It served as a way for customers to still shop and provide revenue for the brand.

Still, businesses have had to keep up with the fast-paced shift from in-person to online buying: 52% of Canadians, for example, are likelier to buy online, including essential goods with 10% more likely to expand their buying to groceries. Americans increased their food and beverage purchases by nearly 26% and even general merchandise stores increased by 6%. We are seeing that customers are more open to new technologies and ways of purchasing, such as self-checkout, contactless local delivery, local pickup, robotics, and virtual reality

Gift cards 

One way customers have been supporting brands is through the purchase of gift cards. Gift card purchases, which have steadily increased during this time, go a long way to help keep businesses afloat. At Shopify, we’ve seen more $13 million worth of gift cards sold from March 1 to April 20. The number of shops selling a gift card for the first time has reached an all-time high since the launch of gift cards on March 20, and this peak has been sustained above Black Friday Cyber Monday (BFCM-)levels since. Customers purchasing gift cards from their favorite brands let them put revenue back into the business and preserve the amount of the gift card for a future date for in-store or online purchases.

Plus, Instagram recently announced the addition of its new gift card, food order, and fundraiser tools for businesses to help generate income during the ongoing crisis.

Tipping

Another way buyers are supporting brands is through tipping. According to The Hustle, some service workers in Indianapolis built a “virtual tip jar” by compiling and circulating a spreadsheet of their Venmo to enable customers to tip servers, bartenders, and kitchen staff, to name a few. Tipping, like how we’ve long been doing it in restaurants and driving services, is a lot like the crowdfunding that happens on Kickstarter or a similar platform. Today, we’re seeing businesses offer an option for their customers to leave a tip through their online checkout.

tipping example on nomad

On Shopify, we’re seeing shoppers tip their retailers $15 on average.

It’s important to note that some customers were the ones who began asking businesses if they had a tipping option as a way to reinforce loyalty to their favorite brands. 

Where the giving economy exists

Depending on the retailer and the market segment, tipping might be a new source of income for a retailer or its employees. Tipping intuitively exists in the online sphere. 

Every customer-service oriented segment has the ability to gain so much support from their community through tipping and gift cards. 

Food

The largest market segment to ask for and benefit from tipping is the food industry. The majority of customers are already familiar with this process when they are going out to restaurants or getting takeaway. For customers, adding a tip to a meal order is like muscle memory, it’s simply like adding it in person. For food delivery services, in the same way, that rideshare services like Uber or Lyft asked for a tip at the end of a ride; restaurant delivery services like UberEats or Postmates likewise have this option for deliverers. Tipping is also available on the Starbucks app: Mobile orders on the Starbucks app even let customers add a tip up to two hours after their purchase.

Food and beverage retailers on Shopify have seen the most in terms of tipping, and this isn’t restricted to familiar, household name brands. While big food retailers or franchises have always had this option, smaller or direct-to-consumer brands are using tipping or gift cards as additional revenue streams. 

Apparel

The apparel industry is taking a bit of a dive during this period. For example, during the month of March alone, apparel retail sales plummeted by 50%, according to Retail Dive. This is set to continue, as many people have stayed in their homes, and don’t necessarily need a selection of outfits for different occasions outside. Experts are concerned that staple physical retail spaces like malls will become obsolete after the pandemic. Still, customers are giving back. Customers are encouraged to support their favorite clothing and shoe brands through gift cards. Apparel brands are the newest to the giving economy; tipping isn’t common practice here, nor has it been expected.

Clothing brand Everlane introduced the “choose what you pay” sale, which allowed customers to select one of three percentages for the sale price, and how much they want to spend overall. The giving economy in the apparel industry works to create price transparency for the business (and ultimately build brand loyalty), while also giving the customer a deal. 

Beauty

Gift cards are likely to pop here, too, like Toronto-based nail salon, Naked Beauty Bar. Pre-selected manicure or pedicure pack bundles are also available for purchase to use at a later date in-store. 

In the beauty realm, tipping is often common practice—it goes toward customers’ aestheticians or stylists. Nail artists and stylists, hairstylists, and so many more rely on tips as part of their income in the same way servers or baristas do in restaurants or coffee shops. 

Charity

For brands outside of the food and beverage market, these tips may end up becoming a charitable loop: customers add a tip, a retailer collects the profits and donates them to a charity or cause of their choosing. In Shopify, brands can easily customize what text appears in the tipping box, so customers know which organization they’re supporting.

What can brands do? 

Shopify is giving retailers a way for its customers to give back to the brand. With local businesses having to move online, and even stay that way well past the COVID-19 era, tipping directly to a brand allows customers to further express appreciation monetarily if they have the means to. 

The tipping option is available for a customer during checkout. Buyers will have the option to tip a percentage of their order total or a custom amount on the payment page of checkout. It is not available after a purchase has been completed. 

This capability was designed to be simple and efficient to help retailers raise money for whatever will help during this extraordinary moment. Three percentages will be suggested for the customer to choose from. 

There is a remarkable sense of resilience and responsibility by both brand operators and their buyers that the risk of losing business to the pandemic may have ripple effects within a community. The giving economy exists in part to give back to those brands, those experiences, and memories, that have filtered through the customer’s buying journey.