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The gift that keeps on growing (McHenry County Business Journal)

Getting on the Inc. 5000 list of the fastest-growing companies in the United States is one thing. Being ranked in the top 25 percent of that list is quite another.

But National Gift Card has another much more important goal in mind: Recruiting your business as a customer.

“Everybody buys from us,” said company founder and Chief Executive Officer Douglas Wheeler. “We’re the Wal-Mart of gift cards.”

Revenues are expected to top $100 million this year, NGC President Adam Van Witzenburg said, a tenfold increase from five years. He said the company has averaged between 20 and 40 percent growth a year during that time – thanks to innovations. It was the first gift-card reseller to offer VISA gift cards at a discount without the activation fees and upcharges. It offers full service – from sale to delivery. And it has embraced “open-loop” cards – Visa, Discover, American Express – vs. closed-loop varieties only good at one store.

“We do about 60 percent closed loop and 40 percent open loop. Two years ago we had nearly zero open loop, less than 1 or 2 percent,” Van Witzenburg said. “We went into that against our will, but our customers kept asking for it. Finally, about two years ago, it became available. Now the open-loop cards have redefined the industry and have really found a niche there.”

NGC has grown from six retailers in a fold to offering more than 175 major retail, restaurant and prepaid cards which it resells to businesses for use as promotions, reward programs and customer gifts. NGC buys the gift cards in large quantities from providers, picking up a discount along the way, and charges a small service fee to its clients in the transaction. The fundraising segment used by schools, churches and other nonprofits, dubbed “scrip,” represented the majority of the company’s business five years ago. But that is shifting more and more toward a business-to-business model.

“We are a very high volume, low margin business, so everybody has to do everything, from myself down to the newest hire,” Van Witzenburg said. “Everybody is interacting with customers every day, and we are in sort of a commoditized business at times, and service really is what has helped us maintain and grow.”

The company, created in 2004, initially focused on retailers such as Target and restaurants such as Burger King. But the company’s focus broadened recently to include digital gift cards – delivered through its secure NGCecodess program, which allows gift card customers to order and deliver digital gift cards via e-mail directly to recipients. It also has entered the delivery aspect of the business, which is growing by triple digits every year.

“Three years ago we’d throw all the cards, perhaps 40 in a box, and sent them to a customer. Now they send us the addresses and we actually fulfill those orders for our customers, “ Van Witzenburg said. “NGC handles whole thing, from nuts to bolts – marketing sales and fulfillment. Where many of our competitors just do sales or just do fulfillment, we do all three.”

Van Witzenburg, 41, of Crystal Lake, was promoted to president in June 2009. He was the company’s third employee in 2004. By Christmas 2009 they were up to nine and in March they added four more to reach 28 employees. He credited the fulfillment business and pro-active bent that now has it positioning itself in other markets. NGC has sales offices in Florida, Colorado and California.

“We have an incredible team here. The industry here has taken us places we didn’t know existed. Many of our customers buy from us multiple times a week,” Van Witzenburg said. “It’s a really strange industry. We buy from our fiercest competitors and they buy from us, out of necessity because of the retail partners we might have.”

The nation’s fascination with green products is increasing. But technology still must catch up to customers’ wishes for a gift card delivery system capable of accessing smart phones and personal digital assistants. A mobile platform is needed that will enable the myriad of hand-held electronic devices to understand access codes.

“It will not be in our world anytime soon,” he said. “Problems are how to send it. There are 50 different browsers for iPhone and Blackberry.”

Other hurdles include navigating the legislative rules on how individual states treat gift cards, monitoring the fiscal health of retailers to ensure that recipients are buying value and publicizing NGC’s capabilities. This is not like buying cards off the rack at the corner store.

“It’s really a me-too industry that where mimic each other in may ways. The biggest asset we have and the biggest reason that we garner the business that we do is we are flexible,” Van Witzenburg. “We have some competitors that are much bigger than we are, but our staff is capable enough that we can turn on the dime.”

McHenry County Business Journal
Article Date: Thursday, March 31, 2011
By Kurt Begalka

Copyright © 2011 Business Journal. All rights reserved.
Published in Crystal Lake, Illinois, USA, by Shaw Suburban Media.

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