By Will Hernandez

Attempting to take advantage of the growing popularity of print-at-home coupons and airline tickets, CashStar Inc. is offering consumers the ability to print or e-mail customized gift cards purchased from a retailer's Web site.

Whether the concept will take off may depend on a large retailer taking a chance with paper-based gift cards and on CashStar's ability to prove its product is flawless, says one industry observer.

"If they can do that, it has the potential to change the market," Daniel Horne, associate professor of marketing at Providence (R.I.) College, tells ATM&Debit News.

Uno Chicago Grill, Travelocity Incentives and Gorham Bike & Ski started using CashStar's program last year. Portland, Maine-based Cashstar is focused on signing up large retailers and restaurants during the next 12 months, according to CEO David Stone.

Consumers can purchase an electronic gift card by visiting a participating retailer's Web site. CashStar's platform enables consumers to customize the look of the gift cards with personal messages and pictures, Stone says.

"You're allowing a personal interaction between the purchaser and the recipient that you don't get with plastic cards," Stone says. CashStar is using Coupon.com's barcode technology for its gift cards. Recipients can print the barcoded gift card, which the cashier would scan to redeem its value.

Though CashStar's method offers convenience, changing consumers' concept of what a gift card is will be challenging, says Brian Riley, research director of bankcards at Needham, Mass.-based TowerGroup, an independent research firm owned by MasterCard Advisors. "Quite often, gift cards are impulse items consumers like to buy when they visit a store," Riley says.

Retailers also want the foot traffic because "hopefully they will buy something else on the way out" after purchasing a gift card, Riley adds.

CashStar faces challenges from such other third-party providers of prepaid gift cards as Blackhawk Network and InComm Inc. because they have brought gift cards closer to consumers through display racks at local supermarkets, Horne says. Consumers are bombarded with so many options at the check-out lane it leads them think, "this is a gift I'm going to give," he adds.

But CashStar's early success with electronic gift cards indicates consumers are ready for more-convenient gift card options.

Uno Chicago Grill more than doubled gift card sales through its Web site during the last two weeks of December, according to Rick Hendrie, senior vice president of marketing for the restaurant chain. "Our partnership with CashStar is all about giving convenience to the customers," Hendrie tells ATM&Debit News.

Such partnerships may help CashStar find some niche markets in which its system will be more successful, Riley says. Teenagers leaving home and going away to college is one such niche market. Purchasing an electronic gift card for a pizza gives parents a simple way to help their teenagers, Riley says.

CashStar plans to add options to its platform, including retailer incentives and loyalty rewards. The company did a promotion with Travelocity Incentives during which the online travel agency sold one-time use $50 and $100 gift cards for half the price, Stone says. "[The system] will allow retailers to layer on offers and promotions to the purchaser and the recipient," he adds.

CashStar wants to partner with up to four large retailers before Mother's Day, Father's Day and the rush of student graduations that happen before the summer, Stone says. Several retailers also are exploring using the incentive platform for the back-to-school season, he adds.

Teri Llach, group vice president of Blackhawk Network, was not aware of CashStar's intentions until recently but says the concept has potential if it meets a consumer need. The company operates giftcardmall.com where consumers can personalize cards and have the plastic mailed to recipients.

Consumers still want to give a physical card, Llach believes. "I'm not sure if today [electronic gift cards] will replace [plastic], but we have to look at all these options," she says. ATM

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