The fierce competition in the product market has enriched and deepened sales promotion. At the same time, free gift cards as an important promotional tool has recently been used and favored by many retailers. In this paper, the design of the optimal strategy of free gift cards for the retailer in retailer-dominated supply chain is studied. A decentralized supply chain is constructed including a single retailer and a single manufacturer, in which the retailer is a leader and the manufacturer is a follower. In this system, two Stackelberg-game models of supply chain with no gift cards and with gift cards are developed. By comparing the results of these two models, the optimal strategies of free gift cards for the supply chain are obtained. Further, the impacts of the parameters on the optimal strategies and relevant profits are discussed. It is shown that free gift cards promotion increases the expected profits of the retailer, the manufacturer, and the whole supply chain. When offering free gift cards, the retailer will increase the retail price and profit margin of promotion product, and the manufacturer will also increase the wholesale price. Moreover, when the maximal threshold value of gift cards from customer perception increases, the optimal gift cards value, the optimal profit margin, the optimal retail price, and the optimal wholesale price are increasing. When the average gross margin of redemption product increases, the optimal value of gift cards, the optimal profit margin, the optimal retail price, and the optimal wholesale price are increasing.
