OLD Media Moves

A great post-Christmas story

December 29, 2005

Yes, I am about to gag on all of the post-Christmas shopping stories that talk about the crowds on Dec. 26 and how retailers are trying to cut prices to entice customers. I think I have read the exact same story 100 times in the past 10 years.

Looking for a different way to write about post-Christmas retailing? How about this:

In total, an estimated $56B will be spent on gift cards in 2005. Retailers love the concept of gift cards because it simplifies the gift-giving process for some consumers and because they know that not all cards will be redeemed for their full amount. According to a recent study by the TowerGroup, 8.5% of the value of gift cards go unredeemed, accounting for approximately $4.8B each year.

If a person received a gift card this Christmas and do not think they will end up using it, there is hope. Several new web sites have popped up to help people monetize unwanted gift cards. Some analysts estimate the value of this secondary market in gift cards to be worth $1.5B and the end of the year is the best time of year to find good bargains on second hand cards. Each of the exchanges has its own set of rules, but most require a small registration fee, a transaction fee or both. On most sites you can find cards selling at a 10-15% discount to its face value. The discount can vary dramatically depending on where the gift card can be redeemed.

This story can be written in one of two ways. One is the profit retailers are making selling gift cards. And two is the secondary market.

As for myself, I’m sitting here with about $24 remaining on an American Express gift card that my mother in law gave me. I spent the rest of the card on books on Amazon.com — what I told her I really wanted for Christmas. But I hate American Express gift cards because they are so hard to redeem. Restaurants won’t take them, and neither will bars. And a lot of retailers just take MasterCard and VISA.

Another one I hate is when my kids get gift cards for retailers where they don’t shop. I told my older son to Target today with a $50 gift card he got for Christmas, and about halfway through the shopping trip, he turned around and asked if he could turn in the gift card and get the money and go somewhere else. When I explained to him that that’s not how gift cards work, I think he ended up buying a GameCube game he really didn’t want just to spend the money. And I’m betting the remaining $13 on the card doesn’t ever get used. So maybe I’m checking out one of those secondary gift card web sites.

Gift cards are a major deal now at Christmas, but I don’t think I’ve seen any business publication or business section of a newspaper cover this story. And that’s a shame.

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