Here is a blog post showing some new dual purpose gift cards; one glows, one is a remote control car, one is a USB key, one is an MP3 player, and one is a digital camera. Is this really what will drive people to buy gift cards, or are stores just desperate?
To keep abreast of new information related to gift cards one of the tools I use is Google Alerts which monitors news articles and blog postings for keywords. The last month or two, a majority of the articles I have come across have been negative towards gift cards in one way or another, either related to gift card sales going down, the “pitfalls” of gift cards – the fees, expiration dates, and bankruptcies.
Is it possible this represents a new trend in gift cards that is unrelated to the recessionary decline in general? It isn’t like there hasn’t been ample information about the negatives of gift cards, and yet consumers have shown little regard for this. Is the amount of information now being put in consumers faces enough to sour them on gift cards. This will be interesting to watch.
Someone did a survey where they asked people if they preferred gift cards vs. other gifts, such as DVD’s. The very not surprising results were that people preferred gift cards. Perhaps a better survey would be to ask people if they preferred gift cards or cash. My prediction: 99% of people would take the cash.
I’m scratching my head about this one. Do people really want gift cards that double as toys? Will it get people to buy gift cards that otherwise might not?
The latest Tower Group report on gift card sales has some interesting numbers of open-loop vs. closed-loop gift cards. According to their research, open-loop will be half of closed-loop for 2009, at $29 billion and $58 billion respectively. I had thought open-loop gift cards were nearing about the same sales as closed-loop.
In a two-part interview (part one, part two), a spokesperson from the Blackhawk Network, a division of Safeway that operates the Gift Card Mall service found in Safeway and other locations, has some interesting prognostications for gift cards this holiday season. Going along with other industry insiders, they predict growing sales for gift cards, whereas every independent survey (such as from The Tower Group and Archstone Consulting) predicts declining gift card sales. They also are touting new consumer behavior, such as people purchasing store gift cards over time to save up for a big purchase, instead of just putting money in the bank.
I think they are drinking to much of the company Kool-aid. These predictions sound more like fantasies. In difficult economic times, people tend to make smarter choices, and not buying gift cards, especially the kind with high fees, is among those smarter choices. There is just too much information being presented in the mainstream media for customers to ignore the fees any more. And worries about the health of retailers will surely keep consumers from treating a retailer like a bank for fear of losing all if the business goes into bankruptcy.
The Tower Group expects gift card sales to drop 7% from last years sales, which are down from 2008 levels. Even the National Retail Federation reports that gift card spending will drop this holiday season. Most commonly cited reason: gift cards are too impersonal.
And the Wall Street Journal and Time Magazine (among many others) feature articles (WSJ, Time) that advocate giving cash instead of gift cards. Have gift cards peaked? Are consumes getting smarter?
Strangely though, Canadians seem to be giving more gift cards than ever.
Consumers Union released their annual reminder list of gift card gotchas.
The Fed announced its new proposed rules for Gift Cards from the responsibility given to it by the Credit Card Accountability Act of 2009. The major change from rules on gift cards previously discussed is that rather than allowing monthly fees after 12 months, they will require that no fees be charged until 12 months of inactivity have passed. That won’t matter for people who receive a card and put it in a drawer.
The other interesting proposal is regarding the expiration of a gift card and the expiration date printed on the card, as it is with almost all open-loop (Visa-type) gift cards. In some states, these cards often have expiration dates that is before they are legally allowed to expire. The new rules include two proposals, one that would require the expiration date on the card to be at least 5 years out from the purchase of the card, and the other to allow for a shorter expiration date to be printed on the card but to allow consumers to receive a new card at no cost. It seems that it is up to Congress to suggest which proposal should be adopted
Here is a handy guide that compares gift cards on fees and other things.
Two women Pennsylvania agreed to walk around in public carrying sandwich boards that announced that they had stolen from a 9-year old after stealing the little girls gift cards, in exchange for no jail time. Perhaps if they made Postal employees do this when they were caught stealing gift cards …
I recently came across a story about an IRS employee arrested for stealing gift cards from the mail being delivered to the IRS facility where he worked. Apparently stealing gift cards from the mail isn’t limited to Postal employees. Now you have to work about the workers in the mail room at your business.
If you send gift cards by mail, some simple precautions will make them more likely to arrive.
Don’t put them inside a holiday card. Thieves look specifically for holiday cards and can feel the shape of the gift card inside. Instead, ship them in a box, a padded envelope (to make it look like something other than a holiday card), or a larger manila envelope (so it won’t look like a holiday card). If you can feel the gift card in the packaging, so can someone else.
If you do mail it along with a holiday card, make sure the envelope is sealed properly and the contents inside aren’t too loose. If they are, the Post Office’s automatic sorting machines may shred the envelope.
Buy Postal Service insurance to protect the gift card. To insure an item up to $50, it costs $1.75. Up to $100 costs $2.25. You get the idea.
I’ve come across two surveys recently that predict different results for gift card spending this holiday season.
The first survey, from Archstone Consulting Group predicts flat sales to sales dropping by 5%, which seems like a logical conclusion given the state of the economy. This is similar to what they predicted last year and they were right.
The second survey, from Givex, predicts that gift card spending will rise.
So who is right? Given that Givex is in the gift card businesss (they supply the infrastructure for gift cards), their results sound more like a press release. Archstone is a consulting company that serves many industries and seems like a less biased entity.
I suspect the Archstone’s predictions are more likely.
Western Union just announced a new prepaid debit/gift card, but I think they missed the real feature that Western Union as an organization could offer. Hardly a week goes by that I don’t hear about a Postal Service employee getting caught stealing gift cards from the mail. The mail is clearly an insecure way to send gift cards and when you do send them via USPS, you take your chances. You can purchase the Western Union gift cards online and have them sent to the recipient Fedex Overnight, second day, or regular First Class mail. Western Union’s real strength is the number of locations – about 345,000 agent locations worldwide. If Western Union allowed you to send the gift card to the recipients nearest agent location, that would skirt the mail safety issue and would be a significant value-add for a gift card that is otherwise indistinguishable from the rest of the pack.
Update 4/13/10: They apparently have a new promotion that offers free shipping through First Class Mail for their gift cards.
The Consumer Federation of America has put out a gift card advocacy brochure to help consumers better understand gift cards.
GiftCards.com has jumped on the no-fee band wagon and now offers Visa gift cards with no expiration or maintenance fees. As far as I can tell, this applies to all the fees they previously had, including the monthly administrative fees, fee to close an account, fee to replace a lost or stolen card, balance inquiry fee, etc.
As these survey results seem to indicate, consumers don’t really understand the true costs or fees associated with open-loop (Visa/MasterCard) gift cards. Probably the most understated result is the question where 17 percent said they had trouble spending the remaining amount on their card because a merchant refused to split the transaction across multiple payment types. What is missing is the fact that the other 83 percent of people never had a problem BECAUSE THEY DIDN’T EVEN KNOW YOU COULD DO THIS! :)
This story about gift card thieves is both amusing and educational. On the amusing side, the thieves were caught because Toys-R-Us officials became suspicious when 4,600 calls to the automated gift-card balance line came from a single phone number at the thieves house, which ultimately resulted in thieves being arrested.
On the educational side, it reminds us that closed-loop (Target, Toys-R-Us, Borders) gift cards are generally not safe because the numbers are not protected from view (or swiping) as open-loop cards are, in protective packaging. This makes it very easy for thieves to copy the numbers. They then monitor the card using the card’s support line or at the retailers website to check when it is actived. When it is activated, they encode the newly activated cards number onto a phony gift card and go spend all the money on the card. When the customer tries to use the card, it is drained of all value.
Even worse, hackers are starting to target gift card websites (such as described in this story), for instance, using brute-force to check number after number until they find one that is valid and clone a card to match it. That could be your card.
To protect yourself, check your cards value immediately after you buy it and then a few days later. If thieves are going to steal your cards value, it will typically be very shortly after you purchase it. Continue to check the balance regularly and spend than as soon as possible. As soon as you notice some abnormalities, report this to the store where you purchased your card and ask for a replacement.
As reported in this story, and increasing trend is to give consumers gift cards instead of rebate checks for mail-in rebates. The retailer wins twice because (a) only about 40% of mail-in rebates are ever mailed in, and (b) most people don’t use up the full value of their gift cards; normally 10% of the value on gift cards is left on the table.
As States started to realize that unclaimed gift cards were enriching companies bottom lines, many if not most of them passed laws that allowed them to drag that money into their own coffers via unclaimed property laws. Colorado has tried to legitimizes their efforts by allowing people to get that money back by looking up their gift card on the State’s unclaimed property website. (article)
Of the $13 million Colorado recently pulled in in unclaimed gift card dollars, our expectation is that people will claim less than 0.1%. The great legislators and administrators of Colorado must undoubtedly realize this.
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