Richard Gottlieb

The Gift Card Conundrum

January is the big month for gift card redemption so I became intrigued when I saw this tidbit in a December 20 Seattle Times article: “According to Consumer Reports, more than a quarter of gift-card recipients don't use all of them. About $8 billion went unredeemed last year, TowerGroup estimates, which was almost 10 percent of the amount given.”

That’s great news for retailers. 

That’s bad news for manufacturers.

Why?  It’s because when manufacturers read the figures for holiday retail purchases, they need to factor out $8 billion dollars that will never make its way to them. 

Think about it.  Someone buys a gift card and the recipient fails to use it.  That means that it was never exchanged for a product.  If not exchanged for a product, the retailer banks the money as 100% profit because it was never turned into merchandise.  If not turned into merchandise then a manufacturer never gets their share of those dollars.

So, what can be done?  Here are a few ideas:

• Manufacturers can market in January with a focus on gift card redemption. 
• Manufacturers can add gift cards to existing products, charge more, but not as much as the value of the gift card, and then count on a certain percentage never being redeemed.
• Manufacturers can focus in on selling their own gift cards directly to the consumer via the Internet.

What are your thoughts?

Posted by Richard Gottlieb on December 26, 2007 | Comments (1)