I got interested in the Secondary Gift Card market in 2003 after reading about Swapagift.com when they first launched. The Secondary Gift Card market is the ‘buying and selling of unwanted gift cards’. I thought the idea was a good one. Basically, if a user has a gift card they do not want – they could swap it with someone whom has a gift card that they do want. Ironically, at the same time I just bought GiftCards.com and was thinking of services to add to the site. This was one of the ideas I thought about. The gift card industry grew, in fact gift cards are the #1 gift since 2007 (1). I ended up buying Swapagift.com in 2008 from MJ and Mike Kelly. That year gift card sales were about $91B (3) and unredeemed gift card values about $9 billion. I figured anyone can get a gift card at Wal-mart and there was no reason for them to go to GiftCards.com, but if they can go to GiftCards.com and buy a discounted gift card – it would be worth the time. The market has grown and in 2011 it was the largest since 2007 (2). Merchants were initially resistant to letting websites offer the buying and selling of their gift cards on the Secondary Market.
Here are some facts about the Secondary Gift Card market:
- Unused Gift Cards in circulation are being sold in secondary “open” markets like eBay and Craig’s List, along with many other sites like swapagift.com, plasticjungle.com, cardpool.com, and others.
- 10% of all gift cards purchased in 2007 went unused.
- Industry wide average of 14-22% unspent value is left on gift cards (Nilson Report) and is between $5 Billion to $8 Billion annually.
- Wal-Mart is estimated to have close to $1 billion of unused gift cards in circulation.
- 61% of gift card holders spend more than the gifted amount and 75% of gift card shoppers spend 60% more than the value of the card.
- Purchases made with a gift card are typically between 20% and 50% higher than the average purchase price.
- 96% of secondary card buyers use the gift card themselves.
(Sources: Nilson Report, Tower Group, Dan Horn, and NewBold Corporation)
If Merchants permit the Secondary Gift card market to exist, and they support it some benefits are:
- Positive Perception of Consumer Groups by allowing cardholders to trade in unwanted gift cards.
- Sale on other web sites (EBay, etc..) are occurring anyway… we give you visibility, information and control into secondary market
- Escheatment – Remove the liability, cost and remove from your books-Liabilities into revenue
- Removes the administrative tasks associated with tracking and reporting the liability.
- Stronger balance sheet leads to improved credit rankings, lower borrowing costs, etc.
- We acquire customers for you at no cost to you.
- More stable, predictable earnings management