The Gift Card: Who Is Benefiting?

Have you ever given a gift card as a present to a friend or loved one? At one time or another many of us have. With most large businesses replacing gift certificates (those pieces of paper in the shape of paper money) with gift cards (plastic cards shaped like a credit card) consumers have increasingly become accustomed to purchasing them as gift ideas for Christmas or birthdays. But to whose advantage is a gift card purchase, the retailer, or the consumer?

Albeit to the purchaser of a gift card it comes as a relief in many situations. No longer do you have to worry or fret about what to buy that person on your gift list. He likes electronics, purchase a gift card from Best Buy or Future Shop; she likes clothing, give her a gift card from the Gap or Tommy Hilfiger. No need to stress over whether they will like your purchase and no need to bother keeping receipts in case a return is needed. What could be simpler?

But before you run out to your local retailing giant with cash in hand, you might want to think about what you are actually doing. Perhaps you might want to answer a simple question first: Would you walk into a Walmart or Loblaws and give a cashier 25 dollars to put in her till and leave the store without any purchases for the money? Probably not. But that is exactly what your are doing when you buy a 100 dollar gift card from a major retailer. Why is this? According to most consumer groups gift cards are redeemed only for a fraction of their total worth by consumers. The range varies from 15 to 40 per cent depending on industry and which group has done the research.

What concerns many in consumer advocacy groups is not these two disadvantages but another behaviour that has appeared with the use of gift cards. When entering an establihment with a gift card, consumers tend to ignore the pricing of items. They are not the wary shopper looking for the best value for their consumer dollar as the card is not money earned from their own labour. Foregoing scrutiny of pricing leads to the retailer becoming less conscience of lower prices for their goods. This leads to an overall increase in pricing industry wide as more and more purchases are transacted with gift cards. With many retailers now having more than half of their sales from gift cards, it bodes unwell for the average consumer and their monthly budgets.

The Consumers' Association of Canada's president, Bruce Cran, estimates that about one in four gift cards goes unredeemed. Consumer Reports magazine cited its own survey that estimated 27 per cent of gift cards from 2007 were not cashed in. Gift card providers such as Vantage Card Services out of Woodstock, GA state on their website that "33% of total value [of a gift card] is never used, or redeemed by the user." It seems that the people who benefit the most from gift card purchases is the retailer. It's no wonder that over 80 percent of large retailers (according to Stats Canada) offer gift cards. Why not, it's free money?

Gift Card - Page 2

Article by:
FS Staff

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