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The Case for Gift Card Exchange

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Pay Op-Ed | August 2014 | www.paybefore.com
In Viewpoints, prepaid and emerging payment professionals share their
perspectives on the industry. Paybefore endeavors to present many
points of view to offer readers new insights and information. The opinions
expressed in Viewpoints are not necessarily those of Paybefore.
The Case for Gift Card Exchange
By Tammy Durston, Blackhawk Network
M
ost U.S. consumers have a few gift
cards tucked away in a kitchen
drawer, wallet or at the bottom of a purse.
These gift cards might be usable in stores
that are geographically too far or at
retailers that just don’t appeal to the gift
card recipient. In the past, unspent cards
simply languished in those drawers,
wallets or purses—never to be redeemed.
But now, there’s an option for getting the
value of that gift card, through exchanges
where you can swap your unspent gift
card for another or even for cash.
Gift card exchange is a win-win for
everyone, from the consumer to the gift
card retailer.
Why Are Gift Cards So Popular?
Before focusing on gift card exchanges,
let’s get back to the basics: Why are gift
cards so popular? According to a study
conducted by Blackhawk Network in 2014:
• Gift cards are good for receivers.
Gift cards have been one of the most
driver of gift card purchases, with 79
requested holiday gifts for the last several
percent of gift card buyers citing this as
years, including the number one requestthe reason for selecting this option over
ed gift last year according a study released
gifts. Sixty percent of
by the National Retail
respondents said they
Federation (NRF). In a
Gift card exchange is a simply prefer to give gift
recent national study
cards over other gifts.
of the psychological
win-win
for
everyone,
Shoppers also reported
motivations of gift card
that third-party gift card
buyers and receivers, in
from the consumer to
malls help them in this
which more than 2,500
the gift card retailer.
process, with 75 percent
respondents were
of those surveyed saying
surveyed, 85 percent of
it’s easier to buy gift cards as gifts because
gift card recipients said they used that
they’re sold in many places where they
card to treat themselves to items they
shop regularly, like grocery stores.
wouldn’t normally purchase; while 67
• Gift cards are good for retailers.
percent said they prefer gift cards over
When shoppers redeem gift cards in a
other gifts.
store, they’re generating incremental
• Gift cards are good for givers. Gift
traffic for the retailer. In addition, gift
givers want receivers to be happy, and gift
cardholders often spend more than the
givers know gift cards are universally
amount of the original gift card. In the
appreciated. Eighty-eight percent of gift
survey, 59 percent of gift card users stated
card buyers said they think most people
that this was the case.
enjoy receiving gift cards so they can pick
Unspent gift cards are no good for
the gift they want. Convenience is another
anyone. Getting the right gift card into
the right hands is good for everyone.
Tammy Durston is senior director of research and analysis at Blackhawk Network, a Pleasanton, Calif.-based provider of prepaid and
financial payments products. Her research helps guide Blackhawk’s
strategy for its diverse product lines and geographies. She can be
reached at tammy.durston@bhnetwork.com.
Tammy Durston
The Exchange Model for Gift Cards
An estimated 63 percent of U.S. consumers purchased a gift card in the past year
(BHN Gift Card Segmentation Study,
2014). With this level of prevalence, it’s
only natural that a secondary market has
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prepaid. mobile. emerging payments.
The Case for Gift Card Exchange cont.
emerged. This is similar to the rise of
secondary markets for other established
product categories, such as tickets.
Stubhub, the first to create a secondary
ticketing sponsorship category, is a good
example of how well an exchange model
works. Now, even sporting brands, like
the NFL, work directly with Stubhub.
But how does this model work for
gift cards?
You might have received a pile of gift
cards for different stores as wedding gifts,
but none help you get the couch you really
need. Alternatively, you might have
received a gift card for a store at which
you’d never consider shopping, or you
might really want an item that’s not
available at the store for which you have a
gift card.
The ability to exchange a gift card can
solve these problems and more. However
since “used” gift cards are basically loaded
with cash and ready to go, buying one
from a private seller can be risky. A formal
gift card exchange site offers a safe,
legitimate alternative for secondary-market gift card shoppers and eliminates the
chance you may be purchasing a fraudulent card.
Blackhawk Network’s subsidiary,
Cardpool, is one such gift card exchange.
Cardpool brings buyers and sellers
together in one secure place and helps
everyone get exactly what he or she wants.
With Cardpool, you can exchange your
unspent gift card balances for a different
gift card or even for cash.
In a Blackhawk survey of 715 Cardpool
customers conducted in April 2014, 58
percent of respondents said they expercent reported overspending (BHN Gift
changed a card because it was for a retailer
Card Segmentation Study, 2014).
at which they don’t shop, often because
Although most Cardpool customers in
there were no convenient locations.
the April 2014 study conducted their
Others stated they just did not want the
exchanges online, 15 percent exchanged
gift card, and some said they wanted to
their gift cards in-store. Of those in-store
exchange one large gift
exchangers, 23 percent
card for several smaller
made a special trip to
gift cards.
the store to conduct
Shoppers who buy gift
Cardpool enables a
the transaction, and of
customer to exchange gift cards at exchange sites
these customers, 80
cards online, at kiosks or
are motivated shoppers. percent reported
at certain retail stores,
making other purand Cardpool exchange
chases during the visit.
participants can be confident their
This is a clear bonus to the retailer hosting
transactions are secure. When purchasing
the gift card exchanging service.
a gift card from a seller, Cardpool first
Most gift card exchangers would like
verifies the balance, then guarantees the
to see more locations add gift card
balance to buyers, with the purchase
exchanges, such as local grocery stores,
guarantee detailed at Cardpool.com. The
drug stores, banks, malls and any other
seller receives up to 92 percent of the
frequently shopped stores, making the
card’s face value, and buyers purchase the
process even more convenient. One
card for up to 35 percent off its stated
retailer responding to the growing
value. In each case, pricing is based on
demand is video game, consumer elecdemand for the particular store brand.
tronics and wireless services chain
GameStop, which recently announced
that gift cards from other retailers can be
Motivated Shoppers
exchanged online for a GameStop e-gift
Shoppers who buy gift cards at exchange
card that can be redeemed at a GameStop
sites are motivated shoppers. They are
store or at the GameStop site.
motivated to do business with particular
Gift card exchanges, like Cardpool, are
store brands, and they’re excited to buy
a win-win for consumers and retailers.
discounted gift cards for a retailer they
They allow the consumer to get the card
frequent. The retailer doesn’t bear any cost
they want and will use, while giving
of the discounted price as the gift card was
retailers additional access to customers
originally sold at full price. Since these are
who love their brand and a new way to
loyal customers to the retailer (they
generate incremental spend, online and in
sought these gift cards out), they will most
stores.
likely spend more than the amount of the
original gift card at a rate higher than the
average percentage of overspend, where 59
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