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 firstname.lastname@example.org. 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 ©2014 Paybefore. All rights reserved. Forwarding or reproduction of any kind is strictly forbidden without the prior consent of Paybefore. Pay Op-Ed | August 2014 | www.paybefore.com 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 ©2014 Paybefore, P.O. Box 486, Natick, MA 01760 USA. Email: email@example.com. All rights reserved. Copyrighted material. All material contained in Paybefore publications is the property of Paybefore. Forwarding or reproduction of any kind is strictly forbidden without the express prior written consent of Paybefore. 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