How are some of the nation's top retailers getting rich?? They profit from unused gift cards. Best Buy reported a
$43 Million dollar gain in fiscal year 2006 because of gift cards that were
expired and weren't used within the 2 year limit. Most companies say that you have to use the card within 2 years. If you don't, the
value of the card either
decreases or isn't worth anything at all!!
A lot of companies now days sell gift cards, and when you look at the facts it's actually
foolish for a company to not sell them. Think about this...you own a company and you sell a $25 gift card. The person who receives the gift card may or may not be familiar with your store. If it's the latter, you have a
new customer. If not, you have a person who has $25 to spend in your store. That person comes to your store and buys something for $30 using their $25 gift card. That's
$5 extra that they need to spend that they probably wouldn't have spent if they didn't have the gift card.
Now, think about the flipside. A person receives the $25 gift card but only spends $23 of it on something that they wanted. That leaves
$2 for the balance of the card. Now, say that person never goes back to the store or forgets to use the card within the 2 year limit. That's $2 in the store's pocket as
profit!
More and more companies are starting to realize this and are making
huge profits because of it. I'm actually guilty of not using the entire balance on one of my gift cards that I was given 2 or 3 years ago. I left 70 some odd cents on the balance. Now if 10 million do that, that's profit for the company. A
HUGE profit.
One other interesting note. Supermarkets and Gas Stations have close to a
100 percent redemption rate for gift cards. Those stores aren't profiting nearly as much as the others. The 100% rate is due to the fact that people
HAVE to go to the supermarket and fill up their vehicles with gas. They
DON'T have to go to Best Buy to pick up a DVD. Interesting.
If you received any gift cards for Christmas this year or last year, get out there and spend them. Don't put them in a drawer and forget about them. Don't let those big companies profit on something as easy as expired gift cards.
Well, it's only hours away from a New Year which means New Year resolutions are about to go into effect. I looked at a lot of Top Ten New Year Resolution lists and I found that money related items were almost always on that list.
I just wanted to wish everyone a Merry Christmas and Happy Holidays! I'll be back around Tuesday with regular new content. Until then, enjoy the holiday weekend and may all your "getting rich" dreams come true.
Goldman Sachs announced the other week that they'll be giving their employees an