Study: Americans sitting on $30 billion in unused gift cards
According to a start-up called Plastic Jungle, as much as 7 percent of all the cards go unredeemed, and on average, American households are sitting on $300 worth of the retailer-specific gifts.
If you're a vegetarian, and someone gives you a gift card for Ruth's Chris Steak House, you might find it difficult to use. The same might be true if your dog just died and someone gifted you a $50 PetCo card.
Mismatches such as those and millions more like them have added up to $30 billion worth of unredeemed gift cards that Americans are sitting on collectively, according to a leading player in the burgeoning secondary market for the ubiquitous cards.
In a just-completed study, Plastic Jungle, which buys and sells gift cards, reported that all-told, the U.S. market for them is about $90 billion annually. And of that, about 5 percent to 7 percent go unredeemed and unclaimed each year, said Bruce Bower, the CEO of Plastic Jungle.
Percentage-wise, that may not sound like much, but Bower said that on average, American households have about $300 worth of unredeemed cards. And that has led to the market that has pulled companies like Plastic Jungle, Cardpool, GiftCardRescue, and others into the fray, each hoping to scrape off profits by acting as exchanges between those who want cash for their unused cards and those who are interested in picking up cards at a discount. Some of these seem to be flourishing, with sales in the eight figures. And others, such as, have found it impossible to make a go of it.
You would think that retailers would be all too happy to see consumers let the cards waste away on cork boards and fridges nationwide. But Bower said that increasingly, states are claiming the unused balances under escheatment laws--those that allow states to collect monies in abandoned bank accounts. At the same time, retailers know that consumers are likely to spend more than the value of their gift cards if they actually go shopping with them and often will buy higher-end goods than those without the cards, Bower said.
To be sure, gift card exchanges are nothing new--they have been around for some time, with many outfits paying as much as 92 cents on the dollar for unused cards and selling them at 3 percent to 5 percent--or higher--discounts. Popular national retailers like Home Depot, Best Buy, Target, and others can fetch the full 92 cents, while local and regional retailers may only get around 80 cents.
But with its study, Plastic Jungle has put dollar figures on the market and identified eye-popping value for the amount of money being spent on gifts that are never converted into anything tangible.
All of which could easily lead one to the conclusion that many people would be better off simply giving gifts of cash rather than gift cards for retailers that may or may not be used. But of course, while giving cash as gifts is standard in some cultures, in others it is seen as the height of impersonal. To Bower, gift cards, which themselves might seem to some to reek of the buyer having put little or no time into the present, actually represent the opposite. He says they show that someone is at least trying to think of the type of establishment a gift recipient might shop at and giving them a choice of what they want to buy there.
Still, with so many billions of dollars at stake, it seems obvious that retailers--who are teaming up with outfits like Plastic Jungle--may look for ways to streamline the process. That could mean gift cards that are good at multiple retailers, or which can buy a consolidated experience, such as dinner and a movie, Bower said, or an entire Valentine's Day suite, such as dinner, a spa treatment, flowers, and a night at a romantic hotel.
Either way, it's obvious that millions of Americans are going to keep on buying and giving gift cards, and Bower said that the total value of unredeemed cards is only likely to grow. But a tip for those who give the cards? Make sure the recipient's dog is still around before handing over that PetCo card.