$41+ Billion in unused Gift Cards
Recent retail industry research company "Tower Group" has reported that there are in excess of $41 billion dollars worth of unused Gift Cards still out there since they started keeping track in 2005. In 2011, Gift Card transaction volume exceeded $100 billion dollars for the year.
Some other interesting statistics are:
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Approximately 85 percent of issued cards are used within 60 days.
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The remaining cards are either lost, stolen, or expire due to date restrictions or reduction fees. Even though many fees are down and some states no longer allow expiration dates, based on this years numbers, this still means a potential $15 billion dollar windfall for the retail industry.
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The average value of a closed loop card (retailer specific) purchased in 2011 rose more than 70 percent, from $34 in 2010 to $58 in 2011.
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The average value of an open loop card (not retailer specific) saw a drop of 5 percent in 2011 compared to 2010.
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The average number of gift cards purchased, both closed loop and open loop, remained relatively flat year over year, however, due to the increase in the average value per closed loop card, and the total value spent when using these cards, saw a tremendous increase in 2011, going from $161 to $291.
What all of this says is…
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If most cards are sold during the start of the year end holiday shopping season, the retailer is essentially guaranteed an 85% return revenue stream over the next 60 days. This could be a bonus for the retailer into the first quarter of the new year when most retail sales are typically flat.
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While many consumers like the flexibility of using gift cards, a percentage will never be used or never be completely be used, thereby giving retailers an excellent profit center, especially when considering sales made on closed loop cards.
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Other than the cost of the physical cards, closed loop cards cost the retailer nothing, as opposed to open loop card fees and conventional credit card fees. This means lower overhead for the retailer.
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Consumers will spend more money when a Gift Card is used than they might spend otherwise, resulting in higher than average ticket sales. Often Gift Cards are redeemed for regular priced items, meaning higher profit margins.
So if you aren’t using Gift Cards now, you should seriously consider contacting the CCS Retail Systems Support Department regarding your options…