Startup Offers Gift Card Exchange

A new Web gift card exchange could shake up the gift card space, with cards selling to consumers for less than face value and retailers getting the gift that keeps on giving: previously unavailable data on who is using these cards.

Trying to address the hundreds of millions of dollars lost each year in gift cards that are never redeemed, Plastic Jungle, of Fresno, Calif., has created a Web gift card exchange with a twist: The company is selling valid gift cards for less than the card’s face value, which could have a significant impact on retail gift card sales.

Plastic Jungle CEO Tina Henson said the company plans on partnering with major retailers, to help them reduce accounting losses from unredeemed gift cards.

“Home Depot had $43 million gift cards that were unredeemed and more than two years old,” said Henson. “It just goes on their books as a liability because they’re not able to show it as revenue until it’s been redeemed.”

The way it works is consumers go to the site and fill out some forms (the current site doesn’t ask much but that’s going to change by mid-October), and they can then sell whatever gift cards they have for something in the range of 65 to 75 percent of the card’s remaining value. The site charges a flat fee of $3.99 for each gift card listed, regardless of value, and all transactions are processed through PayPal.

Consumers can also purchase gift cards and pay about 90 to 95 percent of the card’s remaining value, with PlasticJungle.com keeping the difference, Henson said. This would allow consumers to purchase, for example, a $100 Home Depot gift card for $90.

The actual percentages paid and received will vary based on supply and demand, Henson said, adding that some gift cards are simply more popular than others and therefore demand a higher percentage. What are the most popular gift cards? Those from Home Depot, Wal-Mart and Target. The least popular? Barnes & Noble and Borders.

Henson speculated on a few reasons for those popularity differences, but thought a key reason are that those booksellers happen to still use expiration dates (two years for Borders and one year for Barnes & Noble), which is going to be phased out as states—and the feds—crack down on gift card expiration dates.

Beyond those specific retailers, Henson said, the most popular gift card categories are restaurants and department stores, while the least favorites are toy stores and bookstores. Why are toy store gift cards so unpopular? “Children can’t use a gift card,” Henson said, and adults are hesitant to give toy store gift cards to other adults, even adults who need to purchase a lot of toys.

Today’s larger retailers are experimenting with a wide range of different uses for gift cards, with Subway experimenting with merging loyalty cards, gift cards and payment cards.

Security issues are another concern, with e-commerce gift cards posing particular security and fraud challenges, and some retailers are experimenting with adding a secondary identification number on the card, à la traditional payment cards.

One potential advantage for retailers working with Plastic Jungle is a wealth of CRM (customer relationship management) data. Today, gift cards are plastic marketing frustration because the person who buys the card is not the person who will use it, so correlating usage data with the purchaser’s identity is worthless.

“Right now, retailers are selling blind because the whole product is designed to be given away,” Henson said. “We’re going to be able to gather that data and see who is actually using the cards and—more importantly—who doesn’t want that card.”

Initial data to be collected includes age, income level, gender, name, address and related demographic data, she said, but other data points—such as asking why consumers are turning in a particular card—could be added shortly.

The company, which now employs “fewer than five” full-time workers, is also making a plea for charitable contributions with small dollar amounts left on gift cards, Henson said. “Often, people will use almost their entire gift card amount at a store, but then have a little money left on the card,” she said. “These low-balance cards typically get forgotten and go unused, but now people can donate them to worthy causes. All those less-than-$5 cards can add up to a great deal of help.”

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