Are Gift Cards A Scam?

Are Gift Cards A Scam?

Do you like sending gift cards?  Do you like to receive them?  More so, do you like spending them?  I love amazing (and Amazon) gift cards!  So, does everyone else!

Last year, Americans spent $146 billion on gift cards, which represented nearly 5% of ALL retail spending in the U.S.  There was an estimated $26 billion spent on gift cards just during the last year holiday season alone. American shoppers spent an average of $153.08 on gift cards.

In a recent survey, 93% of Americans surveyed said they have given a gift card.  Why, because it’s easy for the giver and the getter can get whatever they want.  No more ugly knitted sweaters from grandma, Disney branded Snuggies, Christmas ties, or something with the name George Foreman on it.  What I am saying is, “no more returns”.  We no longer have to celebrate “National Returns Day:” or as the Brits call it, “Boxing Day”.  We get exactly what we want and someone delivers it to our door.

50.4% of American agree with me.  When asked, those surveyed said, they purchase gift cards so the receiver can choose their own gift.  It was less stressful for them and a perfect gift for the recipient.  Isn’t that terrific?  Finally, we have figured out how to take the “It was the thought that counts” out of gift giving!

But, don’t blame yourself too much for being lazy.  58.8% of people said they wanted to get gift cards as gifts instead of the lousy gift you might to buy them.  (I added the lousy gift quote).  Further, the most commonly purchased gift card is between $21 to $50, with the average consumer purchasing at least two gift cards each for the last holiday season.

Another interesting demographic is, during the last holiday season, men spent nearly $20 more on gift cards than women, to the tune of $162.01 each.  What does that imply?  My mind is reeling, but my social filter is kicking in so I will leave that deduction up to you.

Consumers who are 65+ spent an average of $186.44 on gift cards during the last holiday season.  This might be due to generosity, forgetfulness, or knowing that the recipient most likely will be the ones caring for them of them in 10 or 20 years and they’re simply hedging their bets.

Gift cards have been the most requested holiday gift for nine years straight.  People love them and so do retailers.

Let’s talk for a moment about the cost of customer acquisition (COCA) every company that sells any kind of a product or service hmust spend.  COCA is the amount a retailer has to spend to acquire one new customer.  You’d be surprised at the dollars it takes to generate just one customer.

Here is a list of industry COCA costs per each customer for different industries.  These numbers are very difficult to obtain, as most companies want to keep their competitor from learning what their cost per customer is.  So, enjoy this:

Typical industry Costs of Customer Acquisition

Travel  $7


Index of 74 Retailers:  $14 $10

Amazon: $29

Direct Catalogs: $15


Consumer Magazines: $48


XM Satellite Radio: $123

Cable Companies: $150

Direct Satellite: $400

DirectTV: $550


Sprint PCS: $315

Nextel: $430


TD Ameritrade: $202

E-Trade: $272

Credit Cards, Platinum: $150

Mortgages:      $300-$700

Automobiles: $230

RV’s $900

New Homes: $2,100

Each time a gift card is given to someone who hasn’t yet purchased from a particular retailer, that company gets the gift of a new customer without having ever having to spend their Cost of Customer Acquisition.  It’s a gift!  Judging by the costs above, every company should give us free, $100 gift cards.  Simply by passing them out to friends and family they acquire new customers absolutely free!

The most popular gift cards are for restaurants.  A whopping 34.8% of all cards given were for restaurants.  We are hungry for gift cards.  Coming in at number two, was department stores at 34.4%.  More than two thirds of all spending was on food or retail. 

The number three category were prepaid credit cards such as; Visa, Master Card, American Express, and Discover Gift Cards.  These are great for the grandkids.  They can head out to the mall and shop themselves senseless, which is a simple feat for the typical Mall Rat teenager.  This category raked in 22.7%.

In fourth position is the coffee shop at 20.1% more than one fifth of all gift cards.  Does anyone want to venture a guess who the “coffee shops” are?  Let’s just say that gift cards keep then in the “green”.  And, in fifth place is entertainment, which includes movies and music coming in at 17.2%.

Fake Money

Did you know, more than $1 billion in cards went unused last year and every other and nearly that in previous years?  When gift card recipients were surveyed, they stated 40% of card holders had lost one or more plastic gift cards.

Another interesting fact is, those using gift cards were 2 1/2 time more likely to pay full price for a product.  And, if that wasn’t enough of an advantage for the retailers, 65% of gift card users spend 38% more than the face values of the card. 

Why do we have such irresponsible gift card spending habits?  Like credit cards, gift cards make shoppers feel slightly less attached to the transaction.  It was reported that “It doesn’t feel like real money!”  It feels like Monopoly money causing them to spend more of it.

Here’s The Big Question

I was thinking yesterday about these statistics and realized this has been true since the inception of the gift card concept.  This is why so many retailers love them!  40% of the gift cards you give, get lost.  What’s not to love?

How many gift cards you’ve given, went unspent?  Think about it for a moment.  Did your niece cash her card in for a herd of My Little Ponies?  Did your grandson buy that drone he wanted so badly?  Did your friend at the office get those Spanks she so badly needed?  Did grandma buy that “Harley” leather jacket she’s been eyeing?

Did you hear back from any of the many gift cards recipients about what they bought with your hard-earned post taxed dollars?  Wonder why?

So, I decided to take a look at my Amazon account.  For the past 5 years, my wife and I have been giving gift cards to the kids, grandkids, brothers, and sisters, neighbors, and business associates.  By logging into your Amazon account and clicking on “Account & Links”, then “Your Orders, you can see your past orders, including all the gift cards you have given to your loved ones and others you felt obligated to for whatever reason.

Next to each gift card order, you can see Amazon’s comments like “Delivered: May 25, 2017, Your package was left in the mailbox” and “Amount Sent: $100.23, Status: Redeemed”, and “Amount: $100.00, Serial number(s): 1134851001020455”, which means…  The gift card was delivered either electronically or through the mail, but was  never redeemed. 

It was either lost, stolen, or eaten by Barney your grandkids cockapoo.  In my account, I could review all of my orders back to 2003.

Guess what I found?  More than $1,000 in un-redeemed gift cards!  That’s right, it’s worth repeating, more than $1,000 in unused gift cards!

And, do you think that Amazon ever informed me of this?  Or, did I simply receive an email after a month, two or six notifying me these cards were never redeemed?  Amazon has no policy or automated practice that refunds un-redeemed gift cards.  Not on your life!  They and other retailers keep our money and the interest it earns then somehow never informs their customers of the positive balance.  Are you surprised?

After an hour on the phone with Amazon customer support, they very cooperative and happy to refund all the un-redeemed gift cards back to my credit card.  How about that?  Within an hour, I received several emails from Amazon, with a refund notice for each un-redeemed gift card value.

As a result of more than $1,000 in unanticipated refunds, my wife and I were shocked!  We even kidded about heading off to Vegas for the weekend to enjoy a room, pool, drinks, buffet, and a show, all as a special thank you gift from my kids, grandkids, and business associates.  But, that wouldn’t be right…  Would it?

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Lon Safko is an acclaimed international keynote speaker, trainer, and bestselling author of The Social Media Bible, and The Fusion Marketing Bible.

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