December 25, 2008

Gift Cards

Do I have this right?
  • You buy me a $50 gift card from "Big Box Brand".
  • I buy you a $50 gift card from "Big Box Brand".
  • On Christmas Day, the tree is littered with mini-plastic-ads for "Big Box Brand".
  • On the day after Christmas, gift cards are redeemed for merchandise sold at 70% off of full price ... whereas the customer, sans gift card, would have paid 40% off of full price just two weeks ago, 25% off of full price on Black Friday, and 15% off of full price on November 1.
  • "Big Box Brand" gets a much-needed cash infusion, but takes huge inventory risk by not selling merchandise prior to Christmas, then not knowing how much merchandise will move in the days after Christmas --- and cannot record the sale until the customer redeems the gift card.
If we, as business leaders, were to invent commerce from scratch, would we draw it up this way?
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5 comments:

  1. Unknown6:51 AM

    This comment has been removed by the author.

    ReplyDelete
  2. Unknown6:52 AM

    There is some % of cards that will never be used or will be left with some balance after purchase, which would offset some of the loss that the retailer takes by pushing sales off through GC purchases. Don't know what that % is though.

    ReplyDelete
  3. MineThatData7:21 AM

    Yup, that will offset some of the loss.

    ReplyDelete
  4. Anonymous10:34 AM

    Or they're banking on people spending more than the face value of the card...

    There seems to be some intangible value on the gift card thing...either the gift giver is recommending this store - "I think you'd like to buy something from here" or "I like this store, I thought you'd like it to." That thing retailers are always trying to achieve through social networking.

    And rather than the gift giver absorbing the shopping experience for the recipient, the gift giver passes the experience on. Now you're selling to the recipient, not the giver.

    So retailers need to meet the recipient with an exceptional in-store or online shopping experience.

    ReplyDelete
  5. MineThatData11:26 AM

    All of that may be true, thanks for the comment!

    ReplyDelete

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