Ever wonder how your competitor is buying unused gift cards from customers off the street for cash? Have you heard of buying gift cards as an alternate source of revenue for your storefront and want to be the first in the neighborhood to provide this service offering?
There are several complexities to buying gift cards for cash from customers via your storefront. The first and foremost problem is: How much do you buy the card for? If you complete a quick internet search on gift cards, you will find that the value of each gift card or merchandise credit varies by Merchant. Why does the value of a gift card vary on the secondary market by Merchant? It is simple supply and demand – some merchants are simply more popular and thus their cards in in more demand than others. Does it make sense that the value of a Starbucks gift card is more on the secondary market than a local coffee shop card or a regional competitor? Of course!
Now that we have that solved, pricing the card of each Merchant should be relatively easy, right? Wrong! The value of each Merchant card also varies (sometimes dramatically) over time. Try this experiment: complete an internet search for a single merchant and determine the value of that card. Then, go back and do the same search one week later and see if you obtain the identical result. Probably Not! Our research indicates that the value of a gift card from a particular Merchant can vary up to +/- 20% in a time span of six months!
Why does this fluctuation happen? Again it is supply and demand. Merchants change their merchandise return policies from time to time to make it easier to obtain gift cards or in-store merchandise credits. Also, Merchants can run promotions to give away gift cards and thus put more gift cards into circulation and make them easier to find. Once, the value of a Starbucks gift card decreased almost 15% over night due to a particular marketing promotion they were running. So, we can equate the purchase of a gift card as similar to purchasing a stock. The price of the gift card on the secondary market is not static, it varies over time.