Were you buying gold and now that business has dried up? Are you looking to diversify your income?
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 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.
A second complexity involving the purchase of gift cards from your storefront is the risk that the Cards Go Bad. What do I mean by that? Well, when you purchase the card, you check the balance and everything is OK. So, you complete the transaction with the customer. A short time later (hours, days, or weeks) you go to check the balance again and it is Zero – wiped out!
Why does this happen? A variety of reasons: Bad Customers. Sometimes customers are dishonest. A bad customer may come in to sell the card to you, but then when they leave the store they can go online and spend the value if they have saved the card numbers and pin. Alternatively, the bad customer may return to the merchant to report the card lost or stolen. In this case the merchant can go in and eliminate the balance on the card and re-issue a new card to the Bad Customer. Finally, if a Bad Customer purchases a gift card from a Merchant with a credit card or check, then later reports the transaction as fraudulent or cancels the check, the Merchant may wipe out the balance on the gift card to cover their losses.
A third complexity involving the purchase of gift cards or merchandise credits from your storefront involves the disposition or Re-Sale of the Cards. Now that you have the cards, how do you sell them quickly? The longer that you hold onto the card yourself, the more the risk increases that the card may Go Bad. So, the key to proper Re-sale of the cards is selling the card to someone who is going to spend the card quickly and thus reduce the risk that the final buyer of the card may come back to you with a warranty claim on the card.
So, the key is to price the cards very competitively on the Re-Sale, ship them as quickly as possible and encourage the buyer to spend the cards as quickly as possible.
So, with all of these risks, why buy gift cards or merchandise credit for cash at your storefront? Answers: Attractive Margin. Our experience is that customers will accept a cash value for the cards which can support a double digit margin on the Re-Sale of the cards. Increased Traffic. Buying gift cards and merchandise credit will bring new customers into your storefront to cross-sell your other services.
So, how can you mitigate the risks and profitably buy and sell gift cards and merchandise credits from your storefront? We have developed an online system which will provide real-time pricing, access to a database of bad customers, and quick disposal and re-sale of the cards for you.
The system is NOW OPERATIONAL!
Are you interested?
Then contact us today for more information.
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