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Sunday, December 25, 2005

The Secondary Market for Gift Cards

Looking for a way to cash out or trade that gift card you received for one to a store you actually like?:

Capitalism at Work on Unwanted Gift Certificates, by Eric Dash, NY Times: ...Gift cards are expected to be among this season's most popular presents, generating about $18.48 billion in sales ... Still, roughly 8.5 percent of the dollars on those cards goes unspent. In response, a handful of Web sites have recently sprouted up, creating a little-known but vibrant secondary market. Analysts say it could be worth $1.5 billion or more. ...

So far, there are several different business models. ... On the one hand, gift cards are increasingly popping up at mainstream online marketplaces, like eBay and Craigslist. Earlier this week, for instance, eBay had auctions listed for more than 5,300 certificates from stores like Tiffany and T. J. Maxx. ... On the other hand, gift-card specific Web sites, like cardavenue.com and SwapAGift.com, tend to have only several hundred cards at a time but often facilitate a faster turnaround and a more focused search. ...

All of this generally comes at a price. Though it varies from site to site, users typically pay a registration fee ... or a transaction fee ... Many of the sites charge a combination of both. ... Still, a shrewd shopper can find savings. ... Most gift card exchange sites have more sellers than buyers at any given time. But during the first few weeks in January, that imbalance is exaggerated when the market is flooded with unwanted holiday gift cards. ... For buyers, that means a wider selection and prices that could be 5 percent to 10 percent lower than they are at other times during the year. For sellers, it may be a reason to wait. ...

From a buyer's perspective, the biggest bargains can be found at nationwide retailers like Sharper Image and Brookstone that have many unique gift items but none of them apparently things that anyone truly needs. ... From a seller's perspective, gift cards that command the most money are for big-box retailers and discount chains, like Sears, Target and Wal-Mart. Demand is also strong for any gift cards and voucher of Home Depot, Lowe's, Staples and other office supply stores. They all usually fetch at least 90 cents on the dollar. ...

I am told that buyer beware is good advice when using these markets.

    Posted by on Sunday, December 25, 2005 at 12:22 AM in Economics | Permalink  TrackBack (0)  Comments (0)

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