Retailers profit from unused gift cards

Monday, December 18th, 2006

Retailers profit from unused gift cards:

Last winter, Best Buy Co. reported a $43 million gain in fiscal 2006 from cards that hadn’t been used in two or more years. Limited Brands Inc. recorded $30 million in 2005 revenue because of unredeemed cards.

Even so, this holiday season is likely to see record sales of gift cards. The National Retail Federation, a trade group, estimates that shoppers will buy $24.8 billion worth of cards, up 34 percent from last year.
About 6 percent, or $4.8 billion, of this year’s gift cards will go unused, estimated Laura Lane, vice president of unclaimed property services for Keane Co., a compliance and risk management consulting firm.

Consumer Reports put the figure even higher, estimating that 19 percent of those who received cards last year had not used them because the cards were lost or expired.
Some gift cards get spent faster than others. Supermarkets and gas stations have close to 100 percent redemption rates, said Bob Skiba, who runs the gift card division of Ceridian Corp.’s Comdata gift card division, based in Louisville, Ky.

Even cards that get used are effectively a free loan to the retailer.

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