Gift cards: I've heard of companies losing millions from cards not being redeemed. Some would think it's not a loss cause once the card is paid for, it's $ in the biz''s pocket. Does the biz not make money unless the gift card comes back to the store?
by 
altgirl84
ANSWERS: 13
-
I always thought that the money immediately goes to the company I purchase the card from so this is news to me.
-
I don't think that's true. Do you remember where you heard it?
-
Gotta agree with the other respondents. I would think the companies would *make* millions from gift cards not being redeemed. They make millions from rebates not being redeemed, too.
-
No- if u but a gift card they make that money right there. If u dont redeem it its just pure profit. Its your loss not theres. The only way they lose is if it gets u going to the store after u spent the card. Then obviously if u never go to the store, then u r a lost customer.
-
Some news reporter heard that one through the backwards filter. It's the consumer who takes the loss when they buy a gift card and fail to redeem it. It's free money for the company that sold the card.
-
I'm with the concensus on this on altgirl. The company who supplies the gift card makes 100% profit. If the card is never redeemed, than the company who issued the card never has to honor the credit. A gift card essentially is loaning money to the store who issued the card, to be applied to the purchase of a specific person. If that person doesn't purchase anything, the company does not have to apply any credits. I worked at Best Buy a long time ago, and one of the biggest contributing factors to their holiday season's success was due to unclaimed gift card dollars.
-
This seems extremely illogical, unless for some reason unredeemed gift cards account for some kind of inventory problem, like adding to the expense of warehousing products. Yeah, even that's kind of a stretch. I think someone got this one backwards.
-
The company gets and keeps the money when it sells the gift card. It records a liability to the card purchaser and does not record sales until the card is used. However, depending on the card's expiration date (if any) and the company's experience with card usage the liability ultimately gets converted to income. No loss to anyone except the person who doesn't use the card. Money without merchandise to the store. That's why specific-brand (as opposed to Visa debit) cards are being pushed so hard.
-
I work at Blockbuster Video, and I can explain this a bit, at least about my store. When you buy a gift card, that money is yours, period, no expiration date, and that money sits on standby, waiting to be used, and is not counted as store profit until it's used. It is considered as a store debt. In other words, on paper it's debt status neutralizes the moneys existence until it is redeemed. Hope you can understand that.
-
And this is the reason that our State enacted a Law that the money must go to the State Treasurer after a certain length of time and then be listed as unclaimed property in the name of the purchaser. (Two years) Most of it goes back to the person who originally bought the card. Also, you cannot have a gift card with an ending date. It's illegal. I used to love it when Radio Shack clerks would tell my credit from returning an item would expire in 30 or 60 days, etc. I laughed at them and told them they can't take my money that way.
-
The point of sale and income from the sale is collected at time of purchase of gift card.
-
Gift card holders loose money when the vendor closes down and she/he ends up holding a gift card that cant be used. For example:When U.S. electronics chain Sharper Image shut down in February, some $20 million in unredeemed gift cards faded away.
-
It depends on the terms of the gift card but it is an area of potential mis-statement for many companies. The store recognizes a liability for deferred revenue. Revenue is recorded and the liability is reduced as the card is redeemed. The company can use a redeemption patern to estimate the liability when the card is not used. If the card has an experation date the store records the balance of revenue when it expires. While low redeemption rates may reduce the company revenue in the short term it is not a loss of cash. The revenue will eventually be recognized.
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC