Jerry Davich: Gift cards — a legal and brilliant scam?
Jerry Davich firstname.lastname@example.org January 10, 2013 10:32PM
Archive photo of a gift card display. | File~Sun-Times Media
Updated: February 12, 2013 2:24PM
Who didn’t enjoy receiving them over the holidays? For tools, clothes, food, music, DVDs, books, shoes, you name it.
I gave them out left and right as Christmas gifts, from $10 coffee shops to $50 chain store retailers. And I also loved receiving, for example, a $25 gift card from Lucrezia, a Chesterton eatery I’ve wanted to try again.
Giving gift cards to anyone other than strangers was once considered lazy, cold, or impersonal, the last refuge of the incompetent shopper. Not anymore.
“You can pick your own perfect gift!” we happily tell recipients.
Gift cards were the most popular gift of the 2012 holiday season, with sales topping $25 billion and comprising up to a third of all gifts, according to the National Retail Federation. These pre-paid plastic cards of potentiality seem like a win-win situation for both the giver and the recipient, right?
Wrong, I say.
It’s much more of a win-win situation for the company behind the gift card - the chain store retailer, the upscale eatery, the mom-and-pops restaurant on the corner. Why? Because they’re guaranteed the sales whether we use the gift cards or not. It’s a scam of sorts. Legal, yes. Brilliant, of course. But still shady, I contend.
A show of hands: How many of you have received a gift card and either used only a portion of its value, overspent its value, or forgot to use it at all? I’m guilty on all three counts, yet each scenario is a money-making bonanza for businesses.
For instance, let’s say you receive a gift card for $25 from a chain store and you use only $23 of its value. Do you search high and low for a $2 item to make up the difference, or do you pocket the card and tell yourself to return later to spend it?
Even if it’s $2 left on that card, it’s $2 in favor of the business, not the consumer. I’ve had gift cards with only 58 cents left on them, and I have no idea what happened to those cards. Cha-ching for the business!
Forgotten or lost gift cards, like the Dunkin Donuts one I received at Christmas 2011? Cha-ching for the company!
How about shoppers who patronize a store strictly because they received its gift card, only to spend more than the card’s value? Cha-ching again! It’s genius, I tell you ... for the companies. And they know it.
‘They never expire’
Here is a marketing pitch to retailers from a manufacturer of gift cards, citing sources such as American Greetings, Green Sheet Quarterly, and the National Retail Federation.
Gift cards eliminate cash refunds - the unused value is retained on the card.
55 percent of gift card recipients need more than one trip to deplete the value of their card.
Two thirds of gift card holders spend more than the gift amount, and the average recipient spends 20 percent more than their card’s initial value.
Retained gift card balances lead to repeat visits and increased sales.*Customers pre-pay for gift cards so you have cash in hand.
“It brings in guaranteed business,” the marketing brochure promises.
According to the National Restaurant Association, one third of consumers received a restaurant gift card this past holiday season.
“Since the recession has had a freezing effect on the dining habits of many Americans, a restaurant gift card allows the recipient to enjoy a nice dinner without worrying about picking up the tab,” states a Restaurant News puff piece.
“This is part of a greater trend of interest in experience-based gifts rather than giving goods,” the piece chirps. “Experiences have a longer effect on your mood, and can be far less expensive than a new watch or television set for the buyer.”
Again, Madison Avenue marketing at its finest. We’re not giving merely a gift. We’re giving a memorable and meaningful experience.
No wonder gift cards can be found everywhere these days, and why nearly every major chain offers them, from Red Lobster to iTunes to Walgreens to Amazon.com. Not to mention the local businesses, too.
“They never expire!” one gift card ad boasts.
No doubt. In fact, I’ll bet more gift card recipients expire before the gift cards do. Companies are banking on it, to be sure.
I’m not suggesting that gift cards are the work of the devil (although some corporations can be viewed as evil), or that we shouldn’t give or receive them. But we should, at least, be aware of the bait-and-switch tactic used against us as consumer lemmings.
It’s no secret that too many Americans are shopping junkies who fill their seemingly empty lives with goods, products, items, and other stuff. Receiving gift cards must feel like blank checks to them, another reason to shop until they drop.
However, all of us should be aware of the real winners in this business-is-booming scenario. Despite its appearances to the contrary, it’s not the giver or the recipient.
Best stories of 2012?
Friday at 8:30 p.m., I will appear on the TV show “Lakeshore Focus” with host Keith Kirkpatrick, talking about the most newsworthy stories of 2012 in Northwest Indiana.
The Valparaiso gunman standoff? The Illiana Expressway moving forward? Porter Regional Hospital relocating? The Gary Airport taking off? Richard Mourdock’s verbal slip? The BP gas recall? Right-to-work legislation enacted?
Tune in to see which ones I missed on Lakeshore Public TV - Comcast channel 17, Dish/Direct/U-verse channel 56.
Are you (or any local groups) planning on attending President Obama’s second inauguration in Washington D.C. on Jan. 21? If so, I’d like to hear from you for an upcoming column.
Email me at email@example.com, or call my voice mail, at 648-3107.
Listen to Jerry’s “Casual Fridays” radio show each Friday at noon on WLPR, 89.1-FM, streaming at www.thelakeshorefm.com.