Gift Card Graveyards: Billions Unused (and Why Retailers Love It)
As the holiday season approaches, many people will be rushing to malls and online retailers, purchasing gift cards to give to their loved ones. It’s a quick and convenient gift option that allows recipients the freedom to choose what they want. However, what many people don’t realize is that a significant portion of these gift cards go unused, leading to what is known as “gift card graveyards.”
The Reality of Unused Gift Cards
According to a study by CEB, an estimated $1 billion in gift cards go unused every year in the United States alone. This staggering number is a concern for both consumers and retailers alike. While it may seem like a waste at first glance, the reality is that retailers benefit from the billions of dollars sitting in unused gift cards. So why do retailers love gift card graveyards? Let’s take a closer look.
The Impact on Retailers’ Bottom Line
Gift cards are considered a profitable business for retailers. When customers buy a gift card, the money is paid upfront and can be used to cover operational costs while the gift card is still unused. Additionally, the majority of recipients who do use their gift cards tend to spend more than the amount on the card itself. This is known as the “spillover effect,” and it’s a significant factor in why retailers continue to offer gift cards.
Furthermore, gift cards provide an opportunity for retailers to gain new customers. If a recipient who has never shopped at a specific store receives a gift card, they are more likely to visit the store and may turn into a regular customer. This can also lead to word-of-mouth marketing, as they may recommend the store to their friends and family.
The Fine Print
One of the reasons why gift cards go unused is due to the fine print. Many retailers have policies that state the card must be used within a specific timeframe, or else it will expire. This expiration date is often years in advance, giving recipients a false sense of security that they have plenty of time to use the card. However, as time goes by, the gift card is forgotten, and the retailer benefits from the unspent funds on their books.
Some retailers also have a policy that allows them to charge a “dormancy fee” for unused gift cards. These fees can range from a few dollars to a percentage of the card’s total value and can quickly add up over time. While it may seem unfair to the recipient, it’s another way for retailers to make money from gift cards that may never get used.
The Consumer’s Perspective
From a consumer’s point of view, the idea of billions of dollars going to waste in the form of unused gift cards may seem frustrating. After all, these are funds that could have been spent elsewhere, yet end up sitting in a drawer or forgotten in a wallet. So, what can consumers do to avoid falling victim to the gift card graveyard?
Be Proactive
First and foremost, it’s crucial to read the fine print before purchasing a gift card. Know the terms and conditions, including any expiration dates or fees.
Secondly, don’t wait too long to use the gift card. If there’s a specific item that you want from a certain store, don’t hesitate to use the gift card to purchase it. That way, you can avoid the risk of forgetting about it and potentially wasting the funds.
Consider Other Options
If you’re hesitant about purchasing a gift card, consider other gift options, such as cash or a physical gift. While gift cards may seem like a thoughtful gift, the reality is that many go unused and end up being a waste of money.
In Conclusion
In the world of retail, gift card graveyards are a reality that retailers will continue to benefit from. Understanding the impact that unused gift cards have on retailers’ bottom line can help consumers make informed decisions when purchasing gift cards. While it’s unlikely that gift cards will disappear entirely, it’s essential for consumers to be aware of the risks and to take proactive measures to avoid becoming a part of the billions of unused gift card dollars every year.
