Unwanted Presents Find Homes In the Online Gift-Card Marketplace
Saturday, December 3, 2005
It rose to popularity as the gift that couldn't go wrong, but a raft of Web sites are here to tell you that many of those gift cards turned out to be a bad fit after all.
Instead of buying themselves a nice little something, thousands of people are selling unwanted gift cards at a discount, swapping them like baseball cards and buying them up to use for their holiday shopping.
It has the air of a mini stock market: On Cardavenue.com yesterday, a $200 Best Buy gift card was going for $175 with less than a minute left to bid. Meanwhile, another user was looking to trade a $25 Gap card for one from eBay, Marshall's, Target, clothing store Guess or home furnishings store Tuesday Morning.
And an enterprising poster on Craigslist was hoping to swap $360 in gift cards from several retailers for an iPod -- preferably one that can play video.
"We're not selling gift cards," said Jeff Kister, president of Giftcardbuyback.com and Giftcardsagain.com. "We're actually selling savings."
The savings may be hard to resist, but there are plenty of risks. There's no way for buyers to be certain how much money is on the card, for example.
Gift cards are big business, and they're designed so people can give them away easily. The National Retail Federation, an industry trade group, estimated that gift-card sales this holiday season would hit more than $18 billion, predicting a 6.6 percent increase over last year's record high. Total gift-card sales this year are expected to reach $66 billion, according to Giftcertificates.com.
But a report by TowerGroup, a research and consulting firm, estimated that 12 percent to 14 percent of those cards are likely to go unredeemed. That has created a growing "aftermarket" for the cards and opened the door for people such as Mike Kelly.
About two years ago, he and his wife, Mary Jane, realized that they had about a dozen gift cards they would never use lying around. Some were for restaurants at which they never ate; others were well-intentioned but misguided wedding gifts.
"They sort of represented a stack of things that were going to collect dust," Mike Kelly said.
And the cards were worth roughly $700 -- making them very expensive dust bunnies.
That's when the couple came up with the idea of Swapagift.com, where cards are bought, sold and traded. Now the site boasts 15,000 registered users. Traffic is about 1,000 visitors on a typical day and jumps to several thousand during the holiday season. Kelly estimated that about half of all transactions occur between November and the end of January.