Guy buys gift cards at Wal-Mart and hands them out in store. Result? Wal-Mart throws him out.

[notadmblnd]

Just saw on CNN a short story about a man buying gift cards at Wal-Mart and handing them out to shoppers. He was questioned by store officials and told to leave.

Good ending. Target stores told him he could bring the gift cards to them, they will exchange them and he can hand them out in the store.
I just thought it was an odd thing for Wal-Mart to do.:shrug:

[Heidi]

1. Wal-Mart probably profits from gift cards that are never redeemed.

I would bet almost anything that they didn't want some guy passing out gift cards that would be _immediately_ redeemed. Good for Target. :thumbsup:

[ProfessorGAC]

2. Why Though?

They have the cash. The overnight rate is so low that holding the money until Friday, or Saturday, or Sunday, wouldn't matter financially.

So, if they already have payment, what difference does it make to Wal-mart when they're redeemed.

This doesn't make sense.
GAC

[NanBo]

4. a huge percent of gift cards are NEVER redeemed

They count on that when they sell them. You give them to someone who has to make the effort to get to the store to use it. If this guy was giving them out to people already there, you can bet they were being fully redeemed.
Good for this guy!

[ProfessorGAC]

11. The Percentage Isn't Huge?

You're right, there is some of that, but from my experience with gift cards (Visa) at the bank where i'm on the board, it's pretty tiny. (IIRC, less than a quarter percent.)

And, in many states (like here in Illinois) it doesn't matter if you put an expiration date on it either. The business has the cash, they must honor the card.

So, this still doesn't make any sense to me as to why it matters to them who the recipients of the gift card are. I think they're treading on thin legal ice.
GAC

[Heidi]

15. Have you ever known anyone who challenged Wal-Mart in court? I have.

Wal-Mart has the resources to keep a private party in court indefinitely. Who's got the resources to challenge Wal-Mart indefinitely over a $50 or even $100 gift certificate?

If only 20 percent of all gift certificates are redeemed, Wal-Mart does indeed profit.

[ProfessorGAC]

19. It's Not 20% Heidi

It's way lower than that. Since my first post i called the VP of operations at the bank. She told me the number is about 0.3%.

You're number is way too high, so the logic you're proposing isn't as strong. If it really were 20%, i'd buy it. But, the number is only a 60th of that.

And, you do know that big companies settle out of court just to avoid having long legal battles? Of course you do! You & i both know it happens all the time.

So, if they can tie things up forever, why settle anything?
GAC

[Heidi]

26. Are you saying that only 1/60th of 20 percent of Wal-Mart gift cards are redeemed?

That's even WORSE. I know that I've received TONS of gift cards in my lifetime, and have redeemed only a very small number of them.

Just because something happens all the time doesn't make it right. You probably agree.

[ProfessorGAC]

31. Don't Get Me Wrong

I started this train of thought because i don't understand what possible purpose this serves Wal-Mart.

0.3% of the revenues from gift cards (in the merchandise realm) end up as "free" cash. So as a business model, this makes no sense.

The negative PR effect potentially far outweighs the relatively tiny benefit. (Remember that over the course of the year the redeeming of gift cards is a small fraction of total sales. So, even if i'm underestimating, and the number is 1%, it's 1% of the gift cards, which are probably way under 1% of revenues.) So, it's a crappy business approach.

And, if you recall, in my first post in this thread, i was questioning what the heck Wal-mart was doing, since it didn't make any sense to do something this stupid. So, don't get me wrong: I'm not on the store's side. I'm questioning the competence of store management.
GAC

[Nay]

53. Like you, Prof, I think this makes no sense. The guy handing out gift cards

is basically giving Walmart shoppers CASH. Those shoppers, wanting to use up their cards, will most likely end up spending MORE than the value of the card. Even if they don't spend it all that day, they will either come in another time to spend it all, or they will forget the card and never redeem the balance, which is what some posters say Walmart wants. Secondly, the actual number of cards the guy handed out can have no conceivable effect on the percentage of profit Walmart, or even that individual store, can get, even if every one of the cards was redeemed in full that day.

There is no down side for Walmart. I have no idea why the mgmt acted this way, except that a lot of managers are Hitler replicas and love to act like assholes when they can.

[Goblinmonger]

52. While alive, Sam Walton said

that he would never pay a dime to anyone that sued him until the Supreme Court told him to. Regardless of cost. Walmart had the lawyer power to bury the average person.

[OwnedByFerrets]

21. Gift Cards an $8 Billion Gift to Retailers

Gift cards
are a great gift, all right -- for the retailers who issue them. The National Retail Federation estimates that gift card sales will hit nearly $80 billion this year. About 10 percent of that amount -- $8 billion -- will stay right in retailers' pockets, thanks to fees, loopholes and consumer forgetfulness.

Most consumers wouldn't think of paying for an item and leaving the store without it, but that's basically what happens with the 10 percent of gift card value that goes to waste each year.

"We estimate the overall raw volume in gift cards this year to be (US)$80 billion," Brian Riley, senior analyst for bank cards with the Tower Group, told the E-Commerce Times. "Through dormancy fees and abandonment, unused funds will run about $8 billion."

[NeedleCast]

24. Honestly I'm surprised it's not a lot higher than that

I would have guessed there was a much higher unused/abandoned percentage. Probably because I'm one of the people that doesn't use them, forgets about them, etc.

[ProfessorGAC]

36. Sheesh!

The Visa reports the bank's VP read to me do not say that. Why would Visa lie to it's own issuers and then tell NYT something else.

Besides, you're not reading my posts correctly. I said the number was based upon GENERAL MERCHANDISING gift cards. Cards for restaurants and narrow market merchandising are all very different.

Lastly, in many states (including here in IL) gift cards don't expire, so those are held on the company books are a pending liability, until the provable administrative costs of maintaining those records exceed the value of the card. (Cite: Brigham & Gapenski's Financial Management textbook, Dryden Press)

So, the $8 billion is a bit illusory.
GAC

[NeedleCast]

40. That got me thinking

When you say Visa, are you talking about Visa gift cards that operate essentially like a Visa card in terms of where it can be used?

I ask becuase I've recieved, for various things, several Visa and AmEx gift cards over the last three years, mostly as rewards/bonuses for work and I DO use those...but I tend not to use the cards for specific chains.

Interesting.

[ProfessorGAC]

44. Yep

We issue a Visa card under our name, so we sell the gift cards. A buyer can even pay for one and then have it wired to the other person's bank.

But, yeah, that exactly what i'm talking about.

And since they're good anyway VISA or AmEx is good, what you're doing is pretty much the norm, i'd guess.
GAC

[OwnedByFerrets]

47. You are correct. I missed the "visa" part of your post. In fact,

I didnt even realize that Visa did this. The other part of the equation that I didnt state though is that if a company declares bankruptcy and you have a gift card from that retailer (see Sharper Image) you are shit outta luck. They have declined to pay out $60 million in gift cards since filing chapter (?).

[Raster]

32. The percentage of unredeemed gift cards IS NOT TINY!

"Problem is, of the $80 billion in gift cards purchased last year, experts estimate that $8 billion (some 10%) will never be redeemed -- an amount that dwarfs credit- and debit-card fraud together, according to the New York Times. Heck, Best Buy alone earned $16 million from unredeemed gift cards last year, the Times said."

http://www.joystiq.com/2007/01/08/unredeemed-gift-cards-dwarf-credit-and-debit-card-fraud/


"As for gift cards — well, let’s just say there is good reason that they are known within the retail industry as a stored-value product: they store their value very well, and often permanently. The financial-services research firm TowerGroup estimates that of the $80 billion spent on gift cards in 2006, roughly $8 billion will never be redeemed — “a bigger impact on consumers,” Tower notes, “than the combined total of both debit- and credit-card fraud.” A survey by Marketing Workshop Inc. found that only 30 percent of recipients use a gift card within a month of receiving it, while Consumer Reports estimates that 19 percent of the people who received a gift card in 2005 never used it.

http://www.nytimes.com/2007/01/07/magazine/07wwln_freak.t.html?ex=1325826000&en=970953e6241456e4&ei=5088&partner=rssnyt&emc=rss

[ProfessorGAC]

34. You Didn't Read My Post

The percentage on gift cards for food service and for niche retailers is a lot different than for general merchandising.
GAC

[Raster]

41. Yes, I did read your post. That said...

Not talking food service. We are talking Walmart, and a man that bought Walmart gift cards in a Walmart and began handing them out to Walmart patrons in a Walmart. Walmart officials asked the man to leave. Industry data shows a sizeable percentage--approximately 7% to 10%--of ALL GIFT CARDS are never redeemed and are a financial boon or "bonus" to the retailers that issued them. Once can assume that this is *probably* true for Walmart, however no immediate data is available. It is not a stretch to imagine that shoppers already in a Walmart handed free WalMart gift cards would use said gift cards to pay for their purchases, thereby depriving Walmart of the "unredeemed gift card bonus." I think that's a plausible reason to ask the man to leave the store.

[ProfessorGAC]

45. Not To Me

It's still not plausible.

And, you can debate the numbers all you want, Visa reports a much different number. So, i'm going with what i was told by the VP at the bank who was reading the VISA corporate statement. (Issued quarterly to all issuers of cards.) You go with your number, i'm going with the one that is reported according to the law.


And, the broader the merchandising category, i would guess it logical to presume that the percentage just keeps going down.

Some people might get Red Lobster cards and not even like fish. Somebody gets a Wal-mart card and there is SOMETHING they need at Walmart, especially since they don't even have to pay for it.

Like i said: We're basing it on two different pieces of information. I think your's in in error. You think mine is. No settling that.
GAC

[Raster]

49. VISA reports a much different number ON THEIR CARDS, correct?

I've received and given VISA cash cards. They are redeemable EVERYWHERE. Call your bank again, I will bet you the numbers quoted to you are FOR VISA CARDS ONLY!

[Recursion]

28. But that doesn't help their bottom line

Retailers don't mark up revenue from gift cards until they are redeemed. Accounting rules are weird.

[NeedleCast]

5. They're counting on people to never redeem them

Well, maybe not couting on, but hoping. That way they get to collect the money but never have to give up stock in return.

[ProfessorGAC]

12. See My Other Post

My experience is based upon one bank only (i'm on the board there), but that number is awfully small. I get your point, but there is no way that the store counts on that specifically. If they did, it would be a rather trivial part of the business plan.
GAC

[NeedleCast]

18. Probably right

and "counting on" probably wasn't the best choice of words I could have used. That being said, there are several companies out there who use(d) questionable practices with gift cards. I might be mixing up my major electronics box chains, but I think it was Best Buy who would issue any remaining balance on their gift cards on the sales receipt. You spend 37 dollars of a 50 dollar gift card, they keep the card and your sales receipt shows you still have a 13 dollar store credit. Seems a bit disingenuous to me. Sort of like manufacturer rebates (where you send in a copy of your receipt and eventually they send you money back), the issuer is kinda crossing their fingers hoping you wont remember or wont go to the hassle of getting the rebate.

I know I'm guilty of it. I've got a desk drawer full of Starbucks and Best Buy and other various gift cards that I don't know if I've used, partly used or never used. Even when I go to a store where I could redeem them, I usually forget to stuff them in my wallet.

[ProfessorGAC]

25. Heck With That

I would never surrender the card. If their computer system knows how much money you have left, their computer system can assign that value to the card.

We get Red Lobster cards every year from one side of the family. We never have to surrender those cards. Geez, even when the balance is zero, they ask you if you want the card to reload another time or do you just want it thrown away. I tell them the latter, and i've seen them toss them out.

But, giving up the card when it still has value is shoddy customer service.
GAC

[NeedleCast]

29. Yeah, I think a lot of companies have changed this practice

I just looked at a just recieved Barnes and Nobles card and a few newer Best Buy cards and all of them have magnetic strips on the back, indicating they could probably be re-used, but I also have some (apparently rather old) Best Buy gift cards that do not.

Maybe retaliers and other chains are realizing that by allowing those cards to be reloaded they're getting a better deal with your repeat business than they would get if you just forgot about/lost/tossed a gift card.

[Catherine Vincent]

6. Greed

One retailer I used to frequent changed their policy on gift cards. If you purchased an item with the gift card that had a balance, they would give you the balance in cash. They've don't do that anymore. They return the card with the balance so you can purchase what's left of it at their store with the hope that you go over, thus using more of your money.

[ProfessorGAC]

9. That's More Understandable

The gift cards are not intended to be cash cards and people don't give them or receive them (for the most part) expecting that they are cash.

So requiring them to use it on merchandise makes business sense. This incident doesn't.
GAC

[bullwinkle428]

10. Barnes & Noble does that all the time, even if you have some piddly amount

remaining on the gift card!! They'll mark $3 or $4 or whatever with a sharpie on the back of your card, so you know what you've got remaining...

[monmouth]

13. That happened to me and the great person waiting on me said that

the cafe would honor it, I should get myself a nice lunch. I did, it was not bad...LOL.

[ProfessorGAC]

33. I Had A Red Lobster Card With $1.14 Left On It

I kept it. I don't throw away dollar bills. Why would i throw this away? Eventually we're going to have a party and go there for a shrimp platter. A dollar-fourteen is a dollar-fourteen!
GAC

[Bake]

48. He's handing them out to customers who are already IN the store

So they're already planning to spend cash. With the cards, they don't have to spend their own money, and the sotre probably figured that they wouldn't buy any more stuff than they would have without the cards.

Cheap ass money grubbing bastids, ain't they, Perfesser????

Bake

[NeedleCast]

3. Bingo

A buddy of mine who works in restaurant managment for a well known national chain of steak houses who's advertising voice overs are often done by people with Australian accents says that probably less than 20% of their promotional/gift card type stuff is ever redeemed. Another friend who works a Starbucks says that lots of people just throw the gift cards away once they know the balance on it is very small (ie. not enough to purchase what they usually purchase). Every time that happens, it's free money for the company.

[ProfessorGAC]

14. Much More Common In That Business

It's FAR less common in merchandising. Because EVERYONE needs staples. Not everyone NEEDS to go to Outback or Red Lobster, especially if the nearest one is 30 miles away.

But, everyone needs paper products, milk, bread, etc., etc., etc.

In merchandising, the percent is much smaller.
GAC

[Heidi]

16. At the same time, there's an experience that goes with redeeming a Wal-Mart gift card:

crowds, being "greeted," trotting down there with your gift card, etc. I haven't shopped in the US in nearly a decade, but as I recall, merchandise "purchased" with gift certificates when I did shop at Wal-Mart had to be dealt with at the customer service counter, like exchanges, rather than at the regular cash registers. Maybe that has changed, though.

[ProfessorGAC]

20. Nope

We got one each Christmas when my wife was still teaching. A group of parents (all special ed kids) would get together and buy my wife and her teaching partner gift cards to Wal-mart.

We usually used them to get kitty litter, dog food, cat food, and stuff like that.

But, you just go to the register, give them the card, and that's it.

If it still were the way you describe it used to be, i'd certainly buy that people don't bother using them.

But, it's not that way now.
GAC

[Heidi]

30. I'm _very_ glad to hear that.

:hi:

[NeedleCast]

22. That's interesting

and makes sense I guess.

There's also (at least for some people) a social stigma that makes redeeming a buy one entree, get one free type coupon, or even gift certificates seem cheap. I know a lot of waitstaff hate these things because more often than not, the user tips of actual amount on the check than what the check would have been without the gift cert.

[ProfessorGAC]

27. Well, Shame On The Tipper

If someone does that, that is horrible. That's even worse than horrible if you think about it.

If i go into a restaurant, drop $75 on meal, use a $50 gift card, and then only tip on the $25, i'm being a sneaky, cheap bastard. I'm ALREADY GETTING A $75 MEAL FOR $25 and now i want to go cheap on the tip, too! That's just rotten.

Geez, i'd probably tip extra because i'm already $50 fewer out of pocket.
GAC

[NeedleCast]

35. As a former waiter, pizza deliver driver and restaurant manger

I salute you.

There's a bar across the street from my office that gives out "lunch punch" cards. Eat three lunches there, the fourth is free sort of thing. I'm in there once or twice a week for lunch and sometimes after work drinks. You (but not everyone) would probably be stunned by how much trouble they have with these things. Someone goes in with one card and a party of three and insist that they should get three punches because three people ate lunch. People have lunch and three beers (or even a soda) an insist that their drink(s) should be free as well (the card clearly indicates that it only covers food). People who don't tip at all when getting their free lunch.

The bar and wait staff don't complain too much as the cards go a long way to bringing in repeat lunch customers during an often dead part of the day and the managers do compensate wait staff when they get hosed on a tip due to free lunch cards being played. Helps restore my faith in humanity that at least in this case, for every dick that uses a zero tab as an excuse not to tip there's a manager who will tack on 18% to the wait/bar staffs take home.

[ProfessorGAC]

39. Very Cool

Good on that manager.
GAC

[Bill McBlueState]

7. I wonder how DU's Wal-Mart Defense Brigade will rationalize this one n/t

[madrchsod]

8. i wish to hell i had a target where i live

instead of walcrap. i really hate going to walcrap but there`s some stuff i can`t purchase anywhere else

[Xenotime]

17. WalMart has done nothing good for this country

[nuxvomica]

23. I think it's a control thing

They didn't want someone in their store doing anything but shopping without their approval.

[ayeshahaqqiqa]

37. Smart move on Target's part

they get free publicity as being "the good guys".

[KittyWampus]

38. Mop up on Aisle One- a huge stinking pile of Public Relations

[Stinky The Clown]

42. Wal-Mart ...... case closed

Their company culture is right wing. Their managers are steeped in that culture. Some dumbfuck manager did this on his own. The company will close ranks around him.

Tada!

[Deja Q]

43. Odd. or stupid. But then, Wal-mart doesn't mind letting people get trampled to death either.

(which doesn't negate that those shoppers could have acted like humans instead of savages, but I digress.)

K&R

[Kajsa]

46. Wal-Mart is NOT into the spirit of giving.

That comes as no surprise.

:(

[GrantDem]

50. All part of Wal-Mart's on going War on Christmas...

:sarcasm:

[applegrove]

51. Apparently stores love the gift cards cause a huge percentage of them are never

redeemed and sit in somebody's wallet until they are out of date. Him handing the cards out in the store goes against the business plan of gift cards as a whole. IMHO

[DemBones DemBones]

54. At least Target came to the rescue. Wal-Mart's action makes no sense

to me.