A $100 Gift Card Isn’t Worth $100, Says GiftRocket

If you’ve already bought someone a gift card for the holidays, don’t read the rest of this article. It’ll just make you feel bad.

Okay, still with me? It turns out most gift cards are worth less than their face value. Quite a lot less—at least, judging from the resale value of gift cards on exchanges like Cardpool, Plastic Jungle, GiftCardRescue, and Gift Card Granny. These marketplaces say the average value of a $100 card is more like $72 if you try to sell it to someone else for cash, according to a survey by San Francisco-based GiftRocket.

The Y Combinator-backed startup, which we profiled here in April 2011, isn’t exactly an impartial source. It’s trying to get people to give up on the plastic stored-value cards you can buy at Walmart, Starbucks, Barnes & Noble, and hundreds of other stores and switch to its all-digital cards, which, of course, are called GiftRockets. The argument is that GiftRockets, which can be redeemed for cash, are always worth the face value.

But the fact remains that a lot of gift-card recipients find it inconvenient to use the cards, and end up trying to sell them for hard cash, which is far more fungible. And when they do that, they take a big hit—up to 50 percent for the less popular cards, according to GiftRocket’s study.

GiftRocket co-founder Kapil Kale

A store-brand gift card’s main selling point is that it’s not as gauche as giving cash. The message is “Go buy yourself something nice at this store I know you like.” And after all, it’s the thought that counts. But it might be nice if the thought didn’t come with so many strings attached. “Basically you’re giving them a more restrictive form of money in exchange for the packaging,” says GiftRocket co-founder Kapil Kale.

GiftRocket shared the results in an interactive infographic published yesterday. The startup found that the average resale value of a $100 Whole Foods gift card is $91; Walmart, $87; Toys R Us, $82; Starbucks, $80; Barnes & Noble, $77; Lord & Taylor, $70. The larger the retailer in annual-revenue terms, the more value their cards retain, the startup discovered: Cards from national giants like Best Buy, Walmart, Costco, and Target snag the highest prices on the resale markets. Small retailers like Shopko, a chain of 13 stores based in Wisconsin, suffer worst: its cards go for only 60 cents on the dollar.

“The key point is that when you buy someone a $100 gift card, it’s not actually worth $100, because there is a chance they aren’t going to be able to use it,” Kale says “When you buy someone a GiftRocket, you know they can use it. We’re trying to combine thoughtfulness with a more effective form of money transfer.”

A GiftRocket arrives in the form of a fancily-designed e-mail that resembles a greeting card. The giver has the option to … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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