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

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suggest a store or location where the recipient should spend the money, but the recipient can redeem the gift immediately, whether or not they choose to spend it as suggested.

That’s a big change from GiftRocket’s original formula. The company started out with an elaborate smartphone-based system that would only release the cash if the recipient checked in at the specified location. “Our friends thought that was cool, but a lot of people thought it was too complicated,” Kale says. “A lot of the time you don’t even know if the person you are sending a gift to has a smartphone. So now we’re just letting people redeem up front.”

In another shift, GiftRocket plans to add payment options this week that make it easier to collect a cash gift. In the past, the startup offered only one option: PayPal. Now recipients can also opt to have a gift deposited directly to their bank account, or to have GiftRocket cut them a check and send it by snail mail.

“The amount of negative e-mail we received about PayPal is stunning,” says Kale. “It’s not designed in a user-friendly way. It’s really designed for power users who are buying and selling stuff on eBay. For lightweight uses, it’s not really suitable.”

Kale says he hopes that the new redemption options will encourage people to think of GiftRocket as an easy way to send money for all occasions. “We are really a payments company,” he says. But he adds that “we don’t want to be the next-generation PayPal—the point is it’s an extremely convenient way to send a gift.”

GiftRocket makes money by charging a 5 percent service fee, plus $1, for every gift it handles—so a $100 GiftRocket would cost the giver $106. That makes a GiftRocket a bit more expensive than a big-box-store gift card, but Kale says the startup’s customer research shows that “people don’t mind” the service fee. “It’s a social product—when you go into a Hallmark do you really look at the price of a card? And it’s worth it, if it saves you a trip to the store.”

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

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