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Sunday, December 18, 2005

Buying Used Gift Cards

I'm often amazed at how the Web has changed commerce by breaking down geographical barriers to trade (like eBay). Here's the latest - there's now a market for buying, selling, and trading gift cards.

They've been sold on eBay for some time, but according to a recent New York Times article, Several companies (cardavenue.com and SwapAGift.com, and Gift Cards Again are mentioned in the article, but there are others) have set up an online market for people to list gift cards for sale (or to swap) for stores ranging from Home Depot to Borders Books to Bed and Bath). The economics of the market are interesting, and pretty much what you'd expect):
  • Transaction fees are paid by the sellers, and are usually a couple of bucks.
  • The discount for the cards (the difference between the face value of the card and the offering price) is smallest for stores like Wal-Mart and Home Depot, since almost anyone can use cards at these stores. For less well know stores, there's a thinner market, so the discounts are larger. In fact, the Home Depot ones are often bought by contractors, who will certainly use them quickly.
  • Most of the non-"top tier" store cards come at about a 10-15% discount.
  • The best deals (i.e. the biggest discounts) come right after the big gift-giving holidays, like Christmas, Valentine's Day, and Mother's Day. Not too surprising, since the supply is greatest then.
Click here for the full article. And here for another article on this phenomena on MSNBC - it lists a few other sites and also discusses some potential problems with this practice.

Given the amount of use we get out of Barnes and Noble and electronics and toy stores, the Unknown Household will probably save some money by using these sites.

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