We’re often asked why retailers would want to join the Plastic Jungle marketplace, allowing their gift cards to be traded electronically.  Indeed, many ask us why a retailer wouldn’t prefer that the card simply expire – going off into the ether, allowing the retailer to simply keep the money that otherwise would be spent in the store.  (In the gift card industry, they refer to this as “breakage.”)

There are many reasons, but let’s address the perception that retailers would rather their gift card just went unused.

They don’t.

First, in many states (and more importantly in an increasingly large number of states), unused gift card balances are not kept by the retailers.  They are paid to the state government as lost property.  This is called “escheatment.”  So no benefit here for the retailer.

Second, it used to be that retailers could earn interest on gift cards balances that did not go used.  That meant something when interest rates were 10%.  Not so much now.

So, the notion that all retailers want breakage is just that – a notion.

But more important is the value that the retailer achieves when a gift card is used.

At its heart the Plastic Jungle marketplace is all about getting gift cards out of the hands of people that won’t use them (often simply because the store either is not located closely enough or doesn’t carry the types of products they wish to purchase, no reflection on the retailer), and into the hands of motivated shoppers (the retailer’s best customers).  That in and of itself is incredible valuable to the retailers.  Why?

• Because purchasers will redeem the cards in store usually within a couple weeks.  And the retailer will earn both revenue and profit when they do – remembering that the retailer has booked the card balance as a liability.  That’s real time revenue and profit, not breakage at some future point that the retailer’s lawyers and accountants may or may not allow them to book.  Since most cards that come on to Plastic Jungle are very “young” that profit has time to earn a return for the retailer, much more so than dead balance.

• Typically when a consumer redeems a gift card in store, they spend more than the value of the card.  A lot more.  The industry average is around 70%, but for certain retailers it’s as high as 300%!  So the gift card is just a means to an end (in this case, a much higher purchase).  And, the types of goods that gift card users purchase tend to be higher margin goods – because the card to them is a way to buy something just a bit nicer than they were planning to.  And more margin means more profit.

• One more important thing retailers love – when someone purchases a card from Plastic Jungle, we know who they are.  If the buyer has given us permission, we can message him or her about all the great ways that they can spend their gift card.  This let’s the retailer promote the types of goods and services it wants its consumers to purchase.  Everyone wins.

So the retailers really do benefit whenever a gift card comes through the Plastic Jungle marketplace.  Now let’s multiply that benefit by $30 billion.  That’s a lot of revenue and profit that Plastic Jungle can unlock and speed to retailers doors.  Enough to turn around the current economic crisis?  Maybe not – but it’s a great start, and retailers want to make sure that they are part of it.

Plastic Jungle enjoys great relations with its retailer partners.  We believe our success is their success, and that’s how we are building our business.  We truly are bringing their gift cards home.