Evan Schuman of Ziff Davis goes thru the urban myths regarding gift cards and how we are told they can be abused, and how they really are.
Opinion: As gift cards soar in popularity—some $25 billion in gift cards are expected to be sold this holiday season alone—the attempts to use them fraudulently have also soared.
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As gift cards have soared in popularity in recent years—some $25 billion in gift cards are expected to be sold this holiday season alone—the attempts to use them fraudulently have also soared. But some of the theft techniques are woefully out of date.
Does this mean that gift cards are secure financial tools for retailers and consumers? Not necessarily, but today's gift cards are certainly no less secure than traditional credit cards, with most retailers and issuers willing to be flexible with consumers who have been burned. The most popular gift card fraud rumor hitting Web discussion forums and many newspapers is that there are bands of thieves who copy down gift card numbers out in the open and then wait for a hapless consumer to buy—and thereby activate—the card. The thief then uses the card anywhere he doesn't have to physically present the card, such as online.
PointerClick here to read why Evan Schuman says data thieves are one big MasterCard commercial.
It may be an interesting story, said gift card fraud expert Paul Cogswell, but it won't work and it likely never did.
"It flat out won't work for you," said Cogswell, vice president of loss prevention for CommData, which issues about half the gift cards used in the United States. "This is a recycling of an urban myth. It's rare if ever that you've had a gift card retailer that wouldn't have anticipated this scam."
Rest of Story -- Gift Card Fraud Rumors and Reality
Gift Cards: Coinstar signs up W.H. Smith for gift card program, this on a day that also saw a lot of industry updates on Coinstar including Trading Markets and Seeking Alpha.
Coinstar is First to Sign Major Retailer to Gift Card Mall Program in the United Kingdom
Popular British Retailer WHSmith will carry Gift Card Mall
BELLEVUE, Wash.--(BUSINESS WIRE)--Coinstar, Inc. (NASDAQ:CSTR) today announced that its subsidiary Coinstar Limited has signed major U.K. retailer WHSmith to its Gift Card Mall program. This well-known retailer is the first major retailer in the United Kingdom to deliver a Gift Card Mall program, initially made popular in the United States.
"By teaming with WHSmith we have access to one of the biggest retail names in Britain," said Steve Verleye, senior vice president and general manager of Coinstar’s E-pay services. “The U.K. Gift Card Mall program represents an important new development in Coinstar’s U.K. product offering and allows us to share our gift card expertise with WHSmith."
The Gift Card Mall consists of a display rack of popular retailers including department stores, clothing, and electronics, as well as experience cards such as holidays, sporting events, and movie going. The program gives the host retailer an innovative, turnkey product to drive incremental traffic, sales and profits into the store. In addition, it also creates a new way for consumers to buy gifts in the form of gift cards for their friends and family.
The program will launch this month in the U.K. with a nationwide roll-out in more than 540 WHSmith’s stores. Additional U.K. retailers are expected to be added to the program over the coming months.
“As leaders in the gift card market it is a logical move for us to sign with Coinstar’s Gift Card Mall service. Coinstar’s U.S. experience will put WHSmith into an even stronger position to take advantage of this rapidly growing market,” said Ian Sanders, Head of Commercial Development at WHSmith.
The U.K. gift card market is expected to grow from £3 million in 2005 to approximately £2.1 billion by 2007 (source: Giftex Research 2005).
About WHSmith
WHSmith is made up of 543 high street stores and 129 airport and station stores. The high street business sells a wide range of newspapers, magazines, stationery, books and entertainment products, while WHSmith Travel sells a tailored range of newspapers, magazines, books and confectionery products for people on the move. In addition, WHSmith Direct – www.whsmith.co.uk - serves customers on the internet 24 hours a day.
About Coinstar, Inc.
Coinstar, Inc. (Nasdaq:CSTR) is a multi-national company offering a range of 4th Wall™ solutions for the retailers’ front of store consisting of self-service coin counting, electronic payment solutions, money transfer, entertainment services and self-service DVD rental. The company’s products and services can be found at more than 60,000 retail locations including supermarkets, financial institutions, drug stores, mass merchants, convenience stores, and restaurants. For more information, visit www.coinstar.com.
Coinstar is First to Sign Major Retailer to Gift Card Mall Program in the United Kingdom
Report posted by Tower Group that over $8 Billion in unredeemed gift cards this year. That's 50% of gift cards issued. Kioskcom Blog � $8 Billion in Unused Gift Cards
Gift Card Fraud An Issue For Retailers To Address
The Detroit Free Press
Dec 23 2004 : While gift cards are a favorite gift choice of US consumers in the 2004 holiday shopping season, fraud is a growing concern with the rise of online gift card trading exchanges. In a case cited by Daniel Butler, a VP at the NRF, one US retailer tested 42 gift cards that were for sale at an online exchange, and found 22 to have a fraud connection. If gift cards are stolen or bought with stolen credit cards, retailers discover the link when the card is used in-store, but those accepting gift cards online as part of a multi-channel strategy, need real-time card validation to minimize fraud.
Just recently, a former Home Depot marketing manager admitted to selling, or intending to sell 2,375 stolen company gift cards on eBay, at a total of USD 269,350 between May 2002 and March 2004, after ordering the cards from Home Depot headquarters. Despite the potential for fraud, gift cards are positive for US retailers and accounted for almost 10 per cent of total retail sales at year-end 2003. Multiple gift card distribution channels such as kiosks, the Internet, malls and third party vendors made their first appearance in 2004 and will be important in future years.
Going forward, US gift card issuers are expected to investigate the UK and general European gift certificate market for future expansion now that most US retailers have gift card programs. Hong Kong based clothing retailer Esprit by contrast extended its gift card program, which originated in Europe, to North America, in September 2004. In the UK, where 26 of the top 35 retailers already issue paper gift vouchers in-store, according to First Annapolis, gift card solutions providers may find the market a hard sell until more UK retailers establish successful gift card programs.
74% of shoppers expected to buy gift cards
Greg Wiles
Bloomberg News
Nov. 18, 2004 01:57 PM
U.S. gift-card sales will rise this holiday season with 74 percent of shoppers buying at least one, a survey found, as retailers appeal to higher-income customers with special packaging and redemption values of as much as $1,000.
Merchants such as May Department Stores Co. and Barnes & Noble Inc. are expanding their gift-card offerings, sales of which are expected to increase by $100 million to $17.3 billion, Washington-based National Retail Federation said. Last year, 70 percent of shoppers bought a gift card in November and December.
Gift cards are the top holiday gift among shoppers this year, according to a Deloitte & Touche USA survey of 16,000 consumers. Last year, gift cards and certificates were the No. 3 choice, behind apparel and CDs and DVDs, the survey said. Barnes & Noble is offering a $1,000 gift card in a fabric-lined box with a pair of bookends and a portrait of William Shakespeare. advertisement
"People have accepted gift cards as truly being a gift," Deloitte & Touche Vice Chairman Tara Weiner said in an interview. "It's not like giving cold cash where you gave it no thought."
Gift cards are expected to play a significant role during November and December, when total retail sales are forecast to rise by 4.5 percent, according to National Retail Federation projections.
Shoppers will spend $80.45 on gift cards, or about 11.5 percent of their average gift budget of $702 this year, the group said. Total retail spending is forecast to reach $219.9 billion.
Shares of May fell $1.04 to $29.71 at 1:46 p.m. in New York Stock Exchange composite trading. New York-based Barnes & Noble rose 74 cents to $26.04.
'Redefining the Season'
May, the St. Louis-based operator of the Lord & Taylor and Marshall Field's chains, has added cards with more contemporary designs printed on them.
"We would be very disappointed if our gift-card sales don't grow between 10 to 20 percent," said May Chief Financial Officer Thomas Fingleton on a conference call last week.
Retailers also are using gift cards as part of discounts and as a way to get consumers to return to their stores. At Best Buy Co., the largest U.S. electronics retailer, shoppers buying a $1,000, 30-inch Samsung high-definition television receive a $100 gift card to use later.
No. 2 U.S. electronics chain Circuit City Stores Inc. is giving a $25 gift card for people signing up for a new credit card.
The growth in gift cards also means that more sales are now in January. Retailers typically don't book the sale as revenue until the gift recipient uses the card to make a purchase.
ValueLink, a First Data Corp. unit that began issuing gift cards for retailers in 1995, found 58 percent of 1,000 people it surveyed redeemed the card within the first month they had it. Fifty-five percent said they made purchases for more than the value of the card when they were redeeming it.
"It is redefining the season," said Wendy Liebmann, president of New York-based consulting firm, WSL Strategic Retail.
74% of shoppers expected to buy gift cards
Gift cards: Pieces of plastic spread joy, but not all are merry
Monday, November 08, 2004
By Teresa F. Lindeman, Pittsburgh Post-Gazette
With more than half of the gift-receiving public hoping for a gift card this holiday season, the little plastic presents are no longer seem like a lame solution for a difficult-to-please cousin. Now retailers are concentrating on the pizzazz factor.
Department store J.C. Penney this year has introduced plush cardholders ($1.99 with gift card of $10 or more) so givers can tuck their offerings inside a stuffed bear or perhaps a Santa.
GiftCertificates.com, an online purveyor of cards since 1997, will launch a service in the next few weeks to help customers get more bang from their expenditure of bucks. Perhaps that restaurant gift card would look cute in an empty Chinese takeout box with ribbons?
"People love the whole aspect of opening a present," said Kathy Gersch, executive vice president of marketing and merchandising.
Gift cards -- once merely the back-office staff's high-tech replacement for the clunky paper gift certificate -- have been discovered by the marketing team.
The first big assignment was an image fix from the lazy person's solution to a coveted item. That seems to have been accomplished. The National Retail Federation's latest research indicates that more than 50 percent of the receiving public would like to get a gift card this year, up almost 10 percent from two years ago.
While it may be boring to open a flat envelope, both retailers and consumers have warmed to the advantages of cards. Stores find recipients usually spend more then they have been given. For shoppers, the money on the card is a pot of gold that makes it easier to buy something nicer than usual.
Gift cards also bring many people back into stores during the slow months of January and February. Mall owner Simon Property Group, which rolled out its own gift card nationally in 2003, saw 60 percent of the balances spent within 60 days last year.
Simon, which has three Allegheny County malls, expects to sell $400 million worth of gift cards this year, compared with $340 million last year. Nationally, the holiday gift card industry could reach $22 billion this year, a small, but significant portion of the $220 billion that the retail federation is projecting for holiday sales.
The original gift cards looked like something the accountants might have come up with -- one color, maybe a logo.
But in a recent customer survey by Stored Value Systems, a gift card supplier, respondents said the biggest drawback to cards was that they were impersonal. Few people had received them in anything more personal than a gift card. More than half of those surveyed said the design on the card was important and should relate to the occasion.
Penney's this year has rolled out four new holiday card images and added a Spanish language card. Several national retailers created two-part gift cards for the back-to-school season, allowing students at college to buy while their parents back home reloaded the account.
Even plastic can be improved upon. Target has sold a mood gift card that changed color when held. Hardware retailer Lowe's managed a card made of wood ("Don't ask us how we did it," said Bob Skiba, general manager of gift card supplier Stored Value Systems, which worked on the project.)
"It's not just what shade of black do you want anymore," said Skiba, who was on a team that brought cards in 1997 to The Gap clothing chain.
GiftCertificates.com's top seller is a one-size-fits-all version that can be split among 200 or more participating merchants. The online shop also promotes itself as a one-stop place to pick up cards from a number of companies ranging from Borders Books and Music to Merry Maids to Zales. Millions of cards are stockpiled in a warehouse in Omaha, Neb., ready for shipment.
Gift card kiosks also are showing up, first at Safeway grocery stores and more recently at some Giant Eagle locations in the form of stands holding a range of restaurant and retailer cards.
Marketers and accountants still have issues to work through. Financial rules demand that money received for gift cards not be counted as revenue until that money is actually spent.
American Eagle Outfitters listed $3.3 million in unredeemed gift cards at the close of fiscal year 1997. At the end of the most recent fiscal year on Jan. 31, 2004, the Marshall teen clothier reported more than $25 million in unused card value sitting on the books.
"It's an accounting nightmare," said Gersch, at GiftCertificates.com.
Bookkeeping concerns led to expiration dates and fee systems aimed at limiting the length of time people could forget their cards stashed in the back of the sock drawer. Simon, for example, begins charging a $2.50 monthly fee in the seventh month, eventually clearing out the account.
Upset consumers and a wave of state laws seeking to restrict such requirements have focused attention on the issue and persuaded a number of retailers to change their policies. Penney dropped its service fees a year ago. In July, GiftCertificates.com eliminated the 13-month expiration date on its all-in-one product.
Gersch isn't too concerned about the change. The cards have been around long enough that accountants can better predict how many people will hang on to them.
The National Retail Federation recommends consumers check into fees and restrictions before buying a gift card, since they vary between issuers.
As for the problem of putting off sales into the months after Christmas -- and perhaps exchanging full-price sales for post-holiday discounted merchandise -- there seems to be little sympathy. Skiba said stretching the shopping season should be an opportunity for stores to convert people into regular customers.
More than half of American consumers prefer electronic gift or spending cards when giving gifts rather than giving cash or paper gift certificates, according to the fourth annual Consumer Insights Survey commissioned by spending card solutions firm ValueLink.
Of those consumers surveyed, 52% said they would prefer to give a gift card, while 38% prefer to give cash and 11% prefer to give gift certificates (11%). According to ValueLink, the survey of 1,006 US adults reveals a steady growth in gift card usage across several measurable categories, and American consumers are purchasing more gift cards at higher values than at any time since the annual survey began tracking the figures in 2001. This article is copyright 2004 TheWiseMarketer.com.
Some 64% said they purchased and/or received a gift card in the previous 12 months, compared to only 36% in the original 2001 survey. Consumers had purchased an average of just under seven gift cards in the previous 12 months, with an average value of US$59 per card (up from 4.1 cards at US$44 per card in 2001).
Most spend more
Of those who had received a gift card in the previous 12 months, 27%
said they spent the initial value of their card within one week of
receiving it, and another 31% spent the value within one month. More
than half (55%) of those surveyed said they spent more than the value
of the card when they used it.
"Tracking these statistics over a four year period has provided us with a definitive picture of the American consumer's acceptance, purchase and use of electronic gift cards," explained Kevin Harte, senior vice president and general manager for ValueLink.
| Measurement | 2004 | 2003 | 2002 | 2001 |
| Consumer awareness of gift cards | 94% | 92% | 79% | 76% |
| Purchased or received a gift card | 64% | 59% | 37% | 36% |
| Avg. no. of gift cards purchased | 6.9 | 5.6 | 4.6 | 4.1 |
| Avg. value of gift cards purchased | US$59 | US$41 | US$50 | US$44 |
| Avg. gift card spending in previous year | US$247 | US$197 | n/a | n/a |
| Spend more than initial value of gift card | 55% | 56% | 61% | 58% |
| Overall satisfaction with gift cards (10 = highest) | 9 | 9 | 9 | 7 |
As demonstrated by a preference for gift cards rather than cash or paper certificates, electronic gift cards have evolved to become a desired product by purchasers and receivers alike, according to ValueLink.
Gift options
Looking at the type of gifts for which gift cards are used, 66% of gift
card purchasers said that they give them as a primary gift, while 28%
said they them with another gift.
"The Christmas holiday is a crucial time of the year for gift cards in the retail world, as 56% of respondents cited the occasion for a gift card purchase," said Karen Larsen, ValueLink's vice president of product marketing and evolution. "An even stronger figure, and one that points toward the year-round appeal of gift cards, is that 77% had purchased a gift card to give as a birthday gift."
The benefits
Survey respondents also highlighted the benefits of purchasing and receiving gift cards:
Key findings
Other key research findings included:
Data for ValueLink's Consumer Insights Survey 2004 was collected in August 2004 by TNS Financial Services Group, using its Express Telephone Omnibus (a weekly random survey of adult US consumers).
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Source: ValueLink