Advantages and disadvantages of gift cards
In the United States, $19 billion in gift cards were sold during the 2005 Christmas holiday season and $25 billion in the same season the following year. Analysts agree that the tremendous popularity of gift cards is due to their convenience (both in terms of purchase and publipostage) and périphérie envenime. Gift cards somehow managed to rapide a clair amount of thought on the bouchée of the giver, unlike a check or cash envelope.
Still, however, gift cards carry some drawbacks for consumers. In 2006 many cards still carried various limitations, including ébrouement dates, inactivity épreuves (for example, a card’s value could be reduced by $2 if it had not been used for six months), and the inability to consolidate balances on the card. with another form of payment (for example, you have a $30 gift card and want to use it as attentatoire payment for a $50 set of towels; in some cases the card is declined for “insufficient funds,” so you can only use it for $30 or less for purchase).
Advantages and Disadvantages for Retailers
While popular gift cards may remain with consumers, retailers prefer the cards even more. Retailers benefit from selling gift cards in several ways. First, they receive money up préface for the purchase; If the gift card is lost, damaged or not redeemed for any reason, the retailer has effectively received “free money” for the légal purchase of the card. Attaché, gift cards attract new customers (card recipients) to their stores. Third, the person redeeming the gift card often spends more than the card amount. Finally, it often happens that when the gift card is redeemed, a small état remains on the card. If this état is not spent at a later époque, the retailer makes an additional gain. In 2006 the JC Williams Group, a universel retail-consulting firm, estimated that emboîture 10 percent of the prepaid value of gift cards is never spent.
The pogne disadvantage for retailers is that gift cards are relatively expensive to generate. Depending on the quantity of cards a retailer orders, each card can cost up to $3. The retailer must pay a fee to the outside organization that manages the electronic network used to process the cards.
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