Dec 12, 2011
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New ways to use gift cards sprout this holiday

Dec 12, 2011

Retailers are coming up with ways to make the gift card - that staple of holiday giving - more exciting to receive, from including a set of Lego blocks to putting images of popular paintings on the plastic cards.

At the same time, some companies are trying to make the cards even more appealing to give, by addressing the fact that recipients rarely use the entire amount stored on them.

More than 80 percent of shoppers plan to buy gift cards this holiday, up from 77.3 percent last year. They are expected to spend an average of $155.43 on cards, the highest amount since 2007 and up from $145.61 last year, according to the National Retail Federation.

Total spending on gift cards should reach $27.8 billion this holiday. Consulting firm TowerGroup has estimated that about 10 percent of the value of gift cards are not used, which would leave almost $3 billion on the table.

Keeping that unused cash in mind, on November 6 Del Currie and Lou Corbo launched Moola Street to offer a different kind of gift card. The purchaser only has to pay 10 percent of the value of the card upfront, but gets to give a card with 10 times that value as a gift. So, for example, a $100 gift card costs $10 upfront.

If the card is not redeemed after three months, the purchaser does not have to pay any more. The full amount is charged only when the recipient logs on to moolastreet.com and converts the gift into cards from retailers and restaurants including Amazon.com (AMZN.O), Target (TGT.N), Macy's (M.N) and Subway. The recipient can trade the Moola Street card for up to three retailer or restaurant cards.

"The response so far has been good," said Moola Street Chief Executive Del Currie. "We have launched it, but haven't started all our promotions too heavily yet. We haven't been going berserk with orders yet, but the traffic to the Website has been good."

Some gift cards have become gifts in their own right, as games, lights, music and the occasional toy come along with the ability to buy what you want.

Target, which switched from paper gift certificates to plastic cards with bar codes back in 1999, offers dozens of different gift cards redeemable at its stores and online. Since January 2010 it has also had mobile "cards" that can be stored on a smartphone, eliminating the need for a physical card.

One of the popular Target cards this year includes Lego pieces the recipient can use to build a small version of Target's mascot dog, Bullseye, a polar bear or a snowman, said Terry Scully, Target's president of financial and retail services.

Retailers are big believers in gift cards, as recipients who do redeem them often spend more than the value of the card. Sales are not logged until the cards are redeemed.

The biggest day for using gift cards at Target is the day after Christmas. About one-third of the value of the cards loaded annually is redeemed in December and January, and a majority of the money loaded on cards is used within a year after they are issued, Scully said.


GoalMine, an online investing and savings service, will allow people to redeem gift cards to fund investments, including mutual funds and FDIC-insured savings accounts that it runs.

The offer begins December 19 and runs through the holiday season. Up to 10 gift cards can be redeemed per day. The cards must have at least $25 on them and the first card will be redeemed for 150 percent of its value, for cards up to $50.

Subsequent gift cards will be redeemed based on a market value, set by prices offered at Plastic Jungle, an online gift card exchange.

Plastic Jungle lets people buy gift cards online for up to 35 percent off or to sell cards for up to 92 percent of face value. Sellers get cash that they are much more likely to use.

Cards for Target and Wal-Mart Stores Inc (WMT.N) -- where a card depicting a winter scene by American painter Thomas Kinkade is selling well -- have some of the lowest discount rates on PlasticJungle. On Friday, there were no Walmart cards available, while a Target card with a balance of $26.80 was available for $26, or 3 percent off.

While Plastic Jungle has been around for several years, it has seen "triple-digit growth" in revenue and transactions through November this year, versus the same period of 2010, according to Kristin Morse, vice president of marketing.

Card holders themselves are also selling cards. A search for "gift cards" on eBay's (EBAY.O) online marketplace on Friday morning revealed over 600 pages of cards for sale. The cards on the first page of results were for retailers including Home Depot (HD.N), Best Buy (BBY.N), Amazon.com, Sears (SHLD.O) unit Kmart and Macy's.

Almost all sellers on eBay offered the gift cards at slight discounts to the face value. However, some, for Amazon.com and Apple's (AAPL.O) iTunes store, were offered at prices above the value on the cards.

(Reporting by Alistair Barr in San Francisco and Jessica Wohl in Chicago; Editing by Richard Chang and Gunna Dickson)

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