The Bottom Line in Mall Cards
This was taken from an advertisement in a paper, and coincides well with my post about gift cards, When Money Expires. Read it, and tell me what you think.
by Maura k. Ammenheuser
Gift certificates once were considered rather impersonal.
Not anymore.
“It’s a social trend. Everyone’s very time-pressed,” said Amanda Nicholson, Assistant Professor of Retail at Syracuse University’s Whitman School of Management. “Giving a gift card has become very acceptable.”
Consumers have warmed to the convenience of plastic magnetic-strip cards. Retailers, ranging from Wal-Mart to Tiffany & Co., now sell them. So do shopping centers, where they can be redeemed at any store in a mall, or any mall in a corporate portfolio.
Brenda Gilpatrick of a gift-card consultancy Your Fantastic Plastic said, “Each year, the typical U.S. shopping center sells $1 million of these cards, with an average value of $50. And sales are growing twenty percent annually.” Not surprisingly, when using their gift cards, most people spend more than the face value.Rules of the Game
Popular as they are, mall cards can bear surprises - specifically fees and expiration dates, both of which vary by state. Malls “lose money for every gift card they sell,” explained Scott Krigel, Chief Marketing Officer, Store Financial Services, which partners with more than 200 shopping-center programs.
Shopping centers pay a service charge to financial partners, such as American Express or Visa. Store Financial and AmEx tack a $1.50 charge onto card purchases. Malls don’t recoup that so they cover the expense with fees, at least in states where it’s allowed.
According to Krigel, most shoppers redeem cards within 60 days. But the cards’ value can erode over time. Generaly starting in the thirteenth month, the issuer assesses a monthly fee; with AmEx and Store Financial, it’s $2. So a $50 card unused for 18 months would lose $12.
“Financial companies set expiration dates, typically two years after issuance,” Gilpatrick said, “though shoppers can transfer funds on an expired card to a new one, and some states ban or regulate the expiration period.”
Like dormant bank accounts, after a time, depending on state law, unspent funds go to state coffers. But not all states mandate this.
Connecticut, Hawaii, Massachusetts, New Hampshire, Rhode Island and Vermont ban fees. Malls sometimes choose not to sell cards in those states rather than absorb the cost.
Wally Brewster, Senior Vice President, Marketing and Communications, with shopping center landlord General Growth Properties, was among several experts whoframed the issue in consumer-freedom terms. “Better to allow malls the fees,” he said, “than to deprive shoppers of a popular product.”Buyer Be Educated
Experts uniformly acknowledge that consumers should read the terms disclosed on the card, in paperwork accompanying purchase and often on mall signs.
Brewster compared consumer reaction to these terms to what happened when banks introduced ATMs. “People initially resented being charged a fee to access their money,” he recalled, “but gradually they accepted that using another bank’s equipment necessitated it.”
Shopping centers will keep selling cards to meet consumer demand.
“It’s a marketing tool to drive business,” Nicholson said. “Nobody’s going into this because they’re losing money.”
(Somewhat) Similar Posts:
As if gift cards weren't backhanded enough. Here's news from CNN: As more retailers file for bankruptcy or go out of business, more than $75...Gift cards are a fairly recent invention (although scrip is not), and they have quickly become very ubiquitous. But have you ever had an...Howstuffworks.com has the answer. I'd post part of it here, but it doesn't really make sense without reading the entire article. Interesting stuff......I think the two things that frustrate me the most about business these days are (1) a lack of good information available to the average...