January 7, 2009
Toledo Retailers Accept Competitor’s Gift Cards
By Tom Ryan
For the fourth year,
Culture Clash, a Toledo, Ohio store that sells CDs and records, is accepting
gift cards of other retailers on a dollar-for-dollar basis, according to
the Toledo Blade. At the same time, Toledo’s Appliance Center has
begun accepting gift cards, at 50 percent of their value, from Circuit
City, which filed for Chapter 11 bankruptcy in November.
Both chains believe the
move will help them win new customers.
“We feel it’s a
good way to initiate the public into buying local,” said Pat O’Connor,
Culture Clash owner. While acceptance has some limits, Mr. O’Connor told
the newspaper that about 40 customers have brought in cards this holiday
season to exchange from Best Buy, Target and Barnes & Noble. The exchangers
are usually looking to buy vinyl records or music those chains do not carry,
he added.
Mr. O’Conner said he
redeems the cards himself and sometimes “gets stuck with them.”
At Appliance Center,
Jim Grzywinski, general manager, told the Toledo
Blade that about a dozen customers have brought in Circuit City gift
cards so far despite getting only half their value.
“It’s started to
work out. Since they’ve filed Chapter 11, a lot of people have told us
if they don’t use ’em they know they’ll be able to get something from us,” said
Mr. Grzywinski. “Everybody’s looking for
new business, so by doing this people who maybe don’t shop with us normally
will give us a chance.”
Circuit City, which has
announced plans to close 155 stores nationwide, has said it intends to
continue honoring its gift cards. But Kathy Grannis,
a spokesperson for the National Retail Federation, said customers are worried
that retailers landing in bankruptcy court will not honor gift card commitments.
On Monday, KB Toys, which announced plans to liquidate on December 22,
announced plans to stop honoring its gift cards on January 11.
The last notable case
when a retailer somewhat accepted a competitor’s gift cards was when Sharper
Image filed for bankruptcy in February 2008 and suspended the acceptance
of its gift cards. Competitor Brookstone soon
offered customers a 25 discount on any purchase for a consumer bringing
in their worthless Sharper Image gift card.
Discussion Questions:
Should retailers explore accepting a competitor’s gift cards as a marketing
ploy? If so, how generous should stores be in accepting competitors’
cards, particularly in bankruptcy cases where their value becomes questionable
or worthless?
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This is another gimmick, that while it may bring some shoppers into the store, will not have long-term benefits. In tough economic times it’s important for retailers to strongly project their own core story and their values.
Culture Clash has probably received more PR value from this promotion than it will spend redeeming competitors’ gift cards. In that sense, it served them well. But it does not build their brand.
Appliance Center’s move is yet another positive gesture to the consumer. The chain knows that they will have to go above and beyond to capture market share.
I really like the aggressive nature of this campaign. Why not capitalize on the demise of a less efficient retailer? I have always said in the field that the retailer who makes the customer happy is the one that is going to win. And pretty soon we may have a lot of unhappy Circuit City customers. Appliance Center has the opportunity to capture all the local CC customers by honoring their card. Let the customer gestures continue.
Old Navy said it best almost a decade ago: shopping is fun again! Making your customers happy with the overall shopping experience will build bigger baskets and increase return visits. Common knowledge? How many chains are doing everything they can to ‘gesture’ their customer? If you want to survive, make it known that you appreciate their business. Bravo Appliance Center.
It’s about time! This is one of the smartest marketing programs a retailer could do to see fast, short-term gains and get new people into their stores. And while some might view this as artificially increasing sales while hurting profits, they have to understand that that’s not the real goal here.
When times are tough, you need to get people shopping. If these retailers know what they’re doing, they will redo their store layouts and train staff to encourage upselling, bundling, and impulse purchases.
Now if only I can find someone to take my coupon for a free oil change at any American Motors dealership.
This definitely gets ink but practicality seems murky to me. I’ve worked with retailers who couldn’t tell how much their own gift cards were worth due to software issues, much less a competitor’s. So I wonder how it plays out in the store but as an attention grabbing stunt, they got it right
I agree with Max again; it’s a gimmick. It’s cheap advertising and looks better on the surface than it really is. First, I don’t think any consumers are going to be bringing in hundreds of dollars of gift cards to begin with. Second, a retailer can sell the gift cards on eBay for at least 80 cents on the dollar so they are not going to be out too much. As for accepting Circuit City’s card at 50 cents on the dollar, they might actually turn a profit if they can sell the cards on eBay for 60% or more. This is also a slap in the face to Circuit City and almost slanderous. It’s a subtle way of saying to the consumer that the Circuit City cards are worthless, when in reality they aren’t.
I can just see grocers getting into this now. Offering to pay 75% for their competitors gift cards and then selling them on eBay for 80%. The message is that perhaps the competitor is going out of business when in reality they aren’t. The few dollars they spend on the gift cards will be well spent if they can hurt the reputation of their competitors.
For a small retailer like Culture Clash, this is a cute move that can be managed on a customer-by-customer, moment-to-moment basis. For larger chains like Brookstone, the management of accepting competitors’ gift cards takes on epic proportions. How to design and then communicate the new procedure to employees and customers? What is the follow-up plan, if any, for squeezing some tangible value out of competitors’ gift cards? Is there a central location inside the company where the results are measured and evaluated for use in the future? (If the results of coupon promotions are difficult to measure, how much more difficult would this be?) Who’s assigned to sell the cards on eBay (if they have value, as David Livingston alludes)? Is this an HQ function, with an Operations staffer assigned the job of setting up an eBay account for this purpose? Can they even access eBay through the company’s firewall, or must they perform this function from their home computer?
Let see if I have this straight….
Someone gives 50 bucks to Macy’s for a gift card, then takes $50 worth of merchandise from JCPenney’s inventory with it?
Does JCPenney then chargeback the merchandise vendor for the missing gross margin? Because I don’t see how this works over the long term. Call me old fashioned but if it looks like a gimmick, smells like a gimmick….
The problem with the Brookstone offer last year was the same 20% discount was extended whether your gift card was worth $5 or $500. At least this gesture/gimmick scales to the value of the card, although I agree that it’s hard to verify how much is left on the card.
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This is another gimmick, that while it may bring some shoppers into the store, will not have long-term benefits. In tough economic times it’s important for retailers to strongly project their own core story and their values.
Culture Clash has probably received more PR value from this promotion than it will spend redeeming competitors’ gift cards. In that sense, it served them well. But it does not build their brand.
Appliance Center’s move is yet another positive gesture to the consumer. The chain knows that they will have to go above and beyond to capture market share.
I really like the aggressive nature of this campaign. Why not capitalize on the demise of a less efficient retailer? I have always said in the field that the retailer who makes the customer happy is the one that is going to win. And pretty soon we may have a lot of unhappy Circuit City customers. Appliance Center has the opportunity to capture all the local CC customers by honoring their card. Let the customer gestures continue.
Old Navy said it best almost a decade ago: shopping is fun again! Making your customers happy with the overall shopping experience will build bigger baskets and increase return visits. Common knowledge? How many chains are doing everything they can to ‘gesture’ their customer? If you want to survive, make it known that you appreciate their business. Bravo Appliance Center.
It’s about time! This is one of the smartest marketing programs a retailer could do to see fast, short-term gains and get new people into their stores. And while some might view this as artificially increasing sales while hurting profits, they have to understand that that’s not the real goal here.
When times are tough, you need to get people shopping. If these retailers know what they’re doing, they will redo their store layouts and train staff to encourage upselling, bundling, and impulse purchases.
Now if only I can find someone to take my coupon for a free oil change at any American Motors dealership.
This definitely gets ink but practicality seems murky to me. I’ve worked with retailers who couldn’t tell how much their own gift cards were worth due to software issues, much less a competitor’s. So I wonder how it plays out in the store but as an attention grabbing stunt, they got it right
I agree with Max again; it’s a gimmick. It’s cheap advertising and looks better on the surface than it really is. First, I don’t think any consumers are going to be bringing in hundreds of dollars of gift cards to begin with. Second, a retailer can sell the gift cards on eBay for at least 80 cents on the dollar so they are not going to be out too much. As for accepting Circuit City’s card at 50 cents on the dollar, they might actually turn a profit if they can sell the cards on eBay for 60% or more. This is also a slap in the face to Circuit City and almost slanderous. It’s a subtle way of saying to the consumer that the Circuit City cards are worthless, when in reality they aren’t.
I can just see grocers getting into this now. Offering to pay 75% for their competitors gift cards and then selling them on eBay for 80%. The message is that perhaps the competitor is going out of business when in reality they aren’t. The few dollars they spend on the gift cards will be well spent if they can hurt the reputation of their competitors.
For a small retailer like Culture Clash, this is a cute move that can be managed on a customer-by-customer, moment-to-moment basis. For larger chains like Brookstone, the management of accepting competitors’ gift cards takes on epic proportions. How to design and then communicate the new procedure to employees and customers? What is the follow-up plan, if any, for squeezing some tangible value out of competitors’ gift cards? Is there a central location inside the company where the results are measured and evaluated for use in the future? (If the results of coupon promotions are difficult to measure, how much more difficult would this be?) Who’s assigned to sell the cards on eBay (if they have value, as David Livingston alludes)? Is this an HQ function, with an Operations staffer assigned the job of setting up an eBay account for this purpose? Can they even access eBay through the company’s firewall, or must they perform this function from their home computer?
Let see if I have this straight….
Someone gives 50 bucks to Macy’s for a gift card, then takes $50 worth of merchandise from JCPenney’s inventory with it?
Does JCPenney then chargeback the merchandise vendor for the missing gross margin? Because I don’t see how this works over the long term. Call me old fashioned but if it looks like a gimmick, smells like a gimmick….
The problem with the Brookstone offer last year was the same 20% discount was extended whether your gift card was worth $5 or $500. At least this gesture/gimmick scales to the value of the card, although I agree that it’s hard to verify how much is left on the card.