Gift vouchers are safe havens for the indecisive, the unimaginative and the practical gift-giver who simply cannot figure out what to get the hard-to-please recipient. They are also a safe haven for retailers, with between 10 and 20% of gift vouchers never redeemed.
Of the $80-billion spent on gift vouchers in the United States, financial services research firm Tower Group estimates that about $8-billion will never be redeemed. Marketing Workshop found that only 30% of recipients in the US used a voucher within a month of receiving it. Consumer Reports estimate that 19% of people who received a gift card in 2005 never used it. These figures were revealed in the New York Times’ Freakonomics column, written by Stephen Dubner and Steven Levitt.
One US retailer, Best Buy, was able to earn $16-million in gift voucher “breakage” — that is, gift vouchers were sold but never used, Dubner and Levitt said. But South African retailers are a lot more cagey about gift voucher revenue, although they appear to be similar to the international statistics.
Shirley Dare, manager of the Clicks Clubcard programme, said that 80% of the programme’s cashback vouchers were redeemed within a year. These vouchers are earned by consumers belonging to the Clubcard programme for purchases they make at Clicks stores. As the vouchers expire after a year, 20% of the cash-back vouchers are never redeemed, in line with the trends reported in the US.
Woolworths declined to answer questions forwarded by the Mail & Guardian. “Due to our large and diverse product range, only a very small percentage of Woolworths’ vouchers are not redeemed,” the company said in a statement. The Foschini Group also did not respond to questions.
But even if they do not like telling us what was spent, what we do know is that the stores are on to a good thing. Unredeemed gift vouchers are as close as you get to free money, representing little more than an IOU that will never be called in.