Today's Freakonomics article in the NY Times asks whether gift cards are more beneficial to the recipient or the retailer. If you don't redeem your card, it is pure profit for the business to give you a piece of plastic. Anyone out there ever "forget" to mail in a rebate? Have you finished all of your medicines? I remember an Economist article along these lines several years back.
10 comments:
first off working in retail i love the idea of the gift card. for two reasons. first is there is a chance that the person who recived the card will lose it or forget bout it and yes i know that s abad thing to hope for but it is true. its free cash for the store if it isnt redeemed. and secondly i have learned to appericate the gift card cause if you give someone 50 bucks they will be willing o trest them selves. lets say they normaly only spend 30 bucks in your store well. they can either get their 30 buck items twice or since they have a gift card it is easier to talk them into treating them selves to a higher end product. which thi is help for this winter ( well more like spring) season we are in. with the lack of city people out here ( i hate them as much as the next local and prolly more then most of the rest of you) people arent buying the higher end 50+ dollar products that are overstocked after the holidays or even left over from the summer season.
now i like seeing a check or cash in my card. just cause most of the people in my family are these city or really far upisland people who arent really intouch with reality and try to give me the 'prevent global warming bumper sticker' (not even going to leave a side comment on this one) or the 'guns are bad they kill'(which isnt true guns dont kill, people do) t shirt, which shows just about how much they know about me.
When the economics of a giftcard are looked at, the giftcard seems increasingly inefficient. Allthought the article pointed out some of the problems of the giftcard, they missed quite a few others that also deminish the use of the item. The giftcard is less transferable than cash because while a giftcard can only be used in one branch of stores, cash can be used basically everywhere. In addition, when a consumer purchases a giftcard he gives the store their money to hold untill the recipient redeems the crad. This is basically the equivilent of giving the stores a free loan untill the giftcard is redeemed. This destroys value as inflation slowly destroys the value of the demoninated amount on the card.
From the standpoint of a business, gift cars are brilliant. Make someone give you cash up front for somrthing that may or may not be redeemed later. Statistics tell us that retailers make lare profits off of this because there will always be those lazy people who don't use the card. Even if the card is reedeemed at a significantly later time, the company will still come out ahead because inflation will have lowered the original purchasing power of the card.
Economic analysis of holidays pisses me off. They say holidays like christmas and haloween would be more "efficient" is we just exchanged cash. Just like in the haloween article, these economists don't view human beings realistically. Maybe cash gifts are better, but people are less inclined to give cash gifts. The whole reason people spend around christmas isn't to help the economy, its to find that peferct gift that no one else thought of. Thus, buying into the institution of consumer holidays sparks the economy enough as it is, economists are just plain greedy to expect people to exchange cash with he same eagerness that they exchange haloween candy or christmas gifts with. Clearly, human psychology palys a role here that some economists are missing.
i ahte the mail in rebates. i guess they hope you forget to do it but if you dont its soo annoying, can i just have the rebate without sending anythign in, i dont see the point. i always forget to redeem gift cards so its pure profit. also, why give gift cards, i just want the creme, gift cards are so annoying cuz u have to get something there.
Call me shallow, but I like the way this article is going. I know it is an extremely boring and pragmatic way to look at things, but frankly I would rather just get money and gift cards for christmas and likewise. My closet is stuffed with clothes that my parents have gotten for me for christmas over the years that I've never worn. It pretty much is a waste for them to spend money on things that won't "maximize my utility". And if it was socially acceptable to get everyone else gift cards and money, I would definitely be doing that. Maybe that just makes me uncreative when it comes to gift-giving, but if I have to spend all this money I'd rather spend it knowing for sure that the person I give it to will get something they truly like.
Did you know that in some places you have to pay some sum like .98 cents to redeem you gift card. This to me is awful for companies. Money is the true way to buy things because with gift cards you can only buy things at that store. I mean wouldnt you feel bad getting a gift card to Trader Joes and having to spend it in that weird store. Money = less profit for the company and more money in our pockets to spend on other great things like toe-nail clippers and toothpaste
i think that like most things that start out as simple modifications and eventually break into the mainstream it is beneficial to all parties involved. In fact that is a basic principal of economics. Your question, "to whom is it more beneficial" is kind of irrelevant. It doesn't really matter who gets helped out more as long as both parties conditions improve. As far as gift cards are concerned everyone gets a leg up; the consumer, or more accurately gift recipient gets a more personalized choice as to what to receive. The stores also receive the money that lazy or disorganized people throw away by not redeeming them. And in my opinion all lazy, disorganized people should be lined up and shot. :)
Economically giftcards can be awesome because it is basically a free loan and free money when not redeemed. The gift card can be very insufficent when a date is placed on it in which it is no longer redeemable. Personally I find that the whole giftcard situation is only beneficial to the companies which sell them. Personally I just recieve cash as a present even though I often give giftcards. Giftcards are ofter forgot about anyways and although it is a a more personal gift than cash it economically doesnt function as cash as most people think.
I think that this article poses a good point. In my opinion I’d rather receive a gift card than a present that I wasn’t going to use or one really didn’t like that much. Stores benefit from the selling of their gift cards in two ways, one if the recipient loses it and two if the recipient waits too long before redeeming it, most times on the bottom if the card it says that after a certain amount of time money will be taken off monthly. This Christmas I received mostly gift cards and I was happy with that. From the business standpoint, people can get lazy and don’t use things or become forgetful a lose things resulting in a 100% profit for the store which is wonderful for the merchants. As for those who actually use their gift cards and don’t lose them it is wonderful for them because they get what they want.
i think a gift card is only better for the recipient when there is no dead line on it for example if there is now dead line you could wait for those jeans you want to go on sale and get them and some thing else which means the company lost money however if there is a dead line then you have to buy full price or pass or some times forget about the card completly all of these are economicly better for the company it is eaither as if you just paid cash for those jeans or they gained money on your forgetfullness so i guess it all depends on the deadline
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