Gift Card Non-Redemption

Gift cards have become a staple for most retail and restaurant locations.  They understand the basic need for this giftable item, but what is the real return for the cost of design and printing? The main way that the cost is recouped and a profit is made is through non-redemption

People purchasing gift cards and then never using them is the most common way for a gift card program to pay for itself. A research study by the Tower Group estimated that $41 Billion dollars of gift card money is currently unredeemed. Most large retailers that report redemption rates show between 19% and 26% never redeemed.(ie cards over 3 years old). Let’s be conservative and say you we are able to buy bulk cards for $1 each and that you have 500 of them. We are also going to be conservative and say the non-redemption rate is 20%. Here are a few examples of how you make money on the program based on the initial $500 investment:   

  • Clothing Store store sells 50 gift cards at $50 each ($50 X 50 cards X .20 = $500) 
  • Restaurant sells 100 gift cards at $25 each ( $25 x 100 X .20 = $500)
  • Candy store runs a 10% off $100 gift cards 
    • People pay $90 for $100 gift card
    • 50 card sales covers card cost and discount due to Non-Redemption
    • $100 X 50cards X 10% = $500 (Cost of promotion)
    • $500 promotion + $500 card cost = $1000 Break even cost 
    • 50 cards purchased worth $100 = $5,000 X 20% = $1000

As you can see non- redemption is the easiest way in which to recoup your costs. You can also see how it can cover card discounting up to 20%. Business owners often look at gift cards as a necessary evil, but they should be promoted and pushed as hard, if not harder than the products on the shelf. Advertise them loud and proud at the point of sale and at the door/signage. 

MPI Point of Sale is a full service point of sale company selling gift cards for terminals, Vend POS and Lavu POS . MPI prints and designs all cards in house so you get a white glove experience and even help designing a program. 

MPI – MPI Point of Sale provides credit card processing, check processing, payroll solutions, ATMS, gift/loyalty and point of sale services. MPI works with small businesses, restaurants, hotels and seasonal merchants to enhance their operations using technology and by providing top-notch customer service. For more information, please visit our website: Feel free to contact us At 1-800-518-5020

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