Thursday, August 28, 2008

Gift Certificates

I knew something was missing from my POS presentation. Every store should sell gift certificates. They're free money. This was hard for me to grasp at first, because there's an expense to gift certificates, about $.65 per certificate for printing costs; Less if you want to make them yourself. It's free money because the statistics are true, about 30% of the value of gift certificates are never redeemed. Over the past few years, this has resulted in a balance of about $3,000 for the store. It's not only $3,000 of free money, but it's also counted as a liability on my taxes.

I think they're a good idea for customers who don't know what to buy. Some parents will regularly come in to buy them for their children as rewards for good grades. Most sell during the holidays, purchased by the confused non-hobbyist. It's not a scam, as many gamers will blow their entire gift certificate, which I recommend unless you want to add to my gift certificate unused balance. However, many will end up getting thrown away, destroyed in the washing machine, lost or forgotten. That last balance of a couple bucks might not mean a lot to the average customer, but it's what props up that big gift certificate "deficit." Some will assume the certificate has expired, which is not true in California. In California, if you purchase a gift certificate, it never expires. If you're given one, such as part of a contest, it can have an expiration date.

Giving gift certificates is a much better idea for donations than actual games. If you give a game, what have you done? It's a thing with no link to you that may not get to someone who actually enjoys it. It might not be age appropriate or interest appropriate. A gift certificate given for a school auction or church charity event means the winner, who spent money to get it, wants games. They will have to seek you out and learn about your store. The best balance is probably a mix of gift certificates with a little bit of product. That helps explain what kind of games your store sells, since most will assume electronic games. Gift certificates given in this fashion are the ones that come back the least often, but when they do, they often bring along a new customer. What do you have to lose?

Gift cards are rumored to be even more effective than certificates, as customers are said to spend more money on cards than paper certificates. I don't believe that, but those who have switched seem to think so. The problem with cards is that they don't integrate as well with POS systems and they usually require fees. Another company is managing the gift cards for you. I'm wary of anything that hits cash flow, so for now I use gift certificates.

1 comment:

  1. With CA state law being what it is, you're probably better off with gift certificates - even without considering POS and fees.

    I doubt you'd have the issues we do with fraud; but I suspect accidental damage/loss to certificates will mean you retain more value.