Secondary market develops for gift cards

Gift card breakage rates could fall significantly as a result of the establishment of a secondary market in closed loop gift cards in Australia.

Consumer group Choice has estimated that up to one in three gift cards are not redeemed, meaning merchants and card issuers reap millions of dollars in breakage each year from unused gift card vouchers.

 "They can be money for jam for retailers," Choice spokesperson Christopher Zinn told the Sunday Herald Sun in January.

CardLimbo.com.au offers consumers the opportunity to sell their unwanted gift cards for between 60 and 80 per cent of their face value, depending on the popularity of the card and the remaining valid days left on the card.

Card Limbo then offers those gift cards for resale at discounts of up to 30 per cent on face value, with the discount mostly a function of the time until expiry of the card. Card Limbo does not trade in universal (open loop) pre-paid cards.

The founder of the business is former Jetstar and Accenture executive Fergus Koochew, who says the service operates completely independently of the card issuers.

"This operation is completely independent of the merchants. We are creating a dedicated secondary market for gift card vouchers.

"What we are about is trying to eliminate the waste of unused gift cards," said Koochew.

"If people don't have a need or a want to purchase from a particular store that the gift card applies to, they can come to Card Limbo and cash it in, trade it for another card or donate it to charity."

"For people buying cards from us, we sell them for anywhere between 70 per cent and 95 per cent of the retail face value of the card."

The logistics may slow development of the market, since the current card holder must mail their card to Card Limbo.

Over the last three years, dozens of online gift card trading sites have emerged in North America. Among the most prominent are monstergiftcard.com, plasticjungle.com and giftcardrescue.com.

Koochew says the emergence of a secondary market in gift cards is not all bad news for card issuers.

"We are very interested to see what kind of reaction we get from retailers," said Koochew.

"We are redistributing the cards to people who really want them and therefore generating more store traffic for the retailers and more up-sell opportunities."

Koochew said he had international ambitions for CardLimbo.

"Our primary objective is to establish a strong presence in the Australian market and get some brand awareness so people know that they have the option to cash in those cards if they want to.

"Once we have done that we will look to international markets. A fairly logical step for us would be to move into New Zealand and then look north."