The Gift-Card Economy

New York Times ^ | 7 January 2007 | STEPHEN J. DUBNER and STEVEN D. LEVITT

[shrinkermd]

What do a gym membership, a bottle of prescription pills and a holiday gift card have in common? Each of them is a thing that is bought and then often goes unused.

In their recent paper “Paying Not to Go to the Gym,” the economists Stefano DellaVigna and Ulrike Malmendier showed that people who buy an annual membership to a health club overestimate by more than 70 percent how much they’ll actually use it. Many people, therefore, would be better off buying monthly or daily passes.

...As for gift cards — well, let’s just say there is good reason that they are known within the retail industry as a stored-value product: they store their value very well, and often permanently. The financial-services research firm TowerGroup estimates that of the $80 billion spent on gift cards in 2006, roughly $8 billion will never be redeemed — “a bigger impact on consumers,” Tower notes, “than the combined total of both debit- and credit-card fraud.” A survey by Marketing Workshop Inc. found that only 30 percent of recipients use a gift card within a month of receiving it, while Consumer Reports estimates that 19 percent of the people who received a gift card in 2005 never used it.

Considering that two-thirds of all holiday shoppers in 2006 planned to give someone else a gift card, you most likely received one yourself in recent weeks. Perhaps you are among the exceptional minority, and you have already spent it, or soon will. But the odds say that it has instead wound up in your sock drawer.

[psjones]

I prefer using netflix to going down to the video store on a Saturday and not being able to find any new releases to rent. With Netflix, by the time the weekend comes around, I have a movie to watch and don't have to worry about rushing back to return it the following day to avoid late charges.

[Mygirlsmom]

And then there's this: Unused gift cards seen as 'windfall' Lawmaker says state should get the money