A Secondary Market for Gift Cards: Selling and Swapping

There’s an emerging business dealing in gift cards and its not Sears or Blockbuster.

The image of a Best Buy Gift Card, as shown by a recent seller on her eBay posting

Giving gift cards and certificates this past holiday season topped many shoppers’ lists, however the recipients may have other plans for the cards than redeeming at their intended destination, especially if they were not happy with the brand or would have preferred cash.

A secondary gift card market is burgeoning at sites like auctioneer eBay, Inc., and startups like SwapAGift.com and CardAvenue.com, which allow the recipients of gift cards to exchange their cards for cash or another card, or to buy new ones.

For example, a search yesterday on eBay.com under “gift cards” delivered 3,279 hits. The hits included a $20 Blockbuster gift card, a $55 gift card from Victoria’s Secret, a $175 gift card from Office Depot, a $250 gift card from Tiffany, $25 to Applebee’s Restaurant, $500 to Lowe’s and on it went. In a Dec. 30 posting for a $250 gift card from Williams Sonoma, four bids had been placed with the current bid at $220.33 with 13 minutes and 23 seconds left to bid.

And for those that don’t know it, some gift cards have made it to the collectibles category. In another eBay posting, four gift cards were promoted as collectors items available in excellent condition. The cards were from Shell, Circuit City “American flag”, Blockbuster, featuring Martin Lawrence and Will Smith from Bad Boys II and a Walgreens red gift card. The seller said these cards had no value and the current bid was $2.

Of course, the chances that a winning bid on a card delivers a card with no value or one that is expired is the reality of online gift card buying or swapping. At eBay, a seller risks getting a bad review if the merchandise isn’t up to par, like the other transactions that take place at the site. Ebay has a rule that a seller can only post one gift card per week.

With the growing online activity, buying and trading gift card sites can have their pluses and minuses for retailers, said Susan Gray, president of the Incentive Gift Card Council.

On the plus side, the sites can generate additional traffic for retailers but there are a few downsides, Gray said.

“These sorts of sites aren’t necessarily going back to the retailers and getting authorization to use their trade names and their trade marks in selling these gift cards,” she said.

Another problem can be potential customer service issues, such as when the buyer of a gift card arrives at a store only to find that the value of the card is not what is was advertised to be and demands the retailer make good. Or, the cards could have been purchased with fraudulent or stolen credit cards.

Gray said that at least one large national retailer has an agreement with eBay to validate the value of cards its sells before it is actually put up on the site for sale. At CardAvenue.com, which launched last fall, visitors can buy, sell or trade gift cards. The St Louis, MO-based company also aligns retailers who sell gift cards with consumers who want to buy them. Retailers featured at the site include Blockbuster, Starbucks and Best Buy, all featured with links to their individual Web sites. A right-hand column of the home page offers new card arrivals including those from Circuit City, Land’s End, Bed Bath & Beyond, Nordstrom and TJ Max.

As an incentive to bring in registrants to SwapAGift.com, any new registrants will be automatically entered into a monthly drawing for a chance to win—what else—a gift card.