Gift Cards: Don’t Do It!

Gift cards are so easy.  You don’t know exactly what someone wants, but you know a store they like.  Get a gift card.  You know they like a restaurant but they might not want to go with you, buy them a gift card.  Some kids nowadays love to go pick out their own things and feel like they are buying it.  Gift cards are perfect for this.  After all, it’s the holiday season, there is so much commotion out there, gift cards make things easier, simpler.

Have you ever thought of the repercussions of gift cards?

Steven D. Levitt and Stephen J. Dubner, authors of Freakonomics and now SuperFreakonomics, wrote an article for the New York Times titled, “The Gift-Card Economy”.  In this article they reference that of $80 billion spent on gift cards in 2006, $8 billion will never be redeemed.  They also go on to say that 19% of people who used gift cards in 2005 never used them.  And finally, they state that BestBuy made $16 million of of unused gift cards in 2006.

Stop for a second and reread that last paragraph.  We have an economy built on consumer spending.  Right now our economy is struggling and it is popular belief that consumer spending will help stimulate this economy if not lead us out of the rut we are in.  Does a gift card purchase do this?

Let’s take BestBuy for example.  They made $16 million of pure profit.  An unused gift card is essentially that isn’t it.  The cost to make the card is negligible and you barely even have to staff the store.  There is no certainty that any of this money helped to stimulate the economy.  How about the alternative?  If $16 million of products were purchased at BestBuy then they would need to have the extra help with cashiers selling the products.  They might need to hire more floor help.  More shipping and receiving help.  There would be more orders to the manufacturers of the products.  The manufacturers would need more shipping and receiving help.  More assembly help.  More marketing and sales help.  I think you catch my point.  Gift cards don’t help the inner-workings of our economy.

3 alternatives to your generic gift card purchases:

1. Give cash.  It’s not always fun, it’s a bit impersonal but it gets the job done right?  Kids love cash.  They love feeling like they have money or they are rich.  Also, it just might promote saving.  Some people will get cash and feel like they don’t have to spend it.  You never know, you might be boosting an emergency fund or helping contribute to personal improvement.  In a more open society you just might be able to ask people what they would do with cash.  Is that rude?
2. Buy a present.  You know they like books but aren’t sure exactly which one?  Do you know they want shirts for work but aren’t sure their style?  Buy them one.  Remember it’s the thought that counts.  Give them a gift, take a swing.  If you miss you can fall back on gift receipts.  Take a shot, you just might amaze yourself.  Even better, imagine how big that smile will be on someone’s face when you hit a home run.  That unexpected, wow present.
3. Small business gift cards.  If you are adamant about giving a gift card make sure it is for a smaller or local business.  Help support the economy by supporting the local business that won’t necessary just take your money as pure profit.  They are more likely to give back to the community, either directly or indirectly.  Also promote the use of the gift car by offering to take the person shopping to pick out what they do want.

Consumer spending itself is not the driving force for the economy it is made out to be.  It is the ripple affect of consumer spending that helps the economy.  A gift card makes it a whole lot easier to break or destroy that ripple.  When you are out doing your holiday shopping this season, think of the current economy.  Think of your friend or neighbor who is out of work, 10% unemployment.  By purchasing an product or an actual gift you just might be able to change the economy.  You just might be able to create 1 or 2 extra jobs somewhere down the line.  When a company makes more products they don’t just need to higher more manufacturing help, they need more managers, more advertising help, more sales force.  Then they might just need a new location, bigger warehouses, new product displays.  They are higher another company to do this.  The ripples can be huge.

If you want to make a difference this holiday season…Create Ripples!

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Tagged as: economy, gift cards, shopping, spending