Use Your Gifts and Gift Cards
Now that your collection of gift cards is replenished from the holiday gifts make sure you keep track of them in your budget planning and please, use them.
Companies love gift cards; it is prepaid revenue from loyal customers. Companies deal with the minor inconvenience of accruing expenses related to the gift card liability, but they benefit from the additional gift of gift card non-redemption.
Gift card non-redemption, or gift cards which are not redeemed for merchandise is referred to as gift card breakage. Gift card breakage is reported in financial statements and annual reports, see example below.
For this example, (company) realizes annual gift card breakage or 6.8% in the US and 6.1% in Canada. This (company) carried a $4.5M accrued expense from gift card liability in 2020, from which they typically realize $306k US and $274k CAD of gift card breakage revenue. Fiscal 2020 was a banner year where, in this specific case, gift card breakage revenue was $1.3M, potentially 28% gift card breakage. That’s a 28% loss on the cash used to purchase the gift cards.
That Could Be Your Grandmothers Money!
Loyal customers, please use your gift cards, and phone to ensure they are extended into next year for stores impacted by closures.
With restrictions experienced globally last year the freedom to move freely and shop was negatively impacted, in addition to this individual’s access to disposable income has been negatively impacted. Contact any company holding your gift card(s) and request extension of expiry dates so you don’t lose the buying power of the gift.
Protecting your wealth sometimes starts with small wins, and more importantly avoiding loss of capital.
All forms of capital.
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