Secondary market websites have been around for a decade. In 2005, the secondary market was big enough that The Wall Street Journal wrote about it. Like most things, these first movers were not met with open... Show More
1. Reselling Gift Cards is Not New.
Secondary market websites have been around for a decade. In 2005, the secondary market was big enough that The Wall Street Journal wrote about it. Like most things, these first movers were not met with open arms. Merchants weren’t interested in doing business with a group that represented reselling a gift card they had already sold, and generally reacted with a cease and desist letter. Cease and desist doesn’t really matter when reselling property, so marketing these discounted cards became a bit of a free-for-all, and the modus operandi of secondary sites were to ignore merchant concerns. However, in recent years, new players have emerged, interested in getting access to information to combat fraud by providing brands some reporting benefits, as well as some control over things such as images, language, and discount offerings.
2. Most Brands are Already Being Sold.
If it’s not posted on a secondary site at this very moment, chances are it just was and will be again soon. As regulations regarding resale do not require merchants to approve the sale of their gift card or the images used, consumers are free to resell whatever gift cards they own.
3. It’s Changing How Consumers Interact With Gift Cards.
The secondary market thrives because it allows consumers to make their dollar go further, and delivers the product in a way indistinguishable from a new gift card product. Self-use makes up the majority of giftcards on secondary market websites as they tend to have odd denominations which makes them less desirable for traditional gifting. Consumers would prefer getting a discounted gift card than using a promotional coupon, as coupons tend to have a negative connotation and are treated with less respect than a gift card, which could have come from anywhere.
Technology has forced its way into brick and mortar stores as well. Some secondary market apps utilize a consumer’s GPS info to provide offer gift cards for the merchant the consumer is currently shopping or nearby merchants or competitors, offering instant consumer value.
4. Yes, Fraud is Part of this Market.
Anytime there is a marketplace for legitimate products, there is fraud. Because the early days of the secondary market had poor merchant oversight, fraud started almost immediately. Since merchants are still reticent to embrace this sales channel, fraud is still a very real problem. The secondary market players are much more legitimate, and interested in working with merchants to prevent fraud, and less interested in doing whatever makes money regardless of the merchant’s wishes. Working with secondary players allows them to get insight into the fraud they are seeing on their site, get access to card history, and generally be able to do their own prevention better. Some brands have forged relationships with the secondary market players, and have received better insight and controls than they thought possible.
5. The Secondary Market is Not Going Anywhere.
A certain number of merchants still want nothing more than to see these companies shut their doors and go home. It’s clear, and a significant number of investors are betting that the secondary market has some serious staying power. The idea of discounts being more available to consumers may make retailers cringe. However, merchants have been discounting their products promotionally for years. What seems to make this different is that they have always retained control over those discounts and how, when and who they are offered to.
It’s important to remember that done correctly, a gift card is moving from a consumer that does not have an intention of using a gift card to a consumer who does have that intention, and the merchant still receives full value of the gift card from the person that does end up redeeming it, along with all the benefits of the gift card program.
Restaurants have a long history of providing a discount or extra value for their gift cards through promotional pricing. These cards are intended for self-use, and so are the cards available on the secondary market. We don’t have good data on how self-use affects the overall gift card program metrics, but it’s just one of the many things we’re watching as the secondary market continues to evolve.
6 (Bonus!) The Secondary Market is Confusing.
As a sales channel goes, secondary markets are more complex than any we’ve seen historically. The original concept was built on the concept of eliminating gift card breakage, and we’ve found that there are multiple layers of reasons people are interested in selling gift cards, and they are not the type of consumer merchants expected. Where there is opportunity to make cash, there is potential fraud and a new level of work to verify and create a stable marketplace. The good news is that the secondary market players are willing to discuss and work with merchants to improve their marketplace and relationships with merchants. Merchants are slowly coming around, starting to see the benefits of partnering and gaining additional benefits and consumer insight. If you have any questions about navigating the secondary market maze, drop us a line. We’d love to chat about it!