Seigniorage fact of the day

Last winter, Best Buy Co. reported a $43 million gain in fiscal 2006 from cards that hadn’t been used in two or more years.  Limited Brands Inc. recorded $30 million in 2005 revenue because of unredeemed cards.

so, this holiday season is likely to see record sales of gift cards.
The National Retail Federation, a trade group, estimates that shoppers
will buy $24.8 billion worth of cards, up 34 percent from last year.

Here is the full story.  The bottom line?

”It can be fun to get them, but then I forget about them,” said
Deborah Cabaret, 46, who has hundreds of dollars worth of unused cards.
”Or I walk into the store, I look around, I don’t know what I want,
and I leave.”

About 6 percent, or $4.8 billion, of this year’s gift cards will go
unused, estimated Laura Lane, vice president of unclaimed property
services for Keane Co., a compliance and risk management consulting

Consumer Reports put the figure even higher, estimating
that 19 percent of those who received cards last year had not used them
because the cards were lost or expired.

Imagine that, the "showing-that-you-care" benefits of gift-giving, but without the deadweight loss.  Just a pure transfer from an individual to some shareholders, no one has to divert resources by cashing in on a not very valuable present.

Here is a not unrelated story about insurance.


Comments for this post are closed