Little Plastic Promises for Businesses

Sales of that easy-to-buy, easy-to-wrap present—the gift card—are up this year, spreading joy both to merchants and to the growing number of websites devoted to swapping unwanted gift cards.

With holiday retail sales increases expected to rise to pre-recession levels, gift cards are along for the ride. After falling for the past two years, sales totals for the cards will increase nearly 5 percent, to $91 billion, this year, according to the TowerGroup research firm. The National Retail Federation projected shoppers would spend an average of $145.61 on gift cards this season, compared with $139.91 last year, a 4 percent jump.

Gift cards are a bonus for retailers, who enjoy post-holiday sale revenues and splurge-primed shoppers who often end up spending more than their gift card allots. Some stores schedule new products to arrive the week after Christmas to lure in gift-card-carrying shoppers, and others give gift cards away with purchases of certain items.

The rise in gift cards is good news for the growing number of gift-card exchange sites that have been popping up. Through a system of exchanges, the sites aim to help the guy who would prefer cash to a Home Depot card or the woman who would rather shop with a Best Buy card rather than one from Sears.

Among the sites is San Jose, California-based PlasticJungle, which a month ago received $10 million in venture-capital financing. The site offers users up to 92 percent of the gift card’s value in cash or the opportunity to exchange unwanted gift cards for an Amazon.com gift card. The company says up to $30 billion in unused gift cards, or $300 per household, is out there—and it aims to make sure that customers are getting at least the bulk of the value for the unwanted cards.

Other similar sites include San Francisco-based CardPool, founded in 2009 by Anson Tsai and Timothy Wong, which lets consumers buy gift cards for up to 30 percent off. Its list of investors include Jeff Fluhr, who is the founder and CEO of StubHub.com, the secondary ticket marketplace giant; Mitch Kapor, founder and CEO of Lotus; and Max Levchin, founder of PayPal.

Other swap sites include Ellicott City, Maryland-based GiftCardRescue, which offers up to 90 percent back for gift cards, as well as CardWoo.

The business of unwanted gifts is not limited to gift cards.

Amazon has reportedly patented one approach, which a CNN story dubbed a “bad-gift exchange system.”

It’s not up and running yet—and it is not clear if the company will ever actually implement the idea outlined in the patent—but the system would let customers quietly swap gifts that they don’t want before they are shipped.

Amazon users could, for example, come up with a list of rules to turn gifts that they would have received into items that they actually want. They could ban any clothing gifts made of wool, provide accurate clothing sizes, and ensure that any VHS tapes are converted into DVDs. They could also convert any gifts from a relative or friend who repeatedly sends horrible gifts by naming that person in the system.

Kindly, the sender never has to know their gift was not so well-received, since the patented system allows the recipient to send a thank-you note for the original present.

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Teresa Novellino writes for Portfolio.com