Depending upon the research, the secondary closed-loop, private-label gift card market is somewhere between $30 billion to $50 billion annually. As the name suggests, the secondary market complements the primary market, where gift cards are initially issued and sold. The secondary market is therefore where unused, discarded or disregarded gift cards get a second life.
According to Bruce Bower, President of the online gift card exchange Plastic Jungle Inc., 90 to 95 percent of gift cards sold in the primary market are redeemed by consumers who received the cards. But that leaves 5 to 10 percent of cards that are "misgifted"; maybe the recipient does not live close to an outlet of the gift card's retailer or the recipient would prefer cash instead of the card, Bower said.
Whatever the reason, consumers find out about Plastic Jungle via word of mouth or social networking sites and log onto the company's website where they exchange gift cards for other gift cards, for cash, for credits that go toward a purchase on Amazon.com or to buy virtual cows for virtual farms on Facebook, for example. Consumers can also donate gift cards to their favorite nonprofit organizations
When consumers sell gift cards to Plastic Jungle and physically mail the cards to the company's fulfillment center, Plastic Jungle adds the cards to its online marketplace and resells them at a discount (typically around 10 percent, depending on the retailer).
Gary Briggs, Chief Executive Officer at Plastic Jungle, said the process gets money "trapped" on gift cards moving again to the benefit of retailers - an idea sometimes lost on them.
Bower said certain retailers look at Plastic Jungle for the first time and think that the company is unfairly profiting off of their gift cards. To dispel that myth, Plastic Jungle works directly with retailers to educate them on how the service actually benefits them by maximizing the value of retailers' gift card programs.
By getting the right cards in the hands of the right shoppers, Plastic Jungle helps put retailers "back in the driver's seat" of getting consumers to purchase goods from their stores, Bower said.
"We have over 400 brands we accept on our site," Briggs said. "And different consumers have different brand loves. And so we're just helping consumers, whether it be a teenager or mom, connect to those brands based upon their shopping preferences."
A study conducted by Plastic Jungle of over 600 respondents concluded that consumers generally view retailers more favorably when consumers are given the option to either sell a retailer's gift card for cash or swap it for another retailer's gift card. Plastic Jungle also helps merchants from a regulatory perspective. With the passage of The Credit Card Accountability, Responsibility and Disclosure Act of 2009, gift cards must come with at least a five-year expiration date. But Plastic Jungle can render the issue of escheatment moot.
"What we really represent is a private industry solution to that, giving consumers choices regarding what to do with these unused gift card balances," Bower said.
Briggs reports that Plastic Jungle is rapidly increasing its user base and attracting the attention of venture capitalists. He said the company is growing by 15 to 20 percent per month; by April of this year, the four-year-old startup doubled its total payment volume of 2009.
Looking ahead, Plastic Jungle recognizes that the future of gift cards is in virtualization. Bower said the company partnered with First Data Corp. to develop an e-certificate program that will reduce the inefficiency of having to process, warehouse and mail out physical cards. Once money is separated from the form factor of a plastic card, it can be delivered in a variety of ways, such as via text messages and e-certificates.
"I think retailers, when they first sell a gift card, there are still going to be reasons for them to be plastic - the least of which is, you can touch it, feel it, buy it in a more tangible fashion," Bower said.
But retailers are also looking to expand distribution and the number of "touch points" they have with customers, Briggs added. "And that's certainly something that virtual gift cards provide and we believe we provide as well," he said.
To learn more about ,Plastic Jungle, contact:
Kristin (Cunningham) Donelson
Director, Marketing at Plastic Jungle
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