Red Lobster getting pinched over gift card fees

[mugs]

Originally posted by: Thraxen

Originally posted by: mugs

Originally posted by: Toasthead
* Not applicaple in CA where gift cards are considered cash and NEVER expire.

Yes, California is famous for protecting people from their own stupidity.

How would not spending be stupid? I understand why companies would want to deduct after a while given that some cards may never be used, but I don't see why not using cards has anything to do with stupidity.

If a gift card expires after 2 years and you wait 2 years and don't spend it, you're stupid.

 

[mugs]

Originally posted by: Toasthead
The solution is simple. If the company doesnt want tot deal withthe unbearable hassle of giftcards, then dont offer them...Seems simple to me.

There has to be an enormous amount of overhead put into the deducting dormancy fees too and managing cards that may never get used.

The solution is simple. If consumers don't want to deal with the unbearable hassle of having to spend a gift card within 2 years, then don't buy them... Seems simple to me.

There has to be an enormous amount of ass soreness from carrying around those gift cards that never get used.

 

[eakers]

people wait to spend gift cards and store credits all the time. When I worked retail people would frequently come in with store credits and gift cards that were 3+ years old.

What if someone recieved a gift card and then lost it and then found it again? I bet that happens all the time.

 

[Thraxen]

Originally posted by: mugs

If a gift card expires after 2 years and you wait 2 years and don't spend it, you're stupid.

The point being though that many people don't even realize they do expire. That's more ignorance than stupidity. There is a difference.

The solution is simple. If consumers don't want to deal with the unbearable hassle of having to spend a gift card within 2 years, then don't buy them... Seems simple to me.

There has to be an enormous amount of ass soreness from carrying around those gift cards that never get used.

As I had to point out to BigJ earlier, people don't buy gift cards for themselves, they are usually gifts.

 

[DrPizza]

Originally posted by: QED

Originally posted by: Thraxen

Originally posted by: dullard
[No, I don't forget that issue, it is just not an important issue. Whether they profit or not from your purchase is just a smokescreen to cover up the real question of whether it is their right to put conditions on their products.

It's a bit of a stretch to call gift cards "products" though. It's more like a claim on the future acquisition of one of their products. IMO, it's basically the same as cash. The card just ensures that the cash is spent on your products and benefits the card issuer.

You can think of it as cash if you want.

But I can tell you from the IT development/infrastructure side of things, a gift card is much more like a credit card than it is cash in the way that it has to be processed and serviced. And that processing and servicing costs money.

And DrPizza-- your example of me giving you $25 in exchange for a promise that I can get that $25 dollars back someday is a bit innaccurate of an example. A more appropriate example would be if 2 million people every year gave you a varying amount of money, and 1.9 million people (not necessarily the same people) came to claim their money from you. You have to pay for a system and a staff to securely manage and service these accounts (including fielding calls from customers, doing balance inquiries, working with police to handle fraud and/or stolen/missing cards). Don't forget the costs to audit the funds and manage the distributions, or the costs of intergration into any existing business systems you might have. Furthermore, for accounting purposes you are not allowed to touch any of the depositied funds EVER.

The question becomes does the meager 2% or so interest you earn on the money sitting there outweigh your servicing, development, and system integration costs? If companies are forced to honor gift cards for now and forever the answer is no.

Hell yeah, I'd do it. And, I hope you're not serious about a "meager 2%" interest. Since we're talking about 10's of millions of dollars hanging out in the bank, you're going to see a much better interest rate. This is going to result in well over a million dollars income from the interest. I sincerely doubt it costs a company a million dollars to integrate a control system for gift cards into their existing system.

 

[DrPizza]

Wait a second... Where the heck is this law that "legally, they can't use the money until..."?? I say, bullsh!t. (I could be wrong!)
I worked for a restaurant for 20 years. We never gave a crap about gift certificates... If someone purchases a gift cert, did we legally have to sock the money away in a bank? I don't think so. Is there a special law written for gift cards? I doubt it.

 

[BigJ]

Originally posted by: Thraxen

Originally posted by: mugs

The solution is simple. If consumers don't want to deal with the unbearable hassle of having to spend a gift card within 2 years, then don't buy them... Seems simple to me.

There has to be an enormous amount of ass soreness from carrying around those gift cards that never get used.

As I had to point out to BigJ earlier, people don't buy gift cards for themselves, they are usually gifts.

As I pointed out to you earlier:

Then it is the responsibility of the person giving the gift to ensure the recipient knows the terms, and also the responsibility of the recipient to find out such terms regarding the gift.

Don't want to deal with that? Give cash.

 

[preslove]

Originally posted by: dullard

Originally posted by: DrPizza
Also, in the Red Lobster case, or rather the fortune 500 case, I don't believe that the cost of IT to "maintain and service" gift cards is significant on a per card basis, especially when that system is integrated into the rest of their POS.

But you have to realize that probably 99% of cards which are used ARE used within the 2 year period. Thus, you can't look at it per card. You'd have to multiply the cost by ~100 to get the cost per card which isn't used.

The fact is it costs them money to make the card, to set up the account, to keep track of the money, to keep track of the laws in each city/state/country which vary from year to year, to mail the card to you, etc. They make up some of these costs in the form of fees. You are lucky they give you fees, since gift certificates just simply expire and lose all the value instantly.

If you don't like that policy, simply don't purchase a gift card. Or don't accept them as gifts.

Why? The reason these gift card system are put into place because the cards used justify the money sunk, which pays for the. People waiting 3 years gives them even more money in the form of interest.

 

[dullard]

Originally posted by: preslove
Why?

Lets use simple math here (I'm not claiming that any company fits these numbers, they are just easy numbers to work with).
[*]Assume 99% of the cards which are used are used at least once within the 2 year period. Remember, they don't have to be used up in that time, just at least one penny must be used every 2 years.
[*]Assume 10,000 gift cards were sold at $25 each.
[*]Assume it costs $10,000 total to maintain the accounts on old unused cards.

Thus, 100 cards enter the period of non-use. According to DrPizza's post, there is a cost of:
[*]($10,000) / (10,000 total cards) = $1 / card.
I personally feel that is an unimportant statistic. Why include the cards that were used in the cost of maintaining the unused cards? Instead, I say the important math is this:
[*]($10,000) / (100 unused cards) = $100 / unused card.
It is this latter number that is important to businesses. The unused cards are very costly. If their consumers are stupid and don't use/lose the cards, why should the business be forced to pay a high cost to maintain cards that'll never be used without recovering any fees?

 

[sao123]

Originally posted by: DrPizza

Originally posted by: QED

Originally posted by: Thraxen

Originally posted by: dullard
[No, I don't forget that issue, it is just not an important issue. Whether they profit or not from your purchase is just a smokescreen to cover up the real question of whether it is their right to put conditions on their products.

It's a bit of a stretch to call gift cards "products" though. It's more like a claim on the future acquisition of one of their products. IMO, it's basically the same as cash. The card just ensures that the cash is spent on your products and benefits the card issuer.

You can think of it as cash if you want.

But I can tell you from the IT development/infrastructure side of things, a gift card is much more like a credit card than it is cash in the way that it has to be processed and serviced. And that processing and servicing costs money.

And DrPizza-- your example of me giving you $25 in exchange for a promise that I can get that $25 dollars back someday is a bit innaccurate of an example. A more appropriate example would be if 2 million people every year gave you a varying amount of money, and 1.9 million people (not necessarily the same people) came to claim their money from you. You have to pay for a system and a staff to securely manage and service these accounts (including fielding calls from customers, doing balance inquiries, working with police to handle fraud and/or stolen/missing cards). Don't forget the costs to audit the funds and manage the distributions, or the costs of intergration into any existing business systems you might have. Furthermore, for accounting purposes you are not allowed to touch any of the depositied funds EVER.

The question becomes does the meager 2% or so interest you earn on the money sitting there outweigh your servicing, development, and system integration costs? If companies are forced to honor gift cards for now and forever the answer is no.

Hell yeah, I'd do it. And, I hope you're not serious about a "meager 2%" interest. Since we're talking about 10's of millions of dollars hanging out in the bank, you're going to see a much better interest rate. This is going to result in well over a million dollars income from the interest. I sincerely doubt it costs a company a million dollars to integrate a control system for gift cards into their existing system.

I'm forced to agree with the Pizza Delivery guy on this one.

Your example is flawed because... unless the head of the company is a moron... preexisting to any such gift card system, the company would have to have all the things you described anyways, and be paying for them.
Staff for accounting & auditing... check
Staff for customer service... check
Legal team to deal with fraud... check
All except for the gift card system itself, which comes from pre-existing capital.

In a corporation like RL, The system does not have to pay for itself independently... only merely has to enhance your pre-existing gross income.

Aside from the 3 cents it takes to make each gift card, the company has not lost any money. Why? Because until the card is cashed in, no product or service is rendered.
They havent made a sale, so they havent made any profit (except the interest from the money in the account) but they havent lost anything. The equivolent of a **missed** potential cash sale.

 

[sao123]

Originally posted by: dullard

Originally posted by: preslove
Why?

Lets use simple math here (I'm not claiming that any company fits these numbers, they are just easy numbers to work with).
[*]Assume 99% of the cards which are used are used at least once within the 2 year period. Remember, they don't have to be used up in that time, just at least one penny must be used every 2 years.
[*]Assume 10,000 gift cards were sold at $25 each.
[*]Assume it costs $10,000 total to maintain the accounts on old unused cards.

Thus, 100 cards enter the period of non-use. According to DrPizza's post, there is a cost of:
[*]($10,000) / (10,000 total cards) = $1 / card.
I personally feel that is an unimportant statistic. Why include the cards that were used in the cost of maintaining the unused cards? Instead, I say the important math is this:
[*]($10,000) / (100 unused cards) = $100 / unused card.
It is this latter number that is important to businesses. The unused cards are very costly. If their consumers are stupid and don't use/lose the cards, why should the business be forced to pay a high cost to maintain cards that'll never be used without recovering any fees?

Your numbers are severly skewed...


However that isnt the important part.

As I just said, not every part of a business must be completely cost independent...

in large businesses, it is common for a portion of a business to be "not so profitable" and to be cost covered by a more profitable part. This is true because it provides other benefit "such as customer draw as a medium to other profits", etc.
Examples: Coupon printing, Advertising, Giftcards, etc

 

[So]

And now, for a Red Lobster that won't ruin your dinner....John Zoidberg!

 

[Fritzo]

Geeze...if you hold onto a gift card for 2 years, I think it's a sign you're not going to use it. They're lucky they don't expire.

 

[Vic]

Given that all Darden Restaurants sell what is essentially dressed-up fast food at nearly fine dining prices, I feel no sympathy for them. But for a less emotional argument, fraud is -- by definition -- failure to disclose, which is exactly what Darden is doing. Failing to disclose. Whether or not they actually need to charge the fees is irrelevant. What is relevant is that they disclose the terms.

 

[Phokus]

cash is a pretty crappy and thoughtless gift, if you ask me.

 

[Vic]

Originally posted by: Phokus
cash is a pretty crappy and thoughtless gift, if you ask me.

Cash is also an illegal gift in most business circles, too.

 

[s0ssos]

Originally posted by: Tsaico

Originally posted by: Toasthead
* Not applicaple in CA where gift cards are considered cash and NEVER expire.

So until recently, the money was losing value, since inflation was greater then intrest for the last couple of years. We can't invest it, because the money needs to stay liquid and trasferrable in a day's notice in case it is needed to purchase the services the hotel guest wants. I think exipration dates should be fine for these stupid things, if you don't use them if you don't use them in a couple of years, they shouldn't be worth anything. I hate gift cards.

you mean, no online savings accounts? no citibank esavings?
wow, it must suck being a business =P

 

[OutHouse]

Originally posted by: Tsaico

Originally posted by: Toasthead
* Not applicaple in CA where gift cards are considered cash and NEVER expire.

Which create a accounting nightmare. I run the IT side of the stupid gift cards, and while they are great for cash flow, they are horrible to keep track of. When we "collect the money" for the gift card, it must now sit in a bank account (though it is collecting intrest) until used. So while we can always use the intrest as income, the other money is tied up an unusable until the gift card comes back, which as you guys know, is nearly a quarter of them never see the light of day again...

So until recently, the money was losing value, since inflation was greater then intrest for the last couple of years. We can't invest it, because the money needs to stay liquid and trasferrable in a day's notice in case it is needed to purchase the services the hotel guest wants. I think exipration dates should be fine for these stupid things, if you don't use them if you don't use them in a couple of years, they shouldn't be worth anything. I hate gift cards.

based on that i understand why there is a fee after 2 years.

the Gift Certificates i sell for my business are valid for only 1 year.