Wal-Mart seeks to capitalize on unwanted, unused gift cards

by The City Wire staff ([email protected]) 240 views 

The popularity of holiday gift cards continues to rise to an estimated $31.74 billion this year, according to the National Retail Federation. Yet, nearly $1 billion of those will go unused according to industry researchers.

That’s one of the reasons retail giant Wal-Mart launched a program it is testing that allows consumers to exchange gift cards of other retailers for an e-gift card that can be used at Walmart’s stores or Walmart.com.

Wal-Mart unveiled the pilot card exchange on Christmas Day, and it’s expected to run for the next few weeks as the retailer reviews consumer reaction and use of the program. Wal-Mart’s test exchange will accept cards from more than 200 retailers, restaurants and airlines, which can be traded in for up to 97 cents for each dollar of the gift card.

The retailer partnered with CardCash.com on the pilot program. While there are other card exchange sites, Wal-Mart is the first major retailer to test a broad exchange. 

"We have seen tremendous volume and are very happy with the success and impact of the partnership," said CardCash.com CEO Elliot Bohm.

He said the exchange offers on Walmart.cardcash.com average 5% higher better than competitors' offers.

Retail analyst Carol Spieckerman, CEO of newmarketbuilders.com, called the test another bold move by Wal-Mart that’s just in time for the “second holiday” shopping season. She said although the program’s premise is somewhat unique in retail, it follows a pattern that Wal-Mart has established as of late — taking calculated “hits” in order to increase market share and drive incremental sales, and without resorting to margin-gobbling mark-downs. 

“Once again, Wal-Mart has crafted a seemingly straightforward program that nonetheless accomplishes many goals. The competing retailers with the most to lose will be those with a narrower category focus. A guy who received a J. Crew gift card might prefer a power saw over a sweater, for example,” Spieckerman told The City Wire.

Consumers polled by The City Wire gave the program mixed reviews. The majority of responders said they would likely re-gift a card they didn’t plan to use, rather than trade into Wal-Mart for lesser face value.

But Nikki Perritt of Fort Smith said she recently took advantage of Wal-Mart’s gift card exchange. 

“I traded a Sears card for Wal-Mart. I wanted a waffle maker and Sears prices are ridiculous. Wal-Mart had the same waffle maker for a lot cheaper. So I traded my Sears gift card for the Wal-Mart one. Wal-Mart took $3.22 of my card but it was worth it to me,” Perritt said. “I can always find something I want at Wal-Mart.”

Overall Spieckerman said Wal-Mart’s multi-category proposition, combined with everyday low prices that stand up to scrutiny, will make the trade-in a no-brainer for many and a pre-calculated gain for Wal-Mart. 

“The program is perfectly timed as shoppers redeem gift cards and do so voraciously 
as post-Christmas sales proliferate. The temptation for gift-card-wielding shoppers to spend “over-the-limit” will be mighty and Wal-Mart will benefit every time. Clean up on aisle everything,” she added.