Yesterday a number of the local news stations extensively covered the story of the Sharper Image bankruptcy, with particular emphasis on the fact that Sharper Image is no longer honoring gift cards as a result of its bankruptcy. The story not only appears to reflect a sign of toughening economic times, but also re-affirms some of the problems associated with gift cards.
To be sure, it is nothing new that when a company declares bankruptcy, many are left holding claims that have no hope of being satisfied. Now gift cardholders are a part of that “many.” Interestingly, rival store Brookstone is offering a 25% discount for anyone who makes an in-store purchase and turns in a Sharper Image gift card—regardless of the face value of the card. The discount may be more than some creditors ultimately receive.
Yet the Sharper Image story reflects an additional reason why gifts cards may not be the “perfect gift.” Indeed, we have blogged before about some of the problems associated with gift cards, including the fact that they often go unused or otherwise expire quickly. While legislators have sought to respond to these kinds of problems, it seems difficult for them to respond to the bankruptcy problem, even though it appears to reflect a significant amount of money left on the table. And as some news stories suggested, it is a problem that may be exacerbated during an economic downturn. Thus, one research firm predicts that shoppers could lose some $75 million this year as a result of gift cards that are not honored because of store closings. Indeed, given the booming business that gift cards represent for some companies, many news stories speculated about other companies that could find themselves in the same predicament as Sharper Image. For example, one station speculated about Barnes and Noble, which sells lots of gift cards and yet recently forecasted weaker than expected earnings for 2008. To be sure, Barnes and Nobles does not appear to be in danger of declaring bankruptcy, but it is something to keep in mind with respect to purchasing gift cards.
In the end, perhaps you need to research the financial solvency of a company before purchasing a gift card. At the very least, the Sharper Image story underscores the importance of using gift cards sooner rather than later. And since I have a number of Barnes and Nobles gift cards tucked away in various envelopes, I will be making a trip to the bookstore this weekend.
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1. Posted by Jake on March 4, 2008 @ 19:28 | Permalink
A few idle thoughts.
1. Why should legislators respond? The basic "problem" is that recipients of gift cards tend to procrastinate about redeeming them.
2. Maybe some enterprising person will dream up a hedge on gift cards (at a price).
3. Alternatively, a bank could shoulder the risk and guarantee gift cards (again, at a price).
4. Perhaps the Sharper Image bankruptcy will make this a self-correcting problem, if it impels gift card recipients (like Prof. Fairfax, evidently) to clean out their desk drawers and redeem old gift cards.
2. Posted by Giftcardblogger on March 19, 2008 @ 20:20 | Permalink
Interesting post. I agree that consumers need to be aware of what is going on with the company before they purchase a gift card. Also, the sooner they use the card, the better.
For more on this issue, Check out my recent post on the topic: http://www.giftcardblogger.com/gift-card-nightmare-when-the-gift-card-issuer-goes-bankrupt/
3. Posted by Austin on April 8, 2008 @ 15:55 | Permalink
Hi, I’m with a company called Leverage. I’m responding for several reasons. 1) I want to inform the consumers that we have a new bankruptcy policy that allows customers holding gift cards purchased via its LeverageCard.com destination from Sharper Image and other merchants filing for Chapter 11 bankruptcy protection to transfer remaining, unredeemable balances to gift cards from other retailers available on the Leverage site. 2) also to get the word out there so that people know there's a free service available to help them.
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