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« Science fact of the day | Main | A Productive Member of the Economy » January 10, 2007Best Buy is SmilingAmericans spend an incredible amount of money on gift cards, especially during the holiday season. $80 billion worth of gift cards were purchased in 2006. According to the financial-services research firm TowerGroup, however, roughly $8 billion spent on gift cards in 2006 will never be redeemed, a "a bigger impact on consumers than the combined total of both debit- and credit-card fraud," the organization said. As Zach warned us in his classic post on the issue, this is a tremendous gift of free money to companies such as Home Depot, Limited Brands and Best Buy, nearly negating gift cards' positive impact on the "deadweight loss of Christmas." The Freakonomics authors, Stephen J. Dubner and Steven D. Levitt, came to basically the same conclusion in last Sunday's New York Times. Only 30 percent of people who receive gift cards use them in the first month, the authors report, and 19 percent of people who received gift cards in 2005 never used them. The solution? The Freakonomics guys say if you can't think of something personal to give someone, give cash. That is, unless it's considered an insult in your circle of friends, or you feel like playing Santa to The Gap. Posted by David Darlington at January 10, 2007 12:05 PM CommentsBut on the flip side, what is the value of gifts (actual items) that go unused? Why just look at gift cards when there's also millions of hideous ties and shirts that no one wears? I would guess that even after you take into account the unused gift cards, we as a society use them just as well as actual gifts, if not more so. Posted by: Joshua Claybourn at January 10, 2007 02:40 PM | permalink Josh has a good point. Also consider that unused gift cards go directly to the bottom line, making retailers more profitable and giving them the means to keep prices lower. No one puts a gun to anyone's head and keeps them from using a gift card. If lazy or forgetful people want to give Best Buy their money through unredeemed gift cards then maybe I can enjoy more opportunities to buy loss leaders. Posted by: Shane Raynor at January 11, 2007 10:27 PM | permalink Post a comment |
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