Retailers offer holiday bonus gift cards to ensure return visits

  • Article by: JOHN EWOLDT , Star Tribune
  • Updated: December 21, 2013 - 5:24 PM

Retailers use cards as a way to get around Apple’s minimum advertised price.

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In this May 10, 2010 photo, gift cards are shown on display at a Kohl's store in Millbrae, Calif. Kohl's Corp. said May 13, its first-quarter net income rose 45 percent as shoppers spent more at its stores. It is also raising its full-year guidance.

Photo: Paul Sakuma, Associated Press - Ap

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Retailers are taking a tip from restaurants this holiday season — the bonus gift card.

Consumers are used to seeing “buy $100 in gift cards and get $25 free” restaurant promotions in December, but this year bonus cards were included on Apple iPads, Mac Airs and iPhones. Kohl’s cash program offered $15 gift cards for every $50 spent. Radio Shack posted the least restrictive deal, allowing customers a $50 online Visa with a qualifying phone purchase.

Known in the industry as closed-loop cards, retailers offer them for the simple reason that they bring customers back at a time when brand loyalty is waning, according to Glen Holbert, chief sales officer at CardLab Corp. in Texas.

If customers buy several Glade scented items at a discounter and get a $5 gift card or spend $50 to get $10 on a gift card, they simply return on a future visit to use it toward a future purchase.

“Consumers may argue that they would prefer to just have the discount up front,” Holbert said, “but then you may not see them again.”

Laura Spencer Emerick of St. Cloud said she loves getting the bonus cards. “I redeem them immediately either that same day by splitting transactions or the next time I shop,” she said.

This year the bonus gift cards have become a growing trend because retailers are trying everything to compete with Amazon, said Hal Stinchfield, CEO and founder of Promotional Marketing Insights in Orono.

“They’re price matching and trying to make the bricks-and-mortar shopping experience special,” he said. “The closed-loop cards are a way to lure the consumer back in and make them happy.”

Target has been offering the bonus cards for longer than a year and increased the program modestly in 2013, said Target spokeswoman Katie Boylan. Fifteen of the items featured in last week’s Sunday circular included Target bonus cards worth $5 to $30.

“This is all about Target trying to encourage more frequent trips,” said Amy Koo, an analyst with Kantar Retail consulting firm in Boston.

These kinds of promotions are generally very beneficial for the retailer, Koo said, because suppliers such as Keurig, Burt’s Bees or LeapPad usually fund the discount and the retailer gets the extra shopping trip, during which customers will spend more than the value of the bonus card. At least that is the hope.

Offers on Apple products

Experts are divided about who’s footing the bill on the $75 or $100 bonus cards offered since Black Friday on Apple iPads, iPhones and laptops at Best Buy, Target and Wal-Mart. Stinchfield believes that Apple is probably paying most of $30 to $100 bonus cards. “In nine out of 10 instances, the retailer is not funding the card,” he said.

Brian Yarbrough, a retail analyst with Edward Jones Investments in St. Louis, doubts that Apple is subsidizing the gift cards. “Apple doesn’t like discounting and there’s very little margin on these items,” he said.

In the past Apple protected its pricing with a minimum advertised price, although recently retailers have been discounting its products $20 or more. Last week, Sam’s Club offered the iPhone 5c and 5s for about $75 less than list price with a two-year contract. “The carrier usually funds those discounts,” said Holbert.

Regardless of who’s paying for the bonus, experts say that the bonus card discounts being offered during the holidays on Apple products are the best deal they’re likely to find in the next six months.

That’s assuming that consumers actually redeem the bonus cards. Twenty percent of gift cards are never fully redeemed, according to American Express. “When you don’t redeem the gift card, it’s free money to the retailer,” said Kevin Brasler, executive editor of checkbook.org.

 

John Ewoldt • 612-673-7633

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