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Buy from reputable retailers; use quickly in shaky economy
By Betty Lin-Fisher
Beacon Journal business writer
Published on Sunday, Nov 30, 2008
Gift cards have become a popular present — especially for the holidays.
But some consumers are getting worried about giving or receiving gift cards in light of the shaky economy and store closures or potential closures.
That fear has been fueled by forwarded e-mails that supposedly detail store chains that have closed locations, filed for bankruptcy or notified the government of their intentions to close by January. The e-mails warn consumers to be careful with gift cards for fear of losing the value on them.
As is often the case with e-mail messages, they're full of inaccuracies. Well-intentioned friends and family members send the messages, but usually end up giving information new life when it might or might not be true.
It could be that I'm a professional skeptic being a journalist, but even when the forwarded e-mail says the person checked out an urban legends Web site (I like http://www.snopes.com), I still check it out. Then I often e-mail the person back who sent it, saying it's inaccurate. Snopes does have reports about the gift card e-mails with details about specific retailers.
At least one retailer has e-mailed a statement to its online customers and posted a statement from the chief executive officer on its Web site to combat the misinformation.
In one version of the e-mail, retailer Eddie Bauer is included on a list of companies notifying the government it would close between October and January of next year. The e-mail says Eddie Bauer will close 27 stores and more after January.
In the statement, Eddie Bauer CEO and President Neil Fiske said the hoax is ''intended to discourage consumers from buying gift cards from a number of retailers, including Eddie Bauer. We want to set the record straight.''
Fiske says the retailer has been opening new stores and closing older locations as part of the normal course of business. The stores mentioned in the e-mail were closed in January of this year. Next year, the company will open and close a handful of stores as part of normal business.
The false information in the e-mails could have a negative effect on retailers who are already entering a struggling holiday sales season, said Dan Horne, an associate professor of marketing at Providence College who specializes in gift-card research.
''Some of the big retailers are concerned that they're going to get painted with this brush and they're not in any
financial problems whatsoever,'' said Horne, who believes gift cards will still be a popular item to give this holiday season.
A number of large, well-known retailers have formed a new industry association to promote responsible gift-card practices by retailers and combat the negative e-mails.
''Retailers are very concerned about the negative press, which is feeding off either hoax e-mails or highly exaggerated communications,'' said Carman Wenkoff, spokesman for the Retail Gift Card Association.
Wenkoff acknowledged there have been some bankruptcies filed in retailing because of the economy.
''We're looking to find ways to provide consumers with as much comfort as possible with all of these well-established brands that have not been affected in continuing to purchase gift cards and visiting the stores,'' he said.
Horne said the advice in buying gift cards is no different this year — buy from retailers where the recipient shops and use the cards soon after you get them.
Consumers can be more careful in choosing which retailers to shop with for gift cards, he said.
''If people don't have any goods on the shelf, I'm not buying a gift card,'' Horne said.
Some nervousness about lost-valued gift cards came from the Sharper Image, which earlier this year declared Chapter 11 bankruptcy and stopped accepting gift cards, Horne said. It later accepted the gift cards at drastically reduced values before liquidating its stores.
Horne said a lot of retailers learned from Sharper Image to make sure to continue accepting gift cards during bankruptcy proceedings, if possible. Retailers don't want to lose valuable customers as they're reorganizing out of bankruptcy, he said.
An important thing to know is the difference between bankruptcy filings and the effect on gift cards.
Chapter 11 bankruptcy means a company is reorganizing and hopes to stay in business and satisfy creditors. In a Chapter 11 bankruptcy, retailers will often still redeem gift cards and operate their stores.
Of course, they might close some locations, so a consumer needs to know where to redeem cards.
A Chapter 7 bankruptcy is a liquidation, so the company intends to close up and gift cards become part of the legal proceedings. In those cases, consumers holding gift cards become creditors and have to get in line with much larger creditors, so usually you're out of luck.
The same goes for small, one-shop businesses, or regional stores that might close. Often, the consumer can be stuck with gift cards worth nothing.
Some competitors have taken others' bankruptcy filings to gain new customers by accepting the gift cards at their stores. Retailer hhgregg was accepting Circuit City gift cards until this past Tuesday, even though Circuit City is still accepting gift cards at its locations during its bankruptcy reorganization. Hhgregg officials said it's possible they might accept Circuit City gift cards after this weekend again.
Horne, the professor and economist, contends gift cards are good for consumers and retailers. Card recipients can shop without spending their own money or ''co-mingling'' cash gifts with household expenses (for example, not really using the cash for its intended purpose as a present to you, but just putting it in your wallet and using it for everyday expenses.)
Horne said retailers benefit as they typically see consumers spending 40 percent above the value of the gift card.
But cash might not be a bad alternative this year, said Vic Wlaszyn, president of the Better Business Bureau that covers several counties, including Summit County.
If you do decide to give gift cards this holiday season, or receive one, Wlaszyn suggests being prudent.
''Go ahead and redeem it as soon as possible. You don't know. If you wait until Jan. 1, you may find out the store is no longer open,'' said Wlaszyn.
The bottom line: It's consumer beware. If you're going to give gift cards, buy from companies that haven't been in the news with financial struggles and encourage your recipients to use them instead of stuffing them in a drawer.
Betty Lin-Fisher can be reached at
330-996-3724 or blinfisher@
thebeaconjournal.com.
Gift cards have become a popular present — especially for the holidays.
Get the full article here.
Comments
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Posted 04:20 PM, 12/05/2008
As a leader in the space, we at Blackhawk Network (largest third party distributor of gift cards and creator of Gift Card Mall) want to set the record straight. Gift cards will continue to be the preferred gift this holiday. In our study, over 70% feel that gift cards are a useful gift since the recipient can get what he/she wants and 58% of consumers still plan on buying gift cards this season. Deloitte’s Holiday Survey also found for the fifth straight year that gift cards are expected to be the top gift purchase. Regardless of the state of the economy, they provide benefits such as convenience, personal budgeting and fraud protection when buying online. In addition, the reports of the vast amount of retailers not accepting gift cards has been completely overstated and not true. They want to keep their customers during this crucial financial time. Thank you.
Teri Llach, Group Vice President of Blackhawk Network
