Gift cards are big business. Each year $400 billion worth enter the market. About 30% of gift-card values go unspent annually, in part because it’s so easy to forget about that piece of plastic you’ve tucked away somewhere. At 23 George Bousis started his Chicago-based company, Raise, offering gift-card holders the chance to sell the cards they don’t want and buy others they do want at a discount. With the new mobile app, Raise lets consumers grab discounted cards as they wait in line to make a purchase.
Retailers benefited from the unclaimed value on gift cards that used to expire after 12 months until Congress passed the Credit CARD Act of 2009, preventing retailers from retiring gift cards in one year and booking that money as profit. Now gift card values are considered a liability on the retailer’s balance sheet and can’t be voided for at least five years. Some retailers offer gift cards that never expire. Some retailers don’t give cash back for returns, they give store credit on gift cards.
How does Raise work? Raise takes a commission of 15% from the selling price when the gift-card sells. Discounts on cards vary, depending on the retailer as well as on the supply and demand of the market. The average purchase discount is 16%. The average gift-card face value is $200, providing the gift-card re-purchasers about $32 in savings every time they shop with Raise for a card valued at $200. Web users of Raise average 12 purchases a year. Users of the new mobile app increased their number of transactions to three to four purchases a week. Raise projects that 100% of their cards will be in digital format within the next 24 months. The app offers a digital wallet that holds the gift cards purchased on Raise, as well as those received as gifts. The app even reminds users what cards they have via a push notification when you visit a store you own a gift card for.
Most retailers view Raise positively. Raise helps motivate customers to visit their stores or websites where on average, people spend 43% more than the value of the card. Raise allows people the chance to buy and sell digital cards almost instantly; on their mobile device while waiting in line, or just before checking out during online shopping.
Raise’s test marketing began in 2011, hiring independent contractors on Craigslist to do the software development work. In 2011 seed funding totaled $600,000. Raise officially launched in February 2013 with 15 employees. In 2012 they raised $2 million from angel investors. In the fall of 2013 they raised $18.1 million in a Series A stock offering. In January 2015 they raised another $62 million in funding.
The next time you run across an old gift card, don’t toss it – spending it with the issuing merchant isn’t your only option.
What problem exists that you have a solution for? Let’s do some brainstorming!
