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Gift card rescue: bid-ask spreads
On the secondary market, a $100 Brooks Brothers gift card is worth $90 but a $100 Home Depot card is worth $95. Here are further prices (update: the link is now shut down).
For the pointer I thank Robert, a loyal MR reader.
Posted by Tyler Cowen on December 28, 2008 at 08:21 AM in Data Source | Permalink
Comments
And what does it tell us? Does it tell us about the price value ratio of the products, their ease of use or what?
Posted by: Mikko at Dec 28, 2008 8:56:25 AM
A good friend recently sold a 1st generation iPhone on ebay for $300, the newer 2nd generation model retails for $199. Very odd. At one point the 1st gen models were valued as they were more easily hacked, but I think that's no longer true.
Posted by: Speedmaster at Dec 28, 2008 10:22:44 AM
This tells us the relative valuations of this stuff of the gifter relative to the giftee, obviously. Home Depot products, at their prices, are in wider demand than Brooks Bothers products, at their prices. I would guess that a secondary market for broadly useful gift cards, if they could exist, such as American Express, would be almost at par, as would gift cards for cognac and cigarettes. This is not quite the same thing as saying Hone Depot's basket is a closer near money than is Brooks Brothers, but maybe that's true, too.
Posted by: Frank at Dec 28, 2008 10:47:48 AM
There are more contractors who need to pick up shingles next week than there are people who know when they need a new shirt, so the discount horizon is shorter.
Posted by: dk at Dec 28, 2008 10:58:40 AM
Speedmaster: you own a $300 1st gen iPhone free and clear, but have to purchase a contract or pay a $175 early termination fee to truly "own" a 2nd gen iPhone.
This gift card phenomenon has been noticed before. As I recall, prices converge toward 100% of the notional value as the breadth of products available at the store (and the likelihood of its future bankruptcy) decreases. This theory predicts that Wal-Mart, Target, and Amazon gift cards should trade for the highest percentage of their notional value relative to all other gift cards.
Posted by: Kyle S at Dec 28, 2008 11:06:02 AM
Your link is broken...
Posted by: Christopher at Dec 28, 2008 11:36:23 AM
Having never shopped there, I don't know, so I ask: how far will $100 get you at Brooks Brothers? Is that likely to be only a fraction of an average shopper's total purchase there, whereas $100 at Home Depot could buy plenty of useful materials?
Or maybe this says more about the diminishing returns experienced by the kind of people who receive Brooks Brothers gift cards vs those who get Home Depot gift cards.
Posted by: Anonymo at Dec 28, 2008 11:41:28 AM
You guys are missing something, which is that some gift cards are fairly easy to get at a discount (10-20% off) and some are difficult or impossible to get much more than 5% off (such as Home Depot). This is likely the only important difference.
Posted by: Andy at Dec 28, 2008 3:10:27 PM
Does bankruptcy risk figure into this? I won a sales contest at work and the prize was $1500 of gift cards. I could select from a wide variety of retailers. Part of my selection criteria was to avoid retailers that have filed for bankruptcy or have indicated that they're close.
Posted by: Roland Martinez at Dec 28, 2008 5:22:19 PM
I think that some of the Brooks Bros. cards charge you $2.50 for every month gone unused.
Posted by: jjn at Dec 28, 2008 5:29:10 PM
Great: Stamped money, just when we need it.
Posted by: Frank at Dec 28, 2008 9:19:33 PM
There was actually an entry in the Freakonomics blog a while back about gift card going for MORE than face value on ebay.
I don't remember reading any convincing explanation of this phenomenon.
Posted by: Michael at Dec 30, 2008 5:20:34 AM
A friend of mine in New Zealand is buying iTunes cards at a premium on Ebay (US$50 card for US$51.25 + postage is the best deal so far).
Why? This allows him to get around regional restrictions that the Apple iTunes store imposes on certain content. (I believe he gets around them by having a US based iTunes account, but has to use the gift cards to add credit as they won't accept an NZ credit card.)
Posted by: Thomas Beagle at Dec 30, 2008 9:08:38 PM
Interesting discussion. The giftcardrescue.com pricing is based on the popularity of the cards. Less popular cards sometimes require bigger discounts for buyers to bite; hence we purchase them at a lower rate versus more popular cards. Our link was down briefly due to migration to a new and improved site. Check out our new site - http://www.giftcardrescue.com/
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