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Fantastic Plastic

3 ways gift cards can increase your sales

Sales of gift cards are booming. Last year, retailers rang up more than $36 billion worth-and in December alone, Starbucks customers spent a whopping $37.5 million on them.

These plastic cards can help you make money in a variety of ways. Consider breakage-the unredeemed value on the cards. Breakage estimates range from 5 to 10 percent, and at least 15 states have successfully lobbied state regulators to ensure that unclaimed dollars from gift cards are specifically exempt from abandoned property laws, allowing you to keep the remaining dollars. And even if customers do end up using their cards, remaining balances are carried over-encouraging incremental trips to your store.

You can also sell other retailers' gift cards and negotiate a percentage of the sale. Safeway stores, for example, sell more than 23 different gift cards, ranging from AMC Theatres to Best Buy to Marriott Hotels.

Other retailers have created limited-edition collectible gift cards. This practice allows you to collect the money upfront with virtually no chance of redemption. And gift cards work well as impulse items; displaying them wrapped in birthday paper, for example, acts as a reminder for gift-giving.

GiftCard Technologies (www.giftcardtech.com) sells cards for less than $1 each-giving you a low-cost way to build mind share and market share.

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This article was originally published in the September 2003 print edition of Entrepreneur with the headline: Fantastic Plastic.

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