Car Dealer Insider Apr 1, 2008
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Car Dealer Insider Apr 1, 2008

Gift cards still a viable dealership incentive - but do your homework!

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Gift cards still a viable dealership incentive - but do your homework!

Gift cards have been gaining popularity among auto dealers as a way to reward or provide incentives to employees and customers. After all, who doesn't like receiving a prepaid card to spend however you'd like. The gift card divisions of two of the nation's leading retailers, Target and Best Buy, even joined this year's NADA Convention as first-time exhibitors, pitching their programs to dealers.

But before you purchase another gift card, you should know that more than $75 million in gift cards are at risk of becoming worthless this year as more retailers and restaurants file for bankruptcy or close.

Don't panic - this number, as we'll explain in a moment, isn't as bad as it looks. And it doesn't mean that gift cards should be avoided. Instead, it's just another reason why auto dealers should keep a "watchful eye" when making card purchasing decisions, says Brian Riley, a senior analyst at TowerGroup, a leading research and advisory services firm for the global financial services industry.

We first saw the $75 million estimate, attributed to Brian, in recent news articles regarding The Sharper Image's gift card debacle. The specialty retailer announced in late February that it was temporarily suspending its acceptance of gift cards in conjunction with filing for Chapter 11 bankruptcy. This is typical in bankruptcy, since gift cards are treated as an unsecured liability, not cash. In March, after much bad publicity, Sharper Image won court permission to honor its previously issued gift cards but with stipulations: cards must be used in full and may only be used to purchase an item worth twice the value of the card (i.e. a $50 gift card for a $100 item).

Pondering this "strings attached" policy - and wondering where auto dealers would stand if their gift card issuers wind up on the bankruptcy path - Dealer... _(307 of 1228 words)

Also in this Issue:

  • Car dealer sponsors Women's Expo to draw out female demographic (282 words)
  • Gov. Spitzer scandal highlights importance of complying with cash reporting, money-laundering regs (782 words)
  • New Ideas (388 words)
  • News You Can Use - Dates to Save, Trends to Watch (208 words)
  • Settlement of class-action advertising case is a reminder for dealers to stand tough - and together (1028 words)
  • Time Management secrets to success - Part I (506 words)
  • Trend Spotting (315 words)
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