CE_Kiosk_Helios_RightIf you’re like most Americans, you’ve got a healthy supply of gift cards piled up in your purse, wallet or kitchen cabinet. In fact, some reports indicate that as many as two-thirds of the adults in the U.S. either purchased or received a gift card last year, representing some $70 billion.

Even more interesting, about $8 billion worth of those purchased gift cards go unused.

That’s where Bellevue-based Outerwall — the parent company of coin-counting kiosk Coinstar and DVD rental service Redbox — sees a big opportunity.

It wants to turn your old gift cards into cash.

The company’s Coinstar Exchange kiosks initially launched about 15 months ago under the Alula brand in Ohio and Arizona, expanding to the Seattle area last summer. The company now operates about 400 of the gift card-gobbling kiosks — including about 100 in the Seattle area at local Safeway stores. It plans to add another 250 kiosks in the next couple of months, expanding under the Coinstar Exchange brand.

“It is really our next step in translating unused gift cards into cash for consumers,” said Jeff Dirks, senior vice president and general manager of Coinstar Exchange at Outerwall.

Here’s how it works. Gift card owners insert their unused cards into the kiosk, with the machine automatically validating the balance. Coinstar then makes an offer based on the remaining balance, typically around 70 cents on the dollar. (Meaning the gift card owner would receive $70 on a $100 gift card).

If the gift card owner accepts the deal, a voucher is printed that the he or she can use to redeem for cash in the store.

“It’s a real simple way to provide instant gratification,” said Dirks.

Interestingly, different gift cards have different values associated with them. So, for example, a Best Buy gift card may return 75 cents on the dollar while a J.C. Penney gift card could only returns 65 cents.

“It all depends on the market in the retailer,” said Dirks. “From a consumer perspective, what we are trying to do is strike the balance of what we think is a fair offer from the discount off the face value…. We are trying to strike that middle ground of making it a good enough offer so the consumer feels like it’s a fair offer for a gift card they are not going to use, but also not discount it so heavily that a consumer tells us no we are just trying to gouge them for more discount off the end value of the card.”

kioskislandDirks said the dynamic pricing changes everyday, based on multiple factors.

Once a card is collected in the kiosk, Outerwall works with a security company to pick up the cards which are then shipped to Blackhawk, the large in-store operator of gift card islands seen at many retailers. Blackhawk then resells the cards in the secondary market on CardPool.com, with the two companies splitting profits 50-50.

For example, if Outerwall were to pay $70 for a $100 gift card, which then was resold by Blackhawk 15 days later for $90, Outerwall would collect $10 and Blackhawk would collect $10.

Dirks said they are still relatively early in the process of establishing Coinstar Exchange, noting that they are now doing a lot of testing in terms of the proper pricing.

“Everything we are seeing is very positive in terms of consumer response,” he said. “We know, myself included, a lot of folks have unused gift cards in their drawers, wallets and purses, and it really is an opportunity to provide a service as Coinstar has done with translating unused coins into cash, to do the same thing for gift cards.”

The gift card kiosks accept up to 150 gift cards, including those from Lowe’s, Best Buy, Target, Macy’s, Starbucks and more. (Correction: Amazon.com was originally listed as a participating retailer in the gift card exchange program. It is not).

 

Comments

  • Ashley

    This is brilliant!

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  • mainmac

    Wonder what the dollar limit they accept on the cards is? This could very quickly denigrate into an (albeit expensive) method of money laundering, if they accept larger than $100 card balances.

    • Cody

      They do I put in a 250 Home Depot gift card and got 160$ Idk I think it’s kinda rediculous the amount if money they take off though.

    • agesinger

      because a suspicious idiot like you has to point this out, these companies will continue to collect 8bil “breakage” a year unspent.

  • david

    you can sell or buy gift cards at caddo24.com

  • jacob

    I went to that machine today and when I scanned my gift card it said something about fraud alert does anyone know why?

  • Jonathan McMahon

    I’ve used Raise.com time and time again. It seems like the easiest and fastest service out there. Not to mention, they are venture backed with $22M+ in funding and have a 100% money back guarantee on all cards purchased or sold. Plus the 15% commission they charge is reasonable, considering that these kiosks pay out 50% or less for most brands.

  • Joe Pellegreeno

    I just went to try it and it does not work at a regular coinstar machine, its bad enough there arent that many coinstar spots , you got to go all the way to a waldbaums . This is really inconvenient

  • GnomeJeezy

    This is the biggest scam I have ever participated in. I work in a place that takes gift cards for cash and that in itself is a great idea. The problem is that these alula or coinstar exchange machines also accept merchandise credit cards as well as gift cards. This makes me an indirect fence for quite a bit of stolen product. The biggest perpetrators in my case being tweekers that go to Home Depot and pick up items right off the shelf, and return them for store credit without ever leaving the store (they were never paid for, of course). The clerk gives them a merchandise credit, most likely with the expectation that it can only be used to purchase items from that establishment. When however, the thieves go right to my store to collect 60 cents on the dollar for items that were never purchased to begin with. They almost always work in teams with one returning the product and someone else redeeming the fraudulent card. In theory gift cards for cash is a great idea but including merchandise credit makes me a facilitator for crime and drug addiction and that just makes me sick.

    • Mt M

      It is pretty evident that you are a bit sick even without the lives of all the Coinstar hopeless on your shoulders my friend.

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