If 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.”
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).